K.i -1 , V

^i4

.iivv*X44' ^^^-""^

4 /^

«*

//t lo(

■zA

n-

6

Digitized by the Internet Arcinive

in 2007 with funding from

IVIicrosoft Corporation

http://www.archive.org/details/agriculturaleconOOboylrich

LIPPINCOTT'S COLLEGE TEXTS

AGRICULTURE

EDITED BY KARY C. DAVIS, Ph.D.

AGRICULTURAL
ECONOMICS'

JAMES E. BOYLE, Ph.D. (J

EXTENSION PROFESSOR OF RURAL ECONOMY, COLLEGE OF AGRICULTURE,
CORNELL UNIVERSITY

90 ILLUSTRATIONS IN THE TEXT

PHILADELPHIA, LONDON, CHICAGO
J. B. LIPPINCOTT COMPANY

^Z}^

^

,.--

COPYRIGHT, 192 1, BY J. B. LIPPINCOTT COMPANY

MAIN UBRA

PRINTED BY J. B, LIPPINCOTT COMPANY

AT THE WASHINGTON SQUARE PRESS

PHILADELPHIA, U. S. A.

THE PLOUGH

From Egypt behind my oxen with their stately step and slow.
Northward and east and west I went to the desert sand and the

snow;
Down through the centuries one by one, turning the clod to the

shower,
TiU there's never a land beneath the sun but has blossomed

behind my power.

I shd through the sodden rice fields with my grunting hump-
backed steers,
I turned the turf of the Tiber plain in Rome's imperial years,
I was left in the half -drawn furrow when Coriolanus came
Giving his farm for the forum's stir to save his nation's name.

Over the seas to the north I went; white cliffs and a seaboard

blue;
And my path was glad in the English grass as my stout red

Devons drew;
My path was glad in the English grass, for behind me rippled

and curled.
The corn that was life to the sailor men that sailed the ships of

the world.

And later I went to the north again, and day by day drew down
A httle more of the purple hills to join to my kingdom brown;
And the whaups wheeled out to the moorland, but the gray gulls

stayed with me.
Where the Clydesdales drummed a marching song with their

feathered feet on the lea.

Then the new lands called me westward; I found on the prairies

wide
A toll to my stoutest daring, and a foe to test my pride;
But I stooped my strength to the stiff black loam, and I found

my labor sweet.
As I loosened the soil that was trampled firm by a miUion

Then further away to the northward; outward and outward still
(But idle I crossed the Rockies for there no plough will till!),
Till I won to the plains unending, and there on the edge of the

snow
I ribbed them the fenceless wheat fields, and taught them to

reap and sow.

The sun of the southland called me; I turned her the rich brown

lines.
Where her Parramatta peach trees grow and her green Mildura

vines;
I drove her cattle before me, her dust and her dying sheep,
I painted her rich plains golden, and taught her to sow and reap.

From Egypt behind my oxen, with stately step and slow,

I have carried your weighitiest burden, ye toilers that reap and

sow!
I am the ruler, the King, and I hold the world in fee;
Sword upon sword may ring, but the triumph shall rest with me!

Will Ogilvie.

(Reprinted from "The Australian and Other Verses," through the courtesy of the
publishers, Angus and Robertson, Sydney, N. S. W., Australia).

438977

PREFACE

Among the newer subjects which are claiming the attention of
the thoughtful citizen are Agricultural Economics and Farm
Management. Both are mere subdivisions of political economy.
Farm management has to do with the farmer's relation to his
individual farm, the central principle being the economic question
of how he can secure the highest net returns. Agricultural Eco-
nomics, however, is concerned with the social aspects of agriculture,
and has for its first consideration the welfare of the Republic, and
for its second consideration the welfare of agriculture as one com-
ponent part of that Republic. Farm Management may be said
to look on the farmer as practicing a trade; Agricultural Economics
looks on the farmer as a citizen. The question of rural credit, for
instance, is, to the teacher of Farm Management, the very concrete
problem of where and how can farmer Jones borrow money at the
lowest rate of interest: while this same question is, to the teacher
of Agricultural Economics, the broad economic problem which
recognizes the intimate and vital relation of sound credit to both
the individual and community prosperity.

This book does not pretend to be a work of original research.
It is a bringing together of some new and some old information
which is scattered over a mde area of books, papers, reports, and
other sources. The book is not written for the expert or speciaUst,
but for the average student of agricultural problems.

My aim in writing this book is threefold: (1) to interest the
reader in the subject of Agricultural Economics; (2) to point out
by a few simple illustrations the most significant problems in this
field; (3) and finally to stimulate thinking and discussion which
may help towards the solution of these problems. Conversely, I
have not tried to offer ready-made remedies for the problems dis-
cussed, or to formulate a set of "laws and principles," or, indeed,
to present a large number of entirely new facts to the reader. The
facts and illustrations given are beheved to have real significance
in interpreting the deeper movements in agriculture.

In peace or in war, the food supply of the nation is a question
of fundamental importance. And the food supply is primarily a
question of agriculture. In brief, agriculture is an industry which
is fundamental in the political economy of our Republic. It is

^

viii PREFACE

vital, therefore, that the problems in this field be discussed with
sanity and with understanding. This book represents an earnest
effort to select and organize such facts as will lead to this kind of a
discussion of the subject. As cities increase in size, as the farm
population proportionately decreases, we are destined to hear all
sorts of proposals looking to a cheaper food supply for the benefit
of the city dweller. Doubtless some of these proposals will have
considerable merit; and doubtless others will be fraught with
insidious danger, such as the proposal heard even now to place
on our soil a race of Oriental laborers, with lower standards of living
than our own.

The farmers of America are, up to the present moment, not so
well mobilized as the persons in the other great industries and
trades. But they are rapidly beginning to assume more conscious
direction of the processes of production, and are asking for a wider
influence in the economic and poUtical life of the nation. For
these reasons the study of Agricultural Economics is one of very
great importance, both to the dweller in the open country and to
his city cousin.

It has been said that when a problem is once clearly stated it
is already partly solved. So the major effort of this book is to
state problems clearly, in order that their final solution may be
promoted. It is hoped that the casual reader will find these prob-
lems interesting. The serious student, I trust, will find their study
both interesting and profitable.

James Ernest Boyle.
Ithaca, New York,
January, 1921.

CONTENTS

Chapter Page

I. Agriculture, Manufacturing, Commerce 1

II. Anarchy of Agriculture 15

III. Farming versus Land Speculation 24

IV. The "Back to the Land" Movement 31

V. Land Tenure 53

VI. Economic Condition of the Farmer 83

VII. Agricultural Labor 96

VIII. Agricultural Machinery and the Trust Question 115

IX. Marketing and the Middleman 130

X. Cooperation 158

XI- Credit 174

XII. Transportation 188

XIII. Insurance 205

XIV. Cold Storage 214

XV. Agricultural Prices and Valorization 225

XVI. Cost of Production and Farm Accounting 250

XVII. Speculation 262

XVIII. The Agricultural Press 279

XIX. Farmers' Organizations 285

XX. State Aid 312

XXI. The County Agent 329

XXII. The Grain Trade 337

XXIII. Live-stock and Meat Industry 365

XXIV. Taxation Problems; Single Tax; Protective Tariff 393

XXV. Foreign Competition 409

XXVI. Food Supply Problem 425

Index 437 .

IX

AGRICULTURAL ECONOMICS

CHAPTER I

AGRICULTURE, MANUFACTURING, COMMERCE

The Rank of Agriculture Among Our Industries. — For many-
years of our history agriculture was the leading industry. Agri-
culture came first as to the amount of capital invested, first as to
the value of the output, and first as to the number of persons
employed. This economic primacy gave agriculture an important
place in the early political life of the nation, many congressmen
and even several early presidents being actual farmers. George
Washington for instance was born and reared on the farm, died on
the farm, and lies buried on the farm. In Washington's day
wealth, intelligence, dignity, influence, all went with farming.
This primacy of agriculture has been lost due to the economic
evolution of our country and the development of its vast and vari-
ous resources. At the outset, then, let us examine some of the
evidences of this change in the rank of agriculture. The United
States Census Report for 1900 describes the situation in these words:

" Down to 1880, or to some time between 1880 and 1890, agriculture was
the principal source of wealth in the United States. At the last census (1890)
the value of farm products was exceeded by that of manufactured products.
At the census of 1900, the value of farm products is shown to have been
$4,739,118,752. In this total there occur certain duphcations which the
Report on Agriculture eliminates, leaving a residue of $3,764,177,706 as the
actual net value of all farm products in the census year. The net value of
the products of manufactures, as computed in the census, is $8,370,595,176,
a sum more than double the value of the net products of the farm. If from
this net value is eliminated everything in the way of crude materials contrib-
uted by the farm, the forest, the mine, and the sea, there is still left a value of
$5,981,454,234; and on this basis it appears that the contribution of manu-
factures and the mechanical arts to the wealth of the country exceeds the con-
tribution of agriculture by more than a billion dollars. \ The figures indicate
that rapid as has been the development of agricultural interests, manufactures
have advanced even more rapidly.

"This conclusion is strengthened by a consideration of the statistics of
occupations as presented at the several censuses . . . During the twenty
years, 1880 to 1900, the number engaged in agricultural pursuits increased
34.6 per cent, while the number engaged in manufacturing increased 87.2
per cent."

The 1910 census compares the two thirty-year periods, 1850
to 1880 and 1880 to 1910. " During the first of these two periods,"

1

AGRICULTURE, MANUFACTURING, COMMERCE

/^SO 1860 1870 /880 1890

Fig. 1. — Agriculture — rank as an industry.

/900

/9/0

NUMBER OF PERSONS ENGAGED 3

states the Census Report, 'Hhe agricultural industry, so far as can
be measured by statistics as to the number of farms, farm land,
and improved land, more than kept pace with the population."
But it has failed to do so since. "The population increased 116.3
per cent between 1850 and 1880, while the number of farms in-
creased 151.9 per cent; but from 1880 to 1910 the population
increased 83.4 per cent, the number of farms only 58.7 per cent,
and the improved farm land only 68 per cent."

It is true that the value of farm property showed a gain of one
hundred per cent in the ten-year period from 1900 to 1910, increas-
ing from some $20,000,000,000 to $40,000,000,000. Yet this gain
of $20,000,000,000 is rather an illusory gain, since $15,000,000,000
of it represent merely an increase in land value and no added
investment of capital whatever. This "unearned increase" in
value therefore is a detriment rather than a benefit to the coun-
try Qf^' large, and is perhaps an evil to the farmers themselves.
For it makes farms constantly higher in price to the would-be
farmer and hence ownership more difficult to attain. It means
more renters and more mortgages. For more and more it is
becoming true that the farmers do not own the farms. The
city investor or speculator or the "retired farmer" is becom-
ing the farm owner, and is therefore getting the benefit of the
$15,000,000,000 increases in farm land value. And the farmer
who is a tenant is helping pay the penalty. The report of the
Thirteenth Census tells us, "It may be noted that at least since
1880 (and probably further back also) the farms operated by
tenants have in each decade increased faster than those operated
by owners " (Fig. 1).

Number of Persons Engaged. — There has been a gradual in-
crease in the number of persons engaged in agriculture, manu-
facturing, professional service, domestic and personal service, and
in transportation. But the proportion engaged in agriculture quite
naturally shows a gradual decline. In 1870, 48 per cent of the
workers were in agriculture; in 1910, only 33 per cent. There are
approximately six million farms in the United States, and allowing
to each farm a family of five persons, we have thirty million of our
population living in the open country. There remain therefore
over seventy million who are living in cities and villages. The
significance of these figures is important from the standpoint of
an agrarian party or an agrarian policy in the United States. Any
such a party with a policy of increasing agricultural profits at the
expense of the consumer would be in a very hopeless minority.

4 AGRICULTURE, MANUFACTURING, COMMERCE

36

^i

!:::asx:||:[:i:is|[l::::i::|:;::::::::::::::K:;;:;i::;i:::

teso

/eeo

1670 /Sep

Year

/690

1900

f9l0

Fig. 2. — Value of farm property, years 1850-1910.

VALUE OF EXPORTS 5

However, any organization of farmers, along economic lines, with
a policy of '^ savings, not profits," or ''stabilizing of profits," would
not collide with the self interests of the majority.

Capital Invested. — Mention has already been made of the
capital invested in agricultm*e and manufacturing, but not of the
difficulty of interpreting the word capital as applied to agriculture.
The census figures for 1910 show total farm property, for instance,
of forty billion dollars. But of this forty, twenty-eight is land
value. And of this twenty-eight billions, fifteen billions is increase
in land values since 1900, and represents no additional investment
of capital. In 1910 some twelve billions of dollars represented
the value of farm buildings, implements and machinery, and
domestic animals, poultry, and bees. While land value increased
in ten years 118 per cent, these buildings, implements, animals,
etc., increased in value but 71 per cent (Fig. 2).

In manufacturing, however, in 1910, there was a capital
investment of eighteen billion dollars — an increase over 1900 of
105 per cent. In banking in 1910 (in commercial banks only),
there was invested capital to the amount of three billion dollars
— a gain in ten years of 114 per cent. In transportation in 1910
(counting steam railroads alone) the capitahzation was seventeen
billion dollars, an increase in ten years of 42 per cent.

Value of Product. — ^We cannot of course compare the value of
the products of all the great industries since these values are not
a matter of record except in the cases of agriculture and manu-
facturing. Here, however, since 1870, the value of the product of
manufacturing has been more than twice the value of the product
of agriculture. According to the classification of the 1910 census,
the values stood as follows: agriculture, eight billion dollars;
manufacturing, twenty billions (Fig. 3). A study of the census
figures shows that America, like some European countries, is
now primarily a manufacturing country.

Value of Exports. — In time past our chief exports were
foodstuffs. This has now changed. Thus in 1880 exports of food-
stuffs were four times the amount of manufactures exported.
In 1912, however, exports of manufactures were two and a half
times as large as exports of foodstuffs. In other words, exports
of foodstuffs remained at about four hundred million of dollars,
while exports of manufactures grew from a hundred and twenty
miUions to over a billion dollars.

However, agriculture has many exportable products which
are not foodstuffs, chiefly cotton (Fig. 4). Yet even counting

6 AGRICULTURE, MANUFACTURING, COMMERCE

}Q7hl880 J68H890 1891-1900 I90/-I9/0
Decade

Fig. 3. — Agricultural progress, 1870-1910, showing increases by per cent.

VALUE OF EXPORTS 7

the total products of agriculture, over half of our exports are now
of other products than those of agriculture. In 1913, for instance,
our exports amounted to a total of $2,465,884,150; of this amount

17

53p

li LTt-. tit'

ijji

:r;tltr;:

CT ipr TiJIi:!' 1 a| a :::::-■■ ±

|:n:||i|

16

k

iii|;;

i

i

Lt:;:

tlMl T tt' 1 it

:::::::: ::::::

:-::4

;;|i:g

J::.^,.tf

^:-\ : : ::::;:::: ::::,:::: ::: ::

|ii;;: :;;;;;

iS

c:::::::: ::::::::: :: t :::::::::: it

;::;:; ;; ■.■:■:::■:■:■. '■::-::::■::■::. :;;:t

;;::;;;;;;; :;;;:;;

■■?■§■

1

::::::-i(

-^i;;-:;;;:^ --;;:: ;^i:

te"'"

::::::::: : :;!!:::::: ::: :::,::t i!?

V

:::::::::::

:i::::::

c;

:i::::;|

■■'<T ::::: :::::

;^ii:; 1

lyj^ 1 1 HM

::::5s:::: ::::::::::

§

i::g:±:i:

- --f

;;;;±;|:

;;:;: ;

t .. . , . .

f ■ •

»■

:::::::

i:':::::

::::::::£::

^/j

:.::i:|::

¥'\-

:::;;,:

t::::;: :

::::::::: :::::::::::::::: :| :: :

^

;ffl;;

'-'^W

§;;-;

:^^^M

t::::::

:::::::: ::::::: :: :: ::| :: ::

:4±::::::. :::::::::

5

:4::::

H

it

^^ 4i;

■1^^

Slf

;;J;t;:;:;::;;;;;;;

d: T :::::::::::::::: :

•ii;;;;:;:;;;;';;;;

I

i;- ■

■ i

i^i^^^^ " ' "l

1

-iu' ■ j ;

■;iS

I0\

i

: : '■: ■-■:■ \"':" 1 ■::§

.-

t

' — 1

' ^^TT^ TnT,

;|i:

-^:- ■.%

I

i

i^ua-i^^^ iy09-i9/0 1910-1911 li^n-i^i^

Fig. 4. — Cotton production and farm value of cotton.

the products of agriculture represent but $1,123,651,985, or 45
per cent. Whereas agricultural exports remain about the same
from year to year, or increase very slightly, the imports of agri-

y

J8 AGRICULTURE, MANUFACTURING, COMMERCE

cultural products show a steady and rapid growth. Considering
both our imports and exports of agricultural products we find
that our net exports are only about $300,000,000 a year. The big
agricultural exports are, of course, cotton, packing-house products,
grain (especially wheat and flour) and tobacco. The big agricul-
tural imports are coffee, leather and hides, sugar, rubber, and silk.

Agricultural Land of the United States. — ^The United States
has in its vast land area of two billion acres enough land to provide
each man, woman and child of the population a twenty-acre tract.
Of com^e, a large share of this land is not tillable. Much now is
and must ever remain desert or mountain. At the 1910 census,
only eight hundred miUion acres was "land in farms," and only
half of this was "improved." By improved land is meant all land
regularly tilled, or mowed, land pastured and cropped in rotation,
land lying fallow, land in gardens, orchards, vineyards, and nur-
series, and land occupied by farm buildings. The unimproved
land in farms is, as indicated above, some four hundred million
acres. In other words, our thirty million farming population on
six miUion farms is actually utilizing but one-fourth of our land
area. The average acreage of the "farm" in 1910 was one hundred
and thirty-eight acres; of the "improved land" in the farm,
seventy-five acres. In 1900 the average of improved land per farm
was seventy-two acres, which indicates a slight tendency to increase
the amount of land farmed by one farmer.

Exploitation and Conservation. — The economic history of the
twentieth century in the United States begins with the birth of
the doctrine of conservation — conservation of our soils, our waters,
oiu" rivers and our forests. This beginning marks a reaction against
the nineteenth century of wanton and feverish exploitation of
these same resources. The "soil-robbery" carried on by isolated
and competing individuals, and known as farming during these
hundred years, left a legacy of soil exhaustion problems for future
generations to solve.

Better Business for Farmers. — Sir Horace Plunkett declared
the rural hfe problems in the United States to be better farming,
better business, better living. The report of the Roosevelt Country
Life Commission found that from the commercial standpoint
farming is not profitable enough, considering the labor, energy
and risks involved, and the social and sanitary conditions of the
open country.

The unattached man on the farm stands alone against the better
mobilized interests of manufacturing and commerce. As a pro-

BETTER BUSINESS FOR FARMERS 9

ducer, he has been aided by the government. "Our attention has
been concentrated almost exclusively," says the introduction of
the report of the Country Life Commission, "on getting better
farming. . . . Practically the whole of this effort has hitherto
been directed towards increasing the production of crops. In the
beginning this was unquestionably the right thing to do. The
farmer must first of all grow good crops in order to support himself
and his family. But when this has been secured, the effort for
better farming should cease to stand alone, and should be accom-
panied by the effort for better business and better living on the
farm." Thus the cotton growers of the South were taught how
to increase the production of cotton, upon the theory that it is a
blessing to make two blades of grass grow where only one grew
before. But the report of the Secretary of the New Orleans Cotton
Exchange states that while the cotton crop of 1911-12 increased
by four million bales over the 1910-11 crop, the price received by
the planter was over one hundred million dollars less. On the
other hand, the crop of 1909-10 showed a falling off in production
over 1908-09 by over three million bales, but an increase in value
of a hundred miUion dollars. Thus in 1911 the energies of the
Southern planters, devoted to cotton production, resulted in over-
production of this one crop and an under-production of other crops
which the South needed, such as corn and hay, and also swine. In
various important public meetings and congresses in the South,
the farmers there have sought to stabilize their net returns by
limiting the output of cotton to regular trade demands, while at
the same time increasing their output of food crops and other
crops needed by the South. This move for "limitation of output"
has been misunderstood by the public since the practice itself has
been associated with some of the methods of industrial warfare
used by some radical labor unionists. In the case of the Southern
planters, however, the agitation has been to produce a different
output, not a smaller output — different crops, not smaller crops.
It signifies a groping after a method of coordinating supply and
demand. Lack of a balanced production is true for all the great
staple crops, such as wheat and oats, for instance.

The wheat farmers produced a bumper crop in 1906, seven
hundred and thirty-five million bushels. In 1907 they produced a
hundred million bushels less, but got sixty million dollars more for it.

The farmers in 1910 produced the enormous quantity of
1,186,000,000 bushels of oats with a farm value of $408,000,000.
Next year they produced a crop of two hundred million bushels less,

10 AGRICULTURE, MANUFACTURING, COMMERCE

but with a farm value of six million dollars more. In 1912 they
• increased the oats production by the unprecedented amount of

five hundred million bushels, but the crop value only increased
thirty-eight million dollars. Hence the problem of producing
/ more is not the only problem of the farmer. It is no longer his
greatest problem. He must produce more of the right thing. As Sir
Horace says, the problem of better business must be solved if agricul-
ture is longer to compare favorably with the other great industries.

Industrial Concentration. — The most striking economic differ-
ence between agriculture and the other great industries up to the
present time is exhibited in the extent of organization and con-
centration in the general industries, on the one hand, as against the
/ I lack of organization and centralization in agriculture, on the other
hand. Some evidence on this point will make the situation clear.

Lumber. — The Report of the Bureau of Corporations on the
lumber industry (January 20, 1913), in speaking of our standing
timber, says that these three facts are shown by the investigation:
(1) the concentration of a dominating control of our standing tim-
ber in a comparatively few enormous holdings steadily tending
toward a central control of the lumber industry; (2) vast specula-
tive purchase and holding of timberland far in advance of any use
thereof; (3) an enormous increase in the value of this diminishing
natural resource, with great profits to its owners. This value, by
the very nature of standing timber, the holder neither created
nor substantially enhances. Forty years ago, continues the report,
at least three-fourths of the timber now standing was (it is esti-
mated) pubHcly owned. It passed from Government to private
ownership. The three largest holders are now the Southern Pacific
Company, the Weyerhaeuser Timber Company, and the Northern
Pacific Railway Company. ''The Southern Pacific Company
holdings,'' continued the report, "is the greatest in the United
States — one hundred and six billion feet. It is difficult to give
an adequate idea of its immensity. It stretches practically six
hundred and eighty miles along that railroad between Portland and
Sacramento. The fastest train over this distance takes thirty-one
hours. During all that time the traveler thereon is passing through
lands a large proportion of which for thirty miles on each side
belongs to the railroad, and in almost the entire strip this corpora-
tion is the dominating owner of both timber and land."

"These three holdings have enough standing timber to build
an ordinary five- or six-room frame house for each of the sixteen
million famifies in the United States in 1900." The holdings of

OTHER INDUSTRIES 11

the two railroad companies are government grants, and 80
per cent of the Weyerhaeuser Timber Company holding was
bought from the Northern Pacific grant. By an interweaving of
interest, corporate and personal, and by interlocking directorates,
there is a further real concentration of control of a great many
large holdings which on the surface appear to be separate holdings.

With the concentration in timber is also the concentration in
the land which remains after the timber has been cut. In Florida
182 large timber holders have over 16,990,000 acres, nearly one-half
the land area of the state. In the area investigated by the Bureau
of Corporations, the large timber holders had 89,744,000 acres — an
area greater than the ten northeastern states, Maine, New
Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut,
New York, New Jersey, Delaware, and Maryland.

To this concentration in timber and land must be added a
closely connected railroad domination. "Still more impressive,"
contrnues the report, "are the possibilities for the future. In the
last forty years concentration has so proceeded that one hundred
and ninety-five holders, many interrelated, now have practically
one-half of the privately owned timber in the investigation area
(which contains 80 per cent of the whole). This formidable
process of concentration, in timber and in land, certainly involves
grave future possibilities of impregnable monopolistic conditions,
whose far-reaching consequences to society it is now difficult to
anticipate fully or to overestimate. Such are the past history,
present status, and apparent future of our timber resources. The
underlying cause is our public land policy, resulting in enormous
loss of wealth to the public and its monopolization by a few inter-
ests. It lies before us now as a forcible object lesson for the future
management of all the natural resources still remaining in the
hands of the Government."

Other Industries. — Turning now to other industries, we find
similar tendencies at work. The concentration of control of a
large portion of our banking, railroad, and manufacturing indus-
tries in the hands of a few men — of one hundred and eighty men
in fact — was shown by the Federal money trust investigation in
1912 and 1913. This small group of one hundred and eighty men,
by a system of interlocking directorates, were shown to be repre-
sented in the directorships of corporations having total resources
or capitalization of $25,325,000,000. They held, to specify more
in detail, three hundred and eighty-five directorships in forty-five
banks and trust companies having total resources and deposits of

12 AGRICULTURE, MANUFACTURING, COMMERCE

$6,666,000,000; fifty directorship8 in eleven insurance companies
having total assets of $2,646,000,000; one hundred and fifty-five
directorships in thirty-one railroad systems having a total capi-
taUzation of $12,193,000,000 and a total mileage of one hundred
sixty-three thousand, two hundred; six directorships in two
express companies and four directorships in one steamship com-
pany with a combined capital of $245,000,000 and gross income of
$97,000,000; ninety-eight directorships in twenty-eight manufac-
turing, producing, and trading corporations having a total capital-
ization of $3,583,000,000 and total gross annual earnings in excess
of $1,145,000,000; and forty-eight directorships in nineteen public
utility corporations having a total capitalization of $2,826,000,000
and total gross annual earnings in excess of $428,000,000; in all
seven himdred and forty-six directorships in one hundred and
thirty-four corporations with total resources or capitalization of
$25,325,000,000. It is impossible to grasp the magnitude of this
figure, but it may help to compare it with the value of all the farm
land in the United States in 1900, which was but $28,475,000,000.
The interlocking nature of this concentrated control may be
illustrated by the following examples. The firm of J. P. Morgan
& Co., of New York, had three directorships in the Northern
Pacific Railway. This firm also had three directorates in the Astor
Trust Co. and the Astor Trust Co. had two directorates in the
Northern Pacific, as well as two in the Southern Pacific. In brief,
the firm of J. P. Morgan & Co. had twenty-three directorships in
thirteen banks and trust companies, which companies in turn had
fifteen directorships in the Northern Pacific Railroad and eight
in the Southern Pacific. To illustrate further the concentrating
tendency in banking, railroading, and manufacturing, attention is
called to the fact that the firm of J. P. Morgan & Co., together with
four neighboring banks in the city of New York, held three hundred
and forty-one directorships in one hundred and twelve corporations
having aggregate resources or capitalization of $22,245,000,000.
To carry the illustration of this tendency yet a step further, the
fact may be cited that Mr. J. P. Morgan testified,^ that he named
the entire board of directors of the United States Steel Corpora-
tion. This was a corporation capitaMzed at $1,400,000,000, with
some fifteen thousand stockholders, yet Mr. Morgan, owning but
a small fraction of the stock, found the power of control of the
corporation entrusted very largely to his judgment. Thus the

1 Dec. 19, 1912.

QUESTIONS ON THE TEXT 13

institutions above mentioned, especially the banks and railroads,
control resources vastly in excess of what they own. They gain
thereby an importance and a mobilized economic power which is
impressive when compared with the unorganized agricultural
industry. It is only fair to state that most of the great "captains
of industry," so-called, have used their economic power in a con-
structive manner. And this is particularly true of the late J. P.
Morgan, whose control and direction of big commercial investments
was conspicuously successful and made more money for others
than it did for himself. Hence the secret of his power.

A similar condition exists in Canadian agriculture, a country
forming with the United States an economic and ethnic unit. A
recent issue of the Grain Growers' Guide of Winnipeg ^ discussed
the question, ''Who owns Canada?'' The conclusion reached was
that forty-two men controlled $4,000,000,000 in resources, or more
than one-third of Canada's total wealth in railroads, banks, fac-
tories, mines, and lands. The railroads had been favored, says
this report, with cash giants, $208,072,073; with land grants,
56,052,055 acres; and with bond guarantees, $245,070,045. The
forty-two men named in the article hold directorships in the
following institutions; thirty directorships in financial institu-
tions; forty-two directorships in transportation companies; fourteen
directorships in insurance companies; and one hundred and
eighteen directorships in industrial and other corporations.

Will Farmers Own the Farm Land? — The question suggests
itself at this point, will not the ownership of our farm lands even-
tually pass largely into the hands of a small group of capitalists,
just as we have had concentration of control of our other great
industries? There are evidently many tendencies at work making
for this very outcome; there are, however, opposing tendencies in
operation which must also be taken into consideration. The
question is a most serious one, as England and Ireland and other
countries have already found out. But the discussion of this prob-
lem must be postponed to the chapter dealing with land tenure.

QUESTIONS ON THE TEXT

1. State and explain the rank of agriculture among our industries formerly

and now,

2. Cite census figures as evidence of this change.

3. Comment on the increase in value of farm knds.

4. Compare the great industries as to the number of persons engaged in each.

5. Compare the great industries as to the amount of capital invested. The

same for the vahie of the product.

2 June 25, 1913.

14 AGRICULTURE, MANUFACTURING, COMMERCE

6. Show the past and present rank of agricultural exports and imports.

7. What portion of the land area of the United States is "in farms" and what

part is "improved"? Explain these terms.

8. Compare per cent of increase in population, for a series of decades, with

increase in production of staple crops and hve stock. Show significance
of these figures (Fig. 5).

9. Show at what periods of our history we have followed the doctrines of

"exploitation" and "conservation" respectively. Explain these terms.

10. According to Sir Horace Plunkett, what is the rural fife problem in the

United States?

11. State the conclusions of the Roosevelt Country Life Commission.

12. Show the fallacies and the true principles involved in the question of

increased production of staple crops.

13. Show the significance of industrial concentration in various fields in recent

years, such as lumber, banking, and railroads.

14. Compare Canadian industries as to a similar concentration.

15. What do present tendencies indicate as to the future ownership of farm

lands in the United States?

QUESTIONS SUGGESTED BY THE TEXT

1. Is a large increase in land values a benefit to the farmers themselves?

2. What are some reasons for and against an agrarian party?

3. What portion of the land surface of the United States will likely remain

forever out of use for agricultural purposes? What are the Hmiting
factors?

4. From the farmer's standpoint should there be an increase or a limitation

of output of the staple crops? Reconcile the social and the agrarian
viewpoint on the question of increased production.

5. What evidence is there, if any, of farm land ownership becoming central-

ized in the hands of big corporations? If corporation farming is more
efficient than individual farming, should it not be promoted?

6. Give examples from your own village or city of the centralization of con-

trol over local enterprises in a few hands and explain the cause of this
centralization.

REFERENCES

1. U. S. Census Reports. See especially 8th Census, volume on Agricul-
ture (1864); 10th Census, vol. iii; 12th Census, vol. v, xvi-xxxvii.

2. Report of the Country Life Commission. Edited by L. H. Bailey.

3. Haworth, Paul Leland: "George Washington, Farmer."

4. Report of the Industrial Commission, vol. x, i-lxiv (1901); vol. xix,
45-96 (1902).

5. Report of the Bureau of Corporations on the Lumber Industry (Jan-
uary 20, 1913).

6. Baker, O. E.: "Arable Land in the United States, Yearbook," Depart-
ment of Agriculture, 1918, 433-443.

7. Plunkett, Sir Horace: "Rural Life Problems of the United States."

8. Yearbooks, Department of Agriculture: 1903 — "Nation's Farm
Surplus " 479-491. 1904— "Annual Loss Caused by Insects," 461-475. 1905
—"Diversified Farming in the Cotton Belt," 193-219. 1908— "Causes of
Social Rural Conditions: Remedy— Small Farms," 311-321. 1909— "Farm-
ing as an Occupation for City Bred Men," 239-249.

9. Wright, C. D.: "Industrial Evolution of the U. S.," Ch. 12.

10. Day, Clive: "History of Commerce," chs. 51, 52, 53.

11. NouRSE, E. G.: "Place of Agriculture in Modern Industrial Society."
Journal of Pohtical Economy, vol. xxvii, 466-497; 561-577.

12. Hall, A. D.: "A Pilgrimage of British Farming," 1910-1912,
London, 1913.

CHAPTER II

ANARCHY OF AGRICULTURE

Agriculture at present is an unorganized industry, carried
on by millions of competing units. The man on the farm cooper-
ates with nature, but not with his fellow-farmer. The so-called
trusts and large combinations of capital have done much to inte-
grate the other industries. Agriculture remains individualistic. ^
Where industries have reached the monopoly stage or the stage
of strong centralized control, we witness a coordination of produc-
tion and consumption impossible elsewhere. Production is planned
to fit the need; overproduction and underproduction are both to
a certain degree avoided. This is illustrated in the case of refined
petroleum. Many other large industries, without the monopoly
element, yet involving the investment of considerable capital,
show a reasonably close coordination of production and con-
sumption. Take the mining of coal, for instance. Consumption
needs increase as population increases, and as industrial expansion
grows. Hence production of coal should increase in a constantly
growing and unbroken ratio to meet this upward-moving demand.
And such we find to be the case. A glance at the census figures
reveals the situation:

Coal production
Year (tons per capita)

1849 0.28

1859 0.46

1869 0.95

1879 1.43

1889 2.24

1899 3.34

1909 5.00

In manufacturing the same coordination is found, although not
so perfect. The demand is estimated in advance, and this forecast
is fairly accurate. However, competing manufacturers may over-
produce or underproduce and in this manner cause supply to be
out of line with demand. And, of course, in manufactured goods,
we enter the field where there is more elasticity of demand,
and hence more Hkelihood of failure of coordination of supply
and demand.

When we come to the field of agriculture we find the greatest
failure to coordinate supply and demand. Here we have an indus-
try whose product is in universal demand. And this demand,

15

16 ANARCHY OF AGRICULTURE

as shown by the markets, is hke the supply — not constant,
but is dependent in part on fluctuating production in competing
areas in foreign lands, in part on prices and uses of substitutes
and alternates.

Compare the two great staples, for example, cotton and wheat.
In 1886 the wheat crop was four hundred fifty-seven milUon
bushels. Ten years later, with ten million more mouths to feed
in the United States, the crop was thirty-seven niillion bushels
less. And ten years later, with another ten million mouths to feed,
the crop has increased by over three hundred million bushels.
Eight years later, and the crop has increased by one hundred and
fifty million bushels. Cotton production shows the same enormous
variations. Taking the annual yield for five consecutive years,
we have the following impressive figures:

Cotton yield

Year (bales)

1908 13,400,000

1909 10,300,000

1910 11,900,000

1911 16,100,000

1912 14,000,000

An increase of fifty per cent from one year to the next sometimes
occurs in the production of cotton.

We may likewise compare two minor crops which ,are yet
staples and for which the demand is never constant, namely,
tobacco and potatoes.

Note the wide fluctuations in potato production from year to
year in this brief table:

Potato crop
Year (bushels per capita)

1908 3.10

1909 4.14

1910 3.79

1911 ...• 3.15

1912 4.50

Statistics for tobacco production show similar fluctuations:

Tobacco production
Year (pounds)

1900 814,300,000

1905 633,000,000

1910 1,103,400,000

1911 905,100,000

1912 962,000,000

1913 953,000,000

Animals follow the same erratic course, often decreasing rap-
idly as population increases, and again increasing far in advance
of the slow and steady increase in population. This phenomenon
makes the farm output differ from the factory output.

-J

FACTORS OF UNCERTAINTY

17

Factors of Uncertainty. — Is it possible to coordinate production
and consumption of farm crops ? It is impossible to forecast
demand, and it is clearly impossible to forecast or control the

181/ -1860

Iddl - /690
Decac/e

1801 - 1900

1901 - 1910

Fig.

5. — Forty years' progress, crops and livestock, 1870-1910. Increases or decreases by
decades as compared with the population.

supply. There are too many factors of uncertainty. The chief
of these factors, to name but three, are climatic conditions, plant
diseases, and insect pests. A great loss to the American wheat
crop, as well as to the European, is often caused by ''winter-
killing." The winter may be too mild, too severe with no snow
2

18 ANARCHY OF AGRICULTURE

blanket, or may alternately thaw and freeze till the wheat is killed.
Late spring frosts may injure winter wheat or decrease acreage of
spring wheat. Early frosts in the fall injure the wheat, as happened
in 1907 and 1911 in the Northwest and in the Canadian West.
Rain at harvest time, extreme heat, prolonged drouth, all may do
serious damage to the wheat crop. In 1902 the Australian crop
fell from 42,500,000 bushels of the previous year to 19,800,000
bushels. The 1903 crop rose to seventy-five million. This drouth
had the effect of raising the price of wheat in the Pacific Coast
States above the Liverpool price level. Bad weather conditions
also lead to rust and smut which injure the crop seriously. Hail
is an agent of destruction. Floods, as in Kansas in 1904, may
destroy large areas of wheat. This same year, 1904, was known
in America as Black Rust year, since the total loss due to this
cause was seventy-five million bushels.

What has been said about climatic conditions and the wheat
crop is believed to be typical for other farm crops. And these
conditions can neither be foreseen nor removed.

Insects and Diseases. — Among the insect pests may be men-
tioned the ''green bug" (Toxoptera graminum). The green bug
made its appearance in 1890 and proved ver> disastrous to wheat
and oats over a section of the country extending from Texas to
Northern Missouri and eastward to Indiana. Again in 1900, and
still again in 1907, this green bug appeared. In 1907 it attacked
the wheat crop and almost totally destroyed the Texas crop, and
seriously damaged the crops of Oklahoma and Kansas. The
wheat grower also is in constant danger of serious loss from the
Hessian fly, the chinch bug, the wheat midge, and the weevil.
Other crops have an equal number of enemies.

Bulletins from our Agricultural Experiment Stations show the
great variety and serious extent of plant and animal diseases in
the United States. For livestock, as well as field crops, are in
constant peril of disease. For instance, one bulletin of the Wis-
consin Station alone treats of the following pathological conditions
and insect enemies in that State : vaccine treatment of chicken-pox
in fowls; contagious abortion (described as ''the greatest menace
to our dairy cattle"); root killing and body canker (in orchards
and small fruits); potato rot and blight; potato scab; five cabbage
diseases (black rot, soft rot, yellows, black leg, club root); rust
and leaf blight of field crops; barley stripe disease; alfalfa leaf spot;
cottony maple scale; cutworms; onion maggots (destroying from
fifty to ninety-five per cent of the crop); codling moth (apple

EFFECTS OF THESE FACTORS 19

worm); plum curculio; San Jose scale; house fly; onion thrips and
onion fly (Thrips tabaci and Pegomya cepetorum ''now threaten
this crop with destruction''); onion smut; pea blight; root rot of
tobacco (Thielavia basicola, ''As a conservative estimate it is
thought that this single disease last year (1912) cost Wisconsin
tobacco growers a loss of approximately $1,000,000"); black rot
of tobacco. This showing is significant, coming as it does from a
state which is unusually free from plant and animal diseases.
Mention may be made of the following animal diseases, prevalent
in various parts of the United States, but now apparently in course
of extinction: Glanders in horses, tuberculosis in cattle; cholera
in hogs. In the year 1914 an outbreak of the foot-and-mouth
disease among cattle occurred in the United States, entailing a loss
of millions of dollars.

Effects of These Factors. — The above list of pests and diseases
contains only a few of the commoner and better known ones. It
is evident, however, that climatic conditions, pests and diseases
are factors of uncertainty in agriculture. These factors affect
both the quantity and quality of the farmer's output, whether
field crop or livestock. These factors therefore render coordination
of supply and demand impossible. There must inevitably result
from these great fluctuations in supply corresponding fluctuations
in price. Price fluctuations in turn create a class of risk takers.
The farmers themselves, where the markets are narrow, local, and
unorganized, are of course the risk takers, and take both the gain
and the losses of price fluctuations. In the great staple commodi-
ties sold on the world-market, however, where the organized market
is the rule, a distinct class of risk takers, commonly known as
speculators, has been slowly developed. It must be clearly appar-
ent to every person giving the subject any thought that prices do
not fluctuate because men speculate, but that men speculate
because prices fluctuate. The service of the speculator to the
farmer and the trade in general has often been pointed out by the
Federal Government. For instance, the report of Cotton Ex-
changes ^ makes this point very clear, in the following language :

"Dealings in cotton must always be accompanied by risk, either to the
producer, the merchant middleman, the speculator, or the spinner. Natural
conditions greatly affect the supply, and other conditions the demand, and
both consequently affect the price. Whkt is the equitable distribution of
these risks? It is a general principle that much of the risk should properly
be borne by the speculative class; that is, by those who neither produce nor

^ Report of Bureau of Corporations on Cotton Exchanges; Part 1. 1908^
pp. XVII-XVIII.

20 ANARCHY OF AGRICULTURE

spin cotton, but who are interested simply in making a profit out of the rise
or fall of its price. Whatever justification there may be for the speculator
hes in the fact that he stands ready to take a large share of the risk. His
function is to (1) forecast future natural conditions affecting supply and de-
mand, (2) to obtain as accurate information thereon as possible, (3) to make
the price for future dehveries based on such information, and thus (4) to dis-
count in advance as far as possible, for the benefit of the trade in general, the
effect of such future conditions and thereby (5) keep prices free from violent
fluctuations which otherwise would occur from unforeseen natural causes."

While this report of the government pertains to the cotton
industry, it holds true in all essential respects for all commodities
on the various exchanges. And it makes clear the very significant
fact that this organized speculation lessens price fluctuations
instead of increasing such fluctuations.

This same report quotes with approval the well-known treatise
of Emery on the Stock and Produce Exchanges of the United
States, especially that section of the treatise which makes the
distinction between gambling and speculation. The objective
economic distinction between the two, says Emery, is this: gam-
bUng consists in placing money on artificially created risks of
some fortuitous event. Speculation consists in assuming inevitable
economic risks of changes in value.^

Yields and Prices. — By means of insurance farmers are able
to shift certain risks. Crops are frequently protected by hail
insurance, livestock by livestock insurance. There still remain,
however, inevitable economic risks which come from changes in
supply, changes in demand, and changes in price. A farmer's
prosperity has at least four variable factors in it as follows:

1. Good crops and good prices.

2. Poor crops and good prices.

3. Good crops and poor prices.

4. Poor crops and poor prices.

The relation between yields and prices has been too much
neglected. The Experiment Station Record ^ reviewing a work in
this subject contains these words: ''The author criticizes the views
which he states are generally assumed by many writers and speak-
ers, that large yields are always profitable and the best farmers
are those who raise the largest crops; that large yields are a natural
antidote for the high cost of living; that we should now copy the

2 Emery, Speculation on the Stock and Produce Exchanges of the U. S.,
p. 102.

3 Experiment Station Record, Feb., 1915, p. 191.

SEASONAL MARKETING 21

intensive methods of older countries; and that more capital is
needed for the best results. He believes that it is relatively safe
to invest capital freely upon the farm for the sake of correcting
abnormal conditions and raising the yield to the normal, but that
beyond that point, because of the law of diminishing returns, it
will pay only when prices rise."

The anarchy of agriculture evidenced by frequent overproduc-
tion is made clear by an address of C. J. Brand, of the Bureau of
Markets of the United States Department of Agriculture.^ The
cantaloupe trade was cited by Mr. Brand to show an overdevelop-
ment of the industry due to ignorance as to the development of com-
petitive areas, which in 1914 resulted in disaster to the producers
and to the large distributors. Yet the consumers failed to buy at
any lower prices. ''As usual," says the Record, "the slump in
prices was not reflected in the retail trade, consumers pa3ang prac-
tically as much as in a year of scarcity, while the surplus went to
the dump." The conclusion is that ''until we have a better adjust-
ment of production to market requirements, this problem will
continue to be with us." Carl Vrooman, Assistant Secretary of
Agriculture, discussing farm problems before the 1914 Philadelphia
meeting of the American Association for the Advancement of
Science, corrected some of the false popular impressions as to the
advantages of high acre yields. He showed by statistics that the
largest crops do not necessarily mean the largest net income to
the farmer, and that in years of relatively small production he
often realizes quite as much from his crops as in years of maxi-
mum yield.

Seasonal Marketing. — Another point of great significance to
the farmer must be noted, and that is the seasonal nature of his
product. His chief crops are produced once a year. Yet the crop
is consumed every day in the year. Since the crop is produced
and harvested during a short period, and consumed during the
whole year, there is thereby created the problem of storing, pre-
serving, and financing the agricultural product. What, if anything,
shall the farmers themselves do about it? That the situation
to-day is one of anarchy was strikingly illustrated by one speaker
at the 1915 Chicago meeting of the National Conference on Mar-
keting and Farm Credits. R. W. Hockaday, of St. Louis, the
General Industrial and Agricultural Agent of the M. K. and T.
Ry. Co., in discussing the marketing of the Southern peach crop,

* Experiment Station Record, Feb., 1915, p. 106.

22 ANARCHY OF AGRICULTURE

stated that the St. Louis market could absorb twelve cars of
peaches per day and no more. Yet, on one occasion a Georgia
shipper, desiring to consign peaches to St. Louis, took the precau-
tion to wire Mr. Hockaday for information concerning the peaches
billed that day over the road to St. Louis. A brief examination
disclosed the fact that seventy-five cars were on the way on this
one road, to St. Louis ! No wonder shippers find their commission
men and other consignees sometimes paying prices less than
original cost of production! Where does the blame he? And
where is the remedy? Both rest largely with the shippers.

The problem of marketing and the problem of the organized
exchanges must be discussed in later chapters. But it is obvious
that in some specialized, hmited crop areas a part of the present
anarchy in agriculture can be removed by organized production
and by organized marketing. But the farmer cannot eliminate
all risks. Much speculation in the products of the farm must
ever remain.

QUESTIONS ON THE TEXT

1. Show the significance of lack of coordination of supply and demand in

agriculture. Cite illustrations. Compare other industries.

2. Show why coordination of supply to demand is difficult, and in some re-

spects, impossible. Show clearly the factors of uncertainty.

3. Show that with the existing "anarchy" in agriculture, speculation is

rendered inevitable.

4. Quote the Government report on the Cotton Exchanges. What are the

five functions of the speculator?

5. Quote Emery's definitions of speculation and gambling.

6. Quote Brand's statement about cantaloupe production and distribution.

7. Quote Vrooman's statement about the "fallacy of large yields."

8. Show the fundamental necessities back of storage and financing of farm

crops.

9. Illustrate how market gluts arise. Who is to blame?

QUESTIONS SUGGESTED BY THE TEXT

1. Define anarchy. Can this term be applied to agricultural production and

distribution:

2. Distinguish between speculation and gambling.

3. Do we ever have overproduction in agriculture? If so, who gains thereby?

Who suffers?

4. Would the farmer gain by combining and producing smaller crops? Dis-

tinguish between individual and social welfare.

5. Have vou any suggestions to make concerning the improvement of present

methods of stormg and financing farm crops from harvest time to con-
sumption time?

6. To what extent ought farmers to enter the fields of storing, conditioning,

and financing their crops, and to what extent ought speciahsts (middle-
men) perform these functions? Ought a farmer to speciahze exclusively
in farming?

REFERENCES 23

REFERENCES

1. For statistics of agricultural production see Yearbook of the Depart-
ment of Agriculture.

2. For statistics of the movement of grain crops to market see the annual
reports of the Secretaries of the important exchanges, especially the following:
Winnipeg, The Grain Exchange; Duluth, The Board of Trade; Minneapolis,
The Chamber of Commerce; Chicago, The Board of Trade; Kansas City,
The Board of Trade; St. Louis, The Merchants Exchange.

3. For abstracts from the reports issued by the Experiment Stations of
the United States, and from other agricultural hterature, consult the ''Experi-
ment Station Record," pubhshed by the Department of Agriculture,
Washington.

4. Weld, L. D. H.: "The Marketing of Farm Crops."

Maladies Affecting Animals.

In the Secretary of Agriculture's Annual Report for 1915 he estimates the
loss for the year as follows :

Hog cholera $ 75,000,000

Texas fever and cattle ticks 40,000,000

Tuberculosis 25,000,000

Contagious abortion 20,000,000

Blackleg 6,000,000

Anthrax 1,500,000

• Scabies of sheep and cattle 4,600,000

Glanders 5,000,000

Other livestock diseases 22,000,000

Parasites 5,000,000

Poultry diseases 8,750,000

$212,850,000

CHAPTER III

FARMING VERSUS LAND SPECULATION

As already mentioned in the preceding pages, only half the
land in the United States is now in farms; only half the land in
farms is "improved"; and this improved land, according to some
critics, is not well farmed. It has also been shown in a preceding
paragraph that farm land is passing out of the hands of the dwellers
on the land, and, unless the tendency of the past forty years is
broken, the time is not far distant when the land will practically all
be farmed by tenant farmers or hired labor and not by the owner.

The criticism is also heard with increasing frequency that the
farmer is one-third farmer and two-thirds speculator. This criti-
cism is based on the fact that a part of the farmers aim to make
their profits and do make their profits by selling their land, not
by farming it. Many farmers frankly admit that were it not for
this speculative gain their years of toil would show no balance to
their credit. Indeed, the Assistant Secretary of Agriculture has
stated that "the average farmer is only making wages; he is not
making a profit over his wages and the interest on his investment."^
As long as farmers own the land, the American people will doubt-
less be content to see the farmer receive as a reward for his years
of toil this speculative gain coming from increase in land value.
But when the land passes from the hands of the men who farm it,
the question of "overcapitalized land" will doubtless become an
insistent one, and one raised by the farmers themselves.

Overcapitalized Land. — The agitation among farmers which
led to the "granger laws" for state regulation of railroads was
based on harassing conditions: rates were unsatisfactory and
discriminatory; railroads, especially of the western and Pacific
States, were greatly overcapitalized. Perhaps overcapitalization,
or "watered stock" as it was called, was the most loudly denounced
of the evils. Briefly, the farmer considered it wrong that a road
costing twenty-five thousand dollars a mile should be capitalized
at forty or fifty thousand a mile. Applying this same logic to land
now that was applied to railroads forty years ago, it may be an
evil to capitalize land costing $25.00 an acre at $50.00 an acre —
an evil to the farmer and to the general public.

1 Experiment Station Record. Feb. 1915, p. 105.
24

OVERCAPITALIZED LAND 25

The following case of C. L. Smith — a true story — is typical of
many transactions in country real estate which are now being
made every day throughout the entire United States. In the
year 1907 C. L. Smith, a renter on an Illinois farm, decided to
move westward and buy land in North Dakota. The lUinois land
at this time, of good farming quality, was selling for $150 an acre,
whereas the Dakota land, of equal fertility, was selling at one-
third or one-fourth, or even one-fifth that amount. It should be
added also, that much Dakota land of an inferior grade was on
the market at prices ranging from $10.00 to $40.00 an acre. Mr.
Smith, upon his arrival in North Dakota, was taken in charge by
certain real estate agents. These agents had arranged for the
conditional purchase of a farm of six hundred and forty acres at
$20.00 an acre. This farm the agents then sold to Mr. Smith at
$31.50 an acre, and Mr. Smith, thinking of the one-hundred-and-
fifty-doUar land, considered himself the discoverer of a bargain.
He had been deceived, however, as later developments proved.
This land, in common with other land in this community, was
considered by the actual owners to be worth about $20.00 an acre.
Allowing the agent the commission of $1.50 an acre (a $960 com-
mission), Mr. Smith should have paid $21.50 an acre. Instead of
that, he paid $31.50, or $10.00 an acre too much, a total excess of
$6400 on the section. The agents on an investment of $12,800
made a profit of $7360, or a net profit of 57 per cent. Mr.
Smith paid $4000 in cash when he bought the farm, and gave
a mortgage on the farm for the balance. The farm had been
grossly overcapitalized. It was consequently impossible to carry
the load. This meant one of three possible courses: (1) submit
to foreclosure proceedings, and lose the land and much of what
had been invested in it. This frequently happens. (2) Renew the
loan, thus shouldering the same burden for another period of
years with no more hope of ultimate success. (3) Find a new buyer,
ignorant of conditions (commonly spoken of as a '' sucker") and
sell the land to him at $50.00 or $60.00 an acre. This course would
permit Mr. Smith to recoup his losses and retire with a profit.
The mortgage was foreclosed before it was due, and Mr. Smith
estimated his net loss on the deal as $5,000. When asked to suggest
some remedy for this system of merchandising land, Mr. Smith
wrote, in language more forceful than grammatical, as follows:

" I had enough to pay for one hundred and sixty acres. That is what is
hurting this county, because some of the agents are fleecing the men that
come here with a httle money. They overload them with land and when the

26 FARMING VERSUS LAND SPECULATION

pinch comes they lose all. I am not the only man that has lost all through
them around here. If they would charge $L50 an acre for selHng, we could
stand that all right. And this county would boom if the ones that have come
here could make a success of it, and we could if we were told the truth before
we came here."

The process of ''unloading" land onto the inadequately in-
formed buyer is a practice which has assumed immense proportions
in late years. The tiniest village now can boast of its "Real Estate
Offices/' with one or more men giving their whole time to 'this form
of trading, whereas, a few years ago the marketing of agricultural
lands was largely incidental to other businesses or was done by
private agreements. Apparently the only check to this form of
speculation and value-inflation (since there is ordinarily no organ-
ized Real Estate Exchange in the farm community) is the cycle
of financial panics which visits the United States. In panic years,
if the panic be a severe one, much liquidation in real estate takes
place. This entails fearful losses on the land speculators, including
farmer speculators. A good illustration of this was seen in Western
Canada in 1913 and 1914, when the banks ceased to finance land
trading. This was followed by a serious slump in land values, and
a general depression involving the usual feature of heavy liquida-
tions and business failures.

That real estate values are subject to wide fluctuations, and
hence offer great opportunities for speculative gains, is strikingly
illustrated by the Report of Senator Peffer, on ''Agricultural
Depression, Causes and Remedies," submitted to the Senate Com-
mittee on Agriculture and Forestry, February 15, 1894. This
year was a time of low prices, but was both preceded and followed
by a period of high prices. And this is true of every period of
low prices. The following quotations from this report show the
widespread depression in farm land values:

"In Illinois improved lands fell from $20.81 in 1873 to $11.18 in 1892."

"In Nebraska improved lands fell from $4.60 to $3.72, more than twenty
per cent since 1885."

" In Kansas land was about fifteen per cent lower in 1892 than it was in
1874 or 1884."

" In the New England states lands used for agricultural purposes are not
valued as high as they were in 1875 by thirty per cent."

"There are many local influences which affect prices, and it is only by
averages that we can approximate the general truth in regard to the matter.
When men who own land are out of debt and do not want to sell, they hold
their land as high as they ever did; while, on the other hand, when the owner
is in debt or wants to sell, he does not strenuously hold up the price. From
the best sources of information accessible, the committee are of the opinion
that the prices at which farm lands in the older states could have been sold
during the last five years is at least twenty-five per cent below the level of

A RISE IN SELLING PRICE 27

fifteen or twenty years ago. And if we are guided by the reports of land sales
in foreclosure proceedings, the depreciation has been more than fifty per cent.
In three hundred and eighty-three cases in six counties in one state the lands
sold for but twenty-five per cent of the debt, and the debt was only one-third
the estimated value of the land when the debt was incurred."

Investigating Agricultural Conditions. — Four years after this
date — another cycle of prosperity having failed to develop — Con-
gress passed an act (June 18, 1898) creating the Industrial Com-
mission with powers to investigate and report on agricultural and
other conditions. Volume X of the Industrial Commission's
Report issued in 1901 contains these statements concerning farm
land prices:

"The prices of agricultural land in the Eastern States have generally
fallen, in some cases to about fifty per cent of the figures asked during the time
of high prices. There is said to have been also a general dechne in the price of
land along the Mississippi river. Figures given for Pennsylvania show an
increase in the average price of farm lands between 1859 and 1879 (the high
prices preceding the latter year being explained by the inflated currency),
but a drop by 1889 to a lower price than that of thirty years previous . . .
About 1890, California lands showed the effect of the high prices of fruit in
an increase of values which could scarcely be expected to be permanent. Land
can now be obtained at about one-third, or even less, of the prices prevaUing
at that time."

This decline in farm values may be the best thing, after all,
considering the question from the standpoint of proper capital-
ization versus overcapitalization. For, as L. H. Bailey testifies,
''valuation of farm properties have decreased. It is therefore
apparent, if prices have not depreciated, that the income from
investment in farm lands to-day is relatively greater than a gen-
eration ago. When farm values are low it is the time to purchase
farms if one desires to make a living from the proceeds. In this
view, therefore, the decUne in farm values promises well for the
earning power of farming."

Professor Bailey, however, is led into error in his conclusions
concerning the permanence of low values. He says, "It has been
a fault with farmers, perhaps, that they have considered the
changes in farm values to be merely temporary, and they have
therefore been free to contract debts hoping that the status would
quickly regain itself. The fact seems to be, however, that the
decline in farm values is general and relatively permanent."

A Rise m Selling Price. — Yet the value of farm land increased
in the ten-year period, 1900-1910, by one hundred and eighteen
per cent! Since the land in farms increased during this period by
only four and eight-tenths per cent, it is evident that this enormous
increase in land value is due almost wholly to a rise in the selling

28 FARMING VERSUS LAND SPECULATION

price of land. In short, the average value of land per acre rose
from $15.57 in 1900 to $32.40 in 1910, or one hundred and eight
per cent. In one decade, therefore, the value of the farm land in
the United States was more than doubled. Obviously the real
estate market in its present unorganized condition offers oppor-
tunity for speculative gains rivalling and even exceeding those of
the stock exchange or other organized exchanges. Is the farmer
the beneficiary or the victim of high-priced land and of land spec-
ulation? The farmer who depends for a living on the proceeds of
his farming is clearly the victim, since it is rapidly becoming
more difficult to become a land owner. An increase in the number
of mortgages accompanied by a decrease in tenancy would show
a healthy movement of renters becoming owners. But such a
movement is lacking. On the other hand, an increase in mort-
gages, accompanied by an increase of tenancy, shows an unmis-
takable movement of land ownership out of the hands of the
farmers into the hands of absentee landlords. This movement is
unhappily upon us.

Commercial Value vs. Market Value. — The selling price of the
products of the land determine the commercial value of the land.
When land sells for a price in excess of this value it has a market
value out of line with its commercial value and may be said
to be overcapitalized. This situation often exists, and may
be due to various causes. But whatever the cause, the results
are bad for the would-be land-owning farmer. Edwin A. Pratt
in his book on ''The Transition in Agriculture," gives us a strik-
ing statement of the case from his own observation in England.
Says Pratt:

** Looking in the first place at the price which the would-be peasant
proprietor must pay for his land independently of legal charges, it is certain
that the Enghsh agriculturist who desires to purchase a small holding in the
open market labors under special disadvantages. It is not alone that he has
to compete with a number of others possessed of similar aspirations, but various
causes have combined to give to much of the land in this country — more,
perhaps than in any other country — a market value which is in excess of its
commercial value — that is to say, its value when it is wanted for the production
of commodities for sale. This is especially the case in regard to land which
might be utihzed for residential purposes for the sake of the social advantages
afforded by the ownership of an estate or in the interests of sport. Not only
do established country families seek to increase their properties, for one
reason or another, by incorporating therein any bit of freehold they can secure
in the immediate neighborhood, but the market value may be kept above the
commercial value by reason of the fact that every Englishman, more or less,
who has prospered, thinks it incumbent on him to set up his 'place' in the
country, if he should not have one already. In either case a higher price
would be forthcoming than could be afforded by a cultivator who desired the
land as a means of obtaining a hving thereon. Still more do these considera-

OVERCAPITALIZED LAND BAD THING 29

tions apply in the neighborhood of a town or of a village not too far from a
railway station — that is to say, in precisely those localities which the small
holder who wanted to start market gardening, or some other such business,
would find the most desirable for his purpose. Here he might have to compete
with the retired professional man, merchant, or tradesman, who, though
unable to buy a large estate, wished for a 'bit of land,' which he could either
build on or, at least, feel a pride in owning, and for which he is not disposed
to look too closely at the price, assuming he finds what suits his fancy. So
to begin with, the would-be small owner, standing as a sohtary unit might
agree to buy land at a higher price than he ought to pay — from a commercial
standpoint — even if he had the money. But he has not got the money. He
possesses a certain sum, and this the seller of the land agrees to accept, the
remainder being left on mortgage."

This situation leads Pratt to the conclusion that tenancy at a
fair rent is better than ownership at an overcapitalized valuation.
His words are: "Looking at the matter from the point of view of
first principles, I should say the purchase — provided tenancy on
satisfactory lines can be secured instead — is the more undesirable
because the small holder should be able to do better with his
money. Farming as a business must be run on business lines, and
there ought to be greater profit from capital placed in a business,
with the possibilities of a more or less frequent turn-over, than
from capital locked up in land that is wanted for cultivation,
especially in land bought at, as I have said, more than its commer-
cial valuation."

Overcapitalized land is a bad thing for the farmers themselves,
as the foregoing discussion indicates. It is likewise a bad thing
for the wage-earning class. The outstanding economic fact in our
past history has been the abundance of cheap, fertile land. And
this ''free" land — as long as it lasted — was the one great force
tending to maintain the high rate of American wages. Truly did
Winthrop sense the situation when he wrote in 1645: ''Our chil-
dren's children will hardly see this great continent filled with
people, so that our servants will still desire freedom to plant for
themselves, and not stay but for verie great wages." In a similar
vein wrote a royal official of New York in 1723: "North America
containing a vast tract of land, everyone is able to procure a piece
of land at an inconsiderable rate, and therefore is fond to set up
for himself rather than work for hire. This makes labor continue
very dear ..."

Earnings from "watered-stock" and earnings from the "un-
earned increment" in land value are in essence the same, and are
indeed twin evils. Each man ought to reap where he sows and
what he sows, and no more. How much profit, then, is the farmer
entitled to? A fair answer to this question is contained in the

?

30 FARMING VERSUS LAND SPECULATION

federal government's ''Weekly News Letter to Crop Correspond-
ents," in these words: ^

"The county agent is a part of a great agricultural movement. This
movement has for its ultimate purpose the building up of a country life that
shall be wholesome, attractive, cultured, efficient and profitable. There are
many sectioiis of our country to-day that have one or more of these conditions,
but the sections where aU are found in happy unison are comparatively few.
The desire of those who are thinking on rural problems is that rural communi-
ties everywhere shall be wholesome, attractive, and cultured, and that each
individual shall receive a fair reward for the labor done and the capital in-
vested. In proportion as agriculture is made profitable will the community
become attractive, cultured, and a place wholesome and desirable to live in.

"Just what is meant by a profitable agriculture? Simply this: There
shall be a reasonable return on the capital invested in farming and a reasonable
return for the farmer's labor and managerial abihty. A farmer, like any other
man in any other business, is entitled to just what he earns and no more; but
what he earns should be sufficient to give him and his family some of the
more essential conveniences of modern life, time for study, some recreation,
and opportunity for education of his children. With some money in his
pocket the farmer wiU support the church, place conveniences in his house,
magazines and Hterature on the sitting-room table, and send his children to
the best schools with very httle outside prompting."

QUESTIONS ON THE TEXT

1. Distinguish between land farming and land speculation.

2. Distinguish between fa^-mer and land owner.

3. Quote Vrooman on the farmer's average income.

4. Define and illustrate overcapitaHzed land.

5. Cite the case of Mr. C. L. Smith.

6. Give examples of fluctuations in land value.

7. Quote Bailey on land values.

8. Distinguish between commercial and market values.

9. State and explain Pratt's position as to ownership versus tenancy.
10. Show the interest of the wage earner in cheap land.

11 What profits, according to the Government Weekly News Letter, is a
farmer entitled to?

QUESTIONS SUGGESTED BY THE TEXT

1. Ought the land owner to have the "unearned increment," so-called, on

his land?

2. Is free trade in land the ideal method of land trading?

3. Is it for the pubhc welfare to have cheap land or dear land? Reasons for

your answer.

REFERENCES

1. Pratt, E. A.: "The Transition in Agriculture."

2. For a statement of the Single Tax view of the "unearned increment,"
see "Progress and Poverty," by Henry George; also, "The case for Land
Nationalization," by Joseph Hyder.

3. Whittaker, Sir Thomas : "Ownership, Tenure, and Taxation of Land."

4. BoGART, E. L.: "Economic History of the United States," 229-235;
247-249; 286-299.

5. CoMAN, Katherine: "Industrial History of the United States,"
285-307.

6. Marshall, Wright, Field: "Materials for the Study of Elementary
Economics," 635-640.

2 December 16, 1914, p. 4.

CHAPTER IV, _.; i^'^

THE " BACK TO THE LAND " MOVEMENT

An ideal held by a great many people in this Republic is a
sturdy and substantial class of farmers, owning and tilhng their
own small farms. The farm is pictured in song and story as the
true home of health and happiness as well as the very foundation
of wealth and independence. Doubtless many of our forefathers
shared the opinions of Jefferson when he fondly looked upon
agrarian democracy as the goal of the new Republic; when he
considered a large wage-earning class as well as a large commercial
class (depending upon the ''casualties and caprices of customers")
as full of danger, corruption and subservience. To use Jefferson's
own words: ''Generally speaking, the proportion which the aggre-
gate of other classes of citizens bears in any state to that of its
husbandmen, is in the proportion of its unsound to its healthy
parts and is a good enough barometer whereby to measure its
degree of corruption." As to a wage-earning class: "Let our
workshops remain in Europe . . . The mobs of the great cities
add just so much to the support of pure government as sores do
to the human body ... I consider the class of artificers as
panderers of vice, and the instruments by which the liberties of a
country are generally overturned." What would be Jefferson's
opinion of his country to-day? Just after our Civil War the slogan,
''Forty Acres and a Mule," was taken up by the people of the
North and the carpet-bagger of the South, as the ideal solution
of the negro problem in its economic aspects.

To-day from press and pulpit, from publicists and legislators,
comes the cry, "Back to the Land." Now that seventy million
of our people live in villages and cities, and only thirty million
live in the open country, the problem of the "small farm," of the
"closer settlement" is becoming a very interesting one. The cry
is, "Back to the Land." The drift is away from the land. The
situation is perplexing. What should be the attitude of the honest
patriot towards this condition? What have other peoples in other
lands found out about this question of the small farm?

The question of the big farm versus the small farm was a
very hotly debated question in England three-fourths of a century
ago. Good farming must perish with the breaking up of large

31

32 THE "BACK TO THE LAND" MOVEMENT

farms, contended one side; not so, replied the other side. One
British writer, a friend of the small farm owner, stated the matter
concretely as follows: '^Our agricultural writers tell us, indeed,
that laborers in agriculture are much better off as farm servants
than they would be as small proprietors. We have only the mas-
ter's word for this. Ask the servant. The colonists told us the
same thing of their slaves. If property is a good and desirable
thing, I suspect the smallest quantity of it is good and desirable;
and that state of society in which it is most widely diffused is the
best constituted."

Norway is cited as an example where peasant proprietors are
of oldest date and most numerous in proportion to population,
and where as a consequence social and economic conditions are
of the best. Concerning the effects of peasant proprietorship on
the continent, the same writer goes on to say : ^

"If we listen to the large farmer, the scientific agriculturist, the political
economist, good farming must perish with large farms; the very idea that
good farming can exist unless on large farms cultivated with great capital,
they hold to be absurd. Draining, manuring, economical arrangement, clean-
ing the land, regular rotations, valuable stock and implements, all belong
exclusively to large farms, worked by large capital, and by hired labor. This
reads very well; but if we raise our eyes from their books to their fields, and
cooUy compare what we see in the best districts farmed in large farms with
what we see in the best districts farmed in small farms, we see, and there is no
blinking the fact, better crops on the ground in Flanders, East Friesland,
Holstein, in short, on the whole Une of the arable land of equal quahty on the
continent from the Sound to Calais, than we see on the hne of the British
coast opposite to this line, and in the same latitudes, from the Firth of Forth
aU round to Dover. Minute labor on small portions of arable ground gives
evidently, in equal soils and climate, a superior productiveness, where these
small portions belong in property, as in Flanders, Holland, Friesland, and
Ditmarsch in Holstein, to the farmer. It is not pretended by our agricultural
writers, that our large farmers, even in Berwickshire, Roxburghshire, or the
Lothians approach to the garden-like cultivation, attention to manures,
drainage, and clean state of the land, or in productiveness from a small space
of soil not originally rich, which distinguish the small farmers of Flanders,
or their system. In the best-farmed parish in Scotland or England, more land
is wasted in the corners and borders of the fields of large farms, in the roads
through them, unnecessarily wide because they are bad, and bad because they
are wide, in neglected commons, waste spots, useless belts and clumps of sorry
trees, and such unproductive areas, than would maintain the poor of the parish,
if they were all laid together and cultivated. But large capital applied to
farming is of course only apphed to the very best soils of a country. It cannot
touch the small unproductive spots which require more time and labor to
fertilize them than is consistent with a quick return of capital. But although
hired time and labor cannot be apphed beneficially to such cultivation, the
owner's time and labor may. He is working for no higher returns at first from
his land than a bare living. But in the course of generations fertihty and value
are produced; a better living, and even very improved processes of husbandry,

^ Laing, Notes of a Traveler, p. 299 et seq.

IN FRANCE 33

are attained. Furrow draining, stall feeding all summer, liquid manures, are
universal in the husbandry of the small farms of Flanders, Lombardy, Switzer-
land. Our most improving districts under large farms are but beginning to
adopt them. Dairy husbandry, even, and the manufacture of the largest
cheeses by the cooperation of many small farmers, the mutual assurance of
property against fire and hail storms, by the cooperation of small farmers —
the most scientific and expensive of all agricultural operations in modern times,
the manufacture of beet sugar — the supply of the European markets with flax
and hemp, by the husbandry of small farmers — the abundance of legumes,
fruits, poultry, in the usual diet even of the lowest classes abroad, and the
total want of such variety at the tables even of our middle classes, and this
variety and abundance essentially connected with the husbandry of small
farmers — all these are features in the occupation of a country by small pro-
prietor-farmers, which must make the inquirer pause before he admits the
dogma of our land doctors at home, that large farms worked by hired labor
and great capital can alone bring out the greatest productiveness of the soil,
and furnish the greatest supply of the necessaries and conveniences of life to
the inhabitants of a country,"

In France. — The British writer of over a century ago who was
the warmest advocate of large farms, Arthur Young, traveled
over nearly the whole of France. Even at that day France was
known as the land of small farms, due to the repeated subdivisions
of the land. Yet inveterate enemy of small farms as Young was,
he found remarkable evidence of excellent cultivation in the little
fields of France in the years 1787, 1788 and 1789. In his "Travels
in France" we read, for instance, the following:

''Walk to Rossendal, where M. le Brun has an improvement on the Dunes,
which he very obHgingly showed me. Between the town and that place is a
great number of neat httle houses, built each with its garden, and one or two
fields enclosed, of most wretched blowing dune sand, naturally as white as
snow, but unproved by industry. The magic of property turns sand to gold.
. . . From Gauge, to the mountain of rough ground which I crossed, the ride
has been the most interesting which I have taken in France; the efforts of
industry the most vigorous; the animation the most Hvely. An activity has
been here, that has swept away all difficulties before it, and clothed the very
rocks with verdure. It would be a disgrace to common sense to ask the cause;
the enjoyment of property must have done it. Give a man the secure posses-
sion of a bleak rock, and he will turn it into a garden; give him a nine years'
lease of a garden, and he will convert it into a desert . . . Take the road to
Moneng, and come presently to a scene which was so new to me in France,
that I could hardly beheve my own eyes. A succession of many well-built,
tight, and comfortable farming cottages built of stone and covered with tiles;
each having its httle garden, inclosed by cHpt thorn-hedges, with plenty of
peach and other fruit trees, some fine oaks scattered in the hedges, and young
trees nursed up with so much care, that nothing but the fostering attention
of the owner could effect anything like it. To every house belongs a farm,
perfectly well enclosed, with grass borders mown and neatly kept around the
corn fields, with gates to pass from one enclosure to another There are some
parts of England (where small yeomen still remain) that resemble this country
of Beam; but we have very httle that is equal to what I have seen in this ride
of twelve miles from Pau to Moneng. It is all in the hands of Httle proprietors,
without the farms being so small as to occasion a vicious and miserable popu-
lation. An air of neatness, warmth and comfort breathes over the whole,
3

34 THE ''BACK TO THE LAND" MOVEMENT

It is visible in their new-built houses and stables; in their little gardens; in
their hedges; in the courts before their doors, even in the crops for their poultry,
and the sties for the hogs. A peasant does not think of rendering his pig
comfortable if his own happiness hang by the thread of a nine years' lease.
We are now in Beam, within a few miles of the cradle of Henry IV. Do they
inherit these blessings from that good prince? The benignant genius of that
good monarch seems to reign still over the country; each peasant has the fowl
in the pot."

Peasant Proprietors. — John Stuart Mill, in discussing ''peasant

proprietors" in 1848, after reviewing the evidence of many different

writers, sums up his own conclusions in these sane words:

''The experience, therefore, of this celebrated agriculturist (Arthur
Young) and af>ostle of la grande culture, may be said to be, that the effect of
small properties, cultivated by peasant proprietors, is admirable, when they
are not too small; so small, namely, as not fully to occupy the time and atten-
tion of the family; for he often complains, with great apparent reason, of the
quantity of idle time which the peasantry had on their hands when the land
was in small portions, notwithstanding the ardor with which they toiled to
improve their httle patrimony, in every way which their knowledge or ingen-
uity could suggest. He recommends accordingly, that a limit of subdivision
should be fixed by law; and this is by no means an indefensible proposition in
countries, if such there are, where the subdivision, having already gone farther
than the state of capital and the nature of the staple articles of cultivation
render advisable, still continues progressive. That each peasant should have
a patch of land, even in full property, if it is not sufficient to support him in
comfort, is a system with all the disadvantages, and scarcely any of the benefits
of small properties; since he must either hve in indigence on the product of
his land or depend as habitually as if he had no landed possessions, on the
wages of hired labor; which, besides, if all the lands surrounding him are held
in a similar manner, he has httle prospects of finding. The benefits of peasant
properties are conditioned on their not being too much subdivided; that is,
upon their not being required to maintain too many persons, in proportion to
the produce that can be raised from them by those persons."

These words of Mill have an interesting confirmation in the

so-called Wilson-Wallace Report of 1914, a report made by two

qualified agricultural experts of lowa.^

"We have also made a pretty thorough investigation," says this report,
"of the methods used by the British government to furnish land to the land-
less. There are four or five counties in Ireland where the land is inferior, the
rainfall very heavy, and the people very poor, hving on very small farms, which
can at best afford them only the food needed to support their families, whose
male members spend the summers in England or Scotland, working for money
to provide the winter necessaries for the family. The congested district board
has bought up the lands in these counties, has divided them into economic
areas or holdings large enough to support a family, twenty acres being the
minimum, and is building houses on them. It is placing the congested popu-
lation on these areas, charging them three and one-haLf per cent interest on
the value of the land for sixty-eight and one-half years, at the end of which
time they own the land in fee simple. They work under very strict limitations,
however. They cannot sell or divide the land."

2 Agricultural conditions in Great Britain and Ireland. By James Wilson
and Henry Wallace. Pubhshed by the Iowa Department of Agriculture,
Des Moines.

IN HOLLAND 35

Edwin A. Pratt, a British writer on present day problems in
Agriculture, a friend of tenancy rather than ownership, has much
to say concerning peasant proprietary at home and abroad.^ He
criticises the "excessive degree to which the subdivision of small
properties has been carried" in France, Generation after genera-
tion this subdivision has gone on. Says Pratt:

"Even again a property of 20 to 25 acres may be represented by 30, 40,
or 50 small patches and parcels scattered over an entire commune ... In
the cultivation of these scattered fragments of land the practice followed by
successive generations of peasant proprietors of France has been to produce
a little of everything — vines, vegetables, corn, oats, barley, hemp, etc. — on the
same soil irrespective of its suitabihty for such crops, the great idea of the
cultivator being that he should avoid spending any money on the supply
of his domestic wants . . . But the work of cultivating, mainly by hand,
so many separate morsels of land, for the production of so many differ-
ent crops, represents a degree of toil that has often been only slavery under
a different name."

Pratt quotes Lafarque, Lavergne, Michelet, Verney, Lecou-
teaux, and other French writers to bear out his contentions.
Financially, says Pratt, the French peasants are in a bad way,
since ''few of the peasants hold their land free of mortgage,
and many of them are heavily indebted besides." And in spite
of the recent advance in agricultural unions and cooperative
enterprises, says Pratt, "the fundamental disadvantages, both
moral and material, inherent to the system of peasant proprietary
still remain."

In Holland. — Speaking of Holland the same writer says: "In
Holland the position brought about by peasant proprietary is, in
some respects, still more acute than in France." Here most
"farms" are under four acres in size, and very few contain over
ten acres. The Dutch landowners are generally satisfied with a
return of two and one-half to three per cent. The small holdings
of a farm usually comprise, not one piece of land, but many differ-
ent strips or parcels. The parceling of the land into these long
strips is clearly illustrated in Pratt's book by a reproduction of
the plan of the commune of Vledder (Drenthe), Holland. The
average dimensions of a strip of land in one part of this commune
is 380 yards by 14 yards. In one instance there is a length of
428 yards to a breadth of 4 yards. Another strip shows a length
of 1275 yards and a width of 22 yards. Mention is made of one
wealthy farmer whose holdings comprise 90 acres, consisting of
78 separate strips of land in different parts of his commune.

3 Pratt, E, A. The Transition in Agriculture. London, 1909. John
Murray, Pubhsher, one shilling.

36 THE "BACK TO THE LAND" MOVEMENT

Concerning the Danish " peasant proprietors," whose thrift is
much heralded in America, Pratt has this to say:

" Nominally, the peasant proprietors who constitute so important a section
of the Danish people are freeholders; practically they are saddled with a
mortgage debt estimated at about $300,000,000, and representing 55 per cent
of the value of their farms, with buildings, stock, and improvements. The
debt is largely, though not entirely, due to certain credit associations which
were formed in Germany in the 'fifties to enable the Danish agriculturists to
purchase their farms or holdings, mortgages up to 50 or 60 per cent of the
purchase price being granted, with repayment extending over periods of from
50 to 100 years . . . Interest and repayrnent of principal still constitute a
heavy burden, and many a Danish farmer is, with all his family, working for
long hours, and looking to England for the profits he makes on his produce,
not so much for his own gain as to satisfy the demands of his German creditors."

Effect of Cooperation. — With the coming in of successful cooper-
ation in Denmark — perhaps the world's best example of cooper-
ation— and with the anxiety of the farmers to buy the land there
came a substantial increase in the price of the land. Thus it
comes about, says Pratt, that ''the Danish small holder who
becomes a peasant proprietor starts by having to pay an altogether
artificial price for the land he purchases; he sinks in the ownership
of that land present capital which would otherwise be available
for the purchase of stock and for other expenses; and he incurs,
in place of rent, a rigid mortgage debt unduly swollen by the exces-
sive price he has agreed to pay for his farm.'*

An Objection to Small Holdings. — And as a final objection to
the very smaU holding, Pratt has this to say:

" And then there is that last problem of all for the solution of the small
owner! What is to become of his few acres when he dies? If he leaves them
to his widow and she sells, she will do so at a disadvantage. If he divides
his holding equally among his children, and these in turn, divide their share
among their children, it will not be long before a state of things is reached
analogous to that found in certain parts of Italy, where twenty-five per cent
of the peasants have properties of less than one-fourth acre each."

Passing now to the German farmer, we have a vivid picture
of his customs, as given in a report by F. T. H. von Engelken
of Florida:^

*' German Customs. — It can well be beheved that to an American farmer
a walk through the country in Germany is full of interest. At first glance
many of the customs and conditions are incomprehensible, and, to our large
ideas, appear almost absurd. It is only in discussing with the German farmer
his conditions and giving him an idea of those existing in our country that the

*63 Cong. 1 Sess. Sen. Doc. 201. The German Farmer and Cooperation.
F. J. H. von Engelken, Washington, 1913.

THE GERMAN FARMER 37

underlying principles and unyielding circumstances which control German
agricultural operations are made clear, and that an idea is obtained of the
reasons which make necessary their pecuHar methods.

"It must be borne in mind from the first that Germany is a country, not
of farms, or even small farms, but of patches of land. A German farmer may
own as high as 100 acres of land, but instead of lying in a body, as with us,
and being cultivated in large fields with modern tools, his entire holding will
be broken up into innumerable small plots with, perhaps, no two adjoining,
and these plots scattered over the country on all ^ides of the village in which
he makes his home. The entire country is therefore divided into small tracts,
generally oblong in shape, ranging from 15 to 20 feet wide and from 200 to
400 feet long. These tracts are never separated from each other by fences,
for fences are an almost unknown quantity in agricultural Germany. The
dividing line between two tracts is marked by a stone set in the ground, and
so closely are they planted that if three adjoining tracts were planted in the
same grain crop it would be impossible for a stranger to definitely locate any
one of the three without hunting up the boundary stone. It is rarely the case,
however, that adjoining tracts are planted in the same crops, for they belong
to different owners who plant independently and what they wish. In walking
through the country it is therefore quite a usual sight to see a plot of land 30
feet in width, and perhaps 300 feet in length, planted in rye, adjoining it one
12 feet in width and of the same length planted in stock beets, then one 20 feet
wide of the same length in oats, then one 40 feet wide, same length, in potatoes,
then one perhaps 25 feet wide in wheat, and so on through the entire fist of the
various crops grown in that particular section. These tracts may each belong
to a different farmer in that community, and each farmer there will own from
20 to perhaps 100 such tracts scattered all over the 'Bezirk' or locahty in
which he lives. In the hay country, for instance, it is a common sight to see
what appears to be a field of 40 acres or more of hay, which at first glance
would appear to be a very respectable hay field, according to our ideas. A
walk into it, however, will show that it is dotted all over with boundary stones
showing that it is owned, not by one man, but perhaps by fifty, each of whom
when the time comes will cut his Httle patch out of the field whenever he is
ready, and moreover, will cut it with a scythe as his forefathers have done for
generations. The value of such land ranges from $300 to $1000 per acre . . .

"How Germans Live. — Having thus given a brief outline of the peculiar
system under which the German farmer operates, let us follow one to see
where and how he lives, for it is apparent that he does not live on the land
among his crops.

" Germany is literally dotted with villages, and these villages are so unlike
anything in our country that they must really be seen to be appreciated. Rang-
ing in size from 10 to 200 homes and with a population of from 50 to 1000,
they are scattered all over the country as if sown there by some giant hand.
Rarely as distant one from the other as two miles, there are often two or three
clustered almost within a stone's throw of each other, and they are as peculiar
and as striking in their difference from our country towns as are the methods
under which their inhabitants work from ours.

"Throughout almost entire Germany the ground plan of the farmer's
home is the same. The buildings are always of brick or stone (the very old
houses being made of a framework of timbers with a rubble plaster filling),
and the stables and storehouses are also built of the same lasting and non-
combustible materials. Roofs are of tile, it now being against the law to use
thatch. The house always fronts on the street or road. Built against one wall
of this is the storehouse, a continuation of this is used for stables, and from
this again continue the sheds for tools, etc. This group of buildings is built
up on four sides of a square, forming in the center a large court. On one side
of the house is the gate opening into the road, and when this is closedthe whole

38 THE "BACK TO THE LAND" MOVEMENT

place is secure from trespass . . . The outbuildings are also substantially
built with the second floors supported either by heavy timbers or by iron beams.
The storehouse is used for storing the crops from the fields, there being no
buildings of any kind on the land. The stables are used for the milch cows
and for the beef cattle being fattened, as well as, of course, for the necessary
horses. It is one of the peculiar customs of Germany that wherever the soil
is rich and is highly cultivated the cows and hogs and beef cattle are never
taken out of the stables after once being put in. They are literally in for life.
Green food is brought to them daily, and they are well taken care of. Cattle
are chained to their stalls, each with its drinking trough, and they are daily
cleaned off and bedded down knee deep in straw. Hogs are kept in the same
way. Once in their pens they remain there till sold to the butcher; they eat
and sleep and grow, nothing else. This system, while apparently very trouble-
some, is in vogue for two reasons; first, the land is too valuable for pasturage,
as well as being in too small tracts, and secondly, by keeping hvestock in
this manner every bit of manure is saved, and manure, as one farmer aptly
stated, is the life of German agriculture.

^^ Saving Fertilizer. — The method of saving this manure is an excellent one,
and is one that could be used to great advantage by our farmers. In the center
of the court around which stands the buildings is a large square pit about five
feet in depth. On one corner is a runway by means of which a wagon can be
run into the pit to facihtate loading. This large pit is for the dry manure,
and into it is thrown everything with any fertihzing value.

"Between this and the stable is a deep concrete-lined well, much deeper
than the dry manure pit, and this is used for collecting the liquid manure.
This well is made water tight, and into it lead drains from all the stables and
pens, as well as from the dry-manure pit. The Hquid thus collected is pumped
from this well into tanks and taken to the fields, where it is sprayed on the
land. It can be stated here that this economical, thrifty, and intelligent use
of natural fertiUzers has made Germany a farming nation which, with a country
smaller than the State of Texas, and with one-third of its area covered with
forests, produces 95 per cent of its own food products, and its population is
around 65,000,000.

" Women do the Work. — In Germany, it must be understood, the greater
portion of the farm work is done by the women. It is a common sight to see
women hoeing or pitching hay or spreading manure, and they do it well and
cheerfully. The girls of the poorer famiHes go into service as maids, which
means that they do not only a share of the housework, but also their full
proportion of the work about the stables and in the fields. For this service
a girl of, say, sixteen or seventeen years wUl receive wages of three dollars a
month, with board and lodging. She becomes a member of the family and is con-
sidered and treated as such. It would be an interesting experience for some of
our farm workers to try to keep up with one of these young girls in a day's work.

"The tendency in Germany is away from tenant farming and towards
ownership. This movement is of course encouraged by the Government,
which, in many cases, provides the medium for the conversion of large estates
into small holdings, extending at the same time a helping hand to the small
farmer in the purchase of the subdivisions. Other than this breaking up of
large estates, real estate transfers in agricultural Germany are the exception
rather than the rule. In fact, it is frequently impossible to buy from the small
farmers their holdings. Instances are common where two or three times the
value has been oflfered and refused."

In Australia. — Let us turn now to a country of large holdings,
Australia. This country is generally recognized as one having too
large parcels of land in its ^' farms." This feeling led the Legis-

IN AUSTRALIA 39

lative Assembly of Victoria, Australia, to pass a series of "Closer
Settlement Acts" having for their aim the breaking up of the
larger holdings and the placing of the smaller farms in the hands
of actual owners.

These acts furnish land to the settler on what was intended
to be liberal terms. The settler has thirty-one and one-half years
to pay for his land, his annual payment (principal and interest)
being 6 per cent. And when he makes improvements, the Govern-
ment advances him a loan to the value of sixty per cent of his
improvements; likewise he secures liberal advances for the purchase
of stock. The Government, in carrying out these Closer Settle-
ment Acts from 1904 to 1914, in the dry, irrigated area, bought
some 87 large estates, containing a total of 468, 188 acres. The
original payment for these lands was about $30.00 an acre, but
the additional ''loading" on this cost, due to various expenses,
brings the cost price up to $35.00 an acre. These lands were
divided into some three thousand, three hundred and seventy-six
allotments for sale to settlers at cost, on the liberal terms named
above. To quote from the Government's Report on the adminis-
tration of these acts: ^

"The whole design of the Closer Settlement Legislation as may be gath-
ered from its apparently liberal terms of repayment, is to enable men, experi-
enced and able in farming pursuits, but possessed of limited capital, to get
on to their own holdings, and stay there. The conditions imposed by such
legislation, however, often defeat its own purpose."

The report exposes some very interesting conditions, the most
important of which may be profitably reviewed here. Wheat
growing is mainly relied upon by the settlers on these allotments.
And, oddly enough, the farms have proved too small for profitable
wheat growing. The average size of the wheat farm in certain
quarters is 300 acres, and the least area on which a satisfactory
living at wheat-growing can be made in this region is given as
six hundred acres by the settlers. Again, in carrying out the acts,
some unsuitable land was unloaded onto the State at a good price.
This land is known as dry-farming land, and hence suited only to
cereal growing and stock raising. During the investigation carried
on by the committee making this report, the chairman of the
Settlement Board was asked in effect, "Can a man live on three
hundred acres of land suitable only for wheat-growing (that is,
which does not permit of combined wheat growing and dairying

^ Report from the Sub-Committee of the Cabinet on the Administration
of the Closer Settlement Acts. Victoria, Melbourne, Aus., Feb. 3, 1914.

40 THE "BACK TO THE LAND" MOVEMENT

or grazing) at $40.00 per acre, which land will only carry one
'wool' sheep to the acre?" His answer was disconcerting. He
said, ''I do not think so." Settlers in this region impressed on
the committee that the least area on which a satisfactory living
at wheat growing could be made was six hundred acres, or, twice
the average size allotment held by settlers. Hence the result
of many years of experimentation in ''closer settlements" in the
dry area of Australia proved that small holdings are not a success
under certain conditions; that larger holdings must be encouraged
under certain circumstances; and that in any event the size of
the holding should be governed by such economic conditions as
the nature of the soil and climate, the product of the soil, and the
relation of this product to the wide question of supply and demand.

In New Zealand the farming industry is receiving the closest
attention. At the 1916 meeting of the New Zealand Farmers
Union, held at Wellington, among the important matters discussed
was that of the adoption of more effective measures for preventing
the increase of larger holdings of land, it being considered detri-
mental to the development of the country in general.

The Problem in the United States. — Two classes of our people
are enthusiastically advocating the "Back to the Land" move-
ment. Many of these accept the forty-acre farm unit as the ideal.
These two classes are the editors of our city papers and the "High
Cost of Living" sufferers, also city dwellers. To the city dweller,
one cure for the high cost ot living is cheap food. But while cheap
food would be good for the city, it would be bad for the farm.
Conversely, dear food is good for the farmer, since he has it to
sell, but bad for the city man.

The problem is a complex one. The metropolitan editors
usually say: "Be independent. Be good citizens. And by quitting
the city for the farm, you will become both." Such a readjustment
of our population, should there be any considerable drift to the
land or development of small holdings, would demand a serious
consideration of these economic problems: (1) Subtract labor from
the city. This would decrease the output of what? If this shift
would merely decrease the production of brass jewelry, artificial
flowers and feathers, gewgaws and luxuries, a gain to society rather
than a loss would occur. Such a change in consumption would
doubtless be welcome — if it could be effected. (2) Add labor to
the land. This would increase the output of what? More of the
staple crops — corn, wheat, cotton, etc. — are not wanted. Addi-
tional labor thrown into competition with the farmers now engaged

WHAT ARE LUXURIES? 41

in the production of these staples would simply lower the earnings
of all thus employed to a meager subsistence level. In fact it
frequently happens now that there is an overproduction of these
crops, resulting in hardship to producers, and in Uttle or no benefit
to consumers.

The testimony of LeGrand Powers, before the United States
Industrial Commission at Washington, in 1899,^ is especially
interesting in this connection.

Question: What have you to say in regard to the decline in the price of
agricultural products in the last, say, thirty years?

Powers: There has been a very large decline at points where the price is
affected by the cost of transportation ; there has been a less decline in points
from which that transportation has carried the produce. There has been a
decline, but small, in articles that have not been overproduced; there has been
an enormous declme in the articles whose production has increased faster than
population . . .

Question: That holds good in all farm products, grains, cotton, etc.?

Powers: I believe that that principle in general appUes to-day the same
as it did two hundred years ago.

Question: The capacity to consume, by purchase or otherwise, has as
much effect on prices of products as the question of overproduction or under-
production?

Powers: That comes in as a factor slowly modifying prices. With certain
articles it has far greater influence than with others. The amount of bread
which a man can eat, the number of pounds of breadstuffs, including wheat,
com, oats and all others that we use for human food varies but httle. We may
change the form of it, but the number of pounds a human being eats is sub-
stantially the same. He may substitute commeal or oatmeal for wheat, but
the number of pounds consumed will be substantially the same. The general
proposition is not true to so great an extent with articles of food that may be
called luxuries. The rule governing the consumption of strawberries or Cali-
fornia oranges or pears or fruit is quite different. Their consumption may be
increased enormously, and such increase may exert but a Httle influence in
decreasing the consumption of these other things. As showing something of
the power to increase the consumption of food luxuries, I wm mention the
fact that MinneapoHs, as a center of consumption and distribution of the
Northwest, shows a doubling of fruit sales every three years for the last few
years. Population has been doubling once every fifteen years, but the sales
of fruit double every three years, or eight times as fast as population. A
certain portion of the reUef of agriculture must come from an increased con-
sumption of these things, which represent relatively a large amount of labor.
The increased demand of our people in the United States for these luxuries
represents about as much for the farmer as our increased exports. Thus, note
canning, which represents one phase of this business. It began about 1865
or 1870. Now the amount of fruits, vegetables, fish, and meat that is con-
sumed in cans in this country is very great."

What are Luxuries? — The "luxuries" mentioned by Mr.
Powers are now looked on as necessaries, rather than as luxuries,
particularly the California oranges. The 1914 report of the
general manager of the California Fruit Growers' Exchange,

6 U. S. Industrial Commission Report, Vol. X, p. 186.

•X

42

THE " BACK TO THE LAND " MOVEMENT

G. Harold Powell, has this to say on the consumption-overproduc-
tion problem:

"During the past few years the Exchange has increased the per capita
consumption of citrus fruits by advertising. The population of the United
States has increased 21 per cent during the past decade. The consumption
of CaUfornia oranges increased 74.6 per cent during the same period . . .
The citrus fruit crop of California increases 255 per cent from 1895 to 1900;
71.7 per cent from 1900 to 1905; 10.9 per cent from 1905 to 1910; and 48.5
per cent from 1910 to 1914. The production will increase rapidly in the future,
the acreage having increased 128.9 per cent in the last decade. The in-
crease in shipments of citrus fruits from
Florida and California have more than
doubled in the last decade. The ex-
change organizations have, therefore,
an obUgation, not only to sell their fruit
wisely from year to year, but to develop
a distributing and selling system and an
advertising poUcy at the same time
which wiU cause consumption to keep
pace with the increase in production.
Only through the stimulation of con-
sumption in this way can the future
financial stability of the two-hundred-
miUion dollars invested in the California
citrus industry be assured. When pro-
duction exceeds consumption, then the
investment of the grower is jeopardized
. . . There are certain features of the
California industry to which the ex-
change members must give serious con-
sideration. They relate to the increase
in production and to the future sta-
bihty of many investments . . . The
solution of the problems outlined will
depend primarily on a large increase in
the per capita consumption of citrus
fruits and the ability of California to
meet successfully the competition of
Florida oranges and grapefruit and of ItaHan lemons. There are a few lead-
ing fundamentals which the CaUfornia industry must recognize if it meets
these problems successfully. There must be an improvement in the average
standard of the fruit that leaves the state, both in grade and in keeping quality.
This makes it imperative to develop the manufacture of the lower grades
into by-products . . . There must be an improvement in the care of groves
so that more fruit of higher quality may be produced per acre; and in the hand-
ling of the fruit so that decay and other preventable losses are eliminated . . .
Fruit of good eating quahty only can be shipped in the future, if the industry
is to maintain its integrity with the consumer . . . The distribution of the
oranges and lemons must be uniform throughout the year ..." (Fig. 6).

This lengthy quotation from the manager's annual report has
been given to illustrate the significant fact that a great industry
can be conducted in such a way as to improve the product from
year to year, and at the same time make this product cheaper to
the consumer and bring more to the producer. And the whole

Fig. 6. — G. Harold Powell, Manager of the

CaUfornia Fruit Growers' Exchange, Los

Angeles, Cal.

TESTIMONY OF PROMINENT WITNESSES 43

process has been perfectly simple. Advertising has widened the
market. The widened market has made possible certain large-
scale, cooperative processes in production and marketing and a
standardization, whereby all possible wastes have been ehminated.
This has left more income to the producer of the fruit, and a smaller
cost for a better orange to the consumer. It has produced "sav-
ings," not "profits," as the cooperators term it.

Concerning the standardizing of the product and the advertis-
ing of it, the manager above quoted goes on to say:

"Primarily, the function of our advertising is to increase the consumption
of citrus fruits. To do this it is necessary to have a brand around which we
can build our advertising arguments. This brand is the consumer's protection.
It is his guarantee as to the quality of the fruit. In other words, we want him
to feel that all he needs to know about an orange or lemon is that it is "Sun-
kist." We must make the consumer realize that the name "Sunkist" on an
orange or lemon means just what the Sterling mark means on silver. Our
advertising will create in the minds of the consumers a pubhc consciousness
of the food value of oranges and lemons. This can only be done by maintaining
the highest possible standard of quality, for unless an article has quahty, it
cannot be successfully advertised. The permanent prosperity of the citrus
industry depends on getting a sufficient number of people to use oranges and
lemons, and this can most thoroughly and economically be accomplished by
giving the public the reasons why they should use them and suggesting to
them the various ways in which they can be served. Advertising is not a
mysterious thing. It is simply teUing the people the truth about the thing
we have to sell and telling them through those channels in which they have
confidence and to which they are accustomed to look for information and
guidance."

The foregoing discussion is given at some length to illustrate
the truth that an increase in production is good for the farmer
where an increase in demand keeps pace with such increase in
production, but that an increase in the production of staple crops,
where demand is stationary, is bad for the farmer.

Testimony of Prominent Witnesses. — The bonanza farm of the
West and Northwest is a wheat farm. It stands for specialization.
The small farm, on the other hand, is generally used for diversified
farming. In industry the trend of modern times is towards special-
ization. In farming there are two discernible tendencies, the one \
towards specialization on the large farm, the other towards diver- ) \,
sification on the small farm. The advantages of these two are '
open to debate. Doubtless local conditions must be the deciding
factor in either case. Volume X of the Industrial Commission
Report quoted above, contains the following digest of testimony,
pro and con, on the advantages of the small farm, as given by
practical farmers.^

7 Report of Industrial Commission. Vol. X, Washington, 1901, pp.
CXCVI-CXCVII.

44 THE "BACK TO THE LAND" MOVEMENT

Robert Ransom Poole, Commissioner of Agriculture, Alahamn,. —
Mr. Poole says the farmers in the sandy counties of Alabama are
more progressive than the large farmers. Mr. Poole thinks that
if the farmers could be induced to sell off their lands in smaller
tracts (than three hundred and twenty to two thousand) it would
be much better for the country as a whole, but the person who
owns property paying from ten to fifteen per cent on the invest-
ment is very loath to part with it.

Harry Hammond, Cotton Planter, Beech Island, South Carolina.
— ''I know of no record in history where a race of small proprietors
has been prosperous. Everywhere they seem to form the wretched
residuum of labor after all other occupations are supplied."

William Budge, Farmer and Real Estate Dealer, Grand Forks,
North Dakota. — Mr. Budge says there are several big farms in
North Dakota, and mentions one of above seven thousand acres.
He adds that he would like to see them all out of the way. They
take up so much space that they hurt the school districts. The
owners ship in their supplies and ship their wheat out, and ship
their men in and out. The plowing is done with gang plows . . .
One man can handle one hundred and sixty acres on a farm of
that kind. The employees are generally single men. The farni
owners hire a crew in the spring and let them go in the fall, except
one or two to take care of the farm. Mr. Budge thinks some of the
big farms are profitable and some are not, depending on how they
are handled. The land has grown in value, and money is made in
that way.

Brynjolf Prom, Banker and Farmer, Milton, North Dakota. —
Mr. Prom (who owns and farms 1120 acres) says the effect of
bonanza farming is not good. The bonanza farmers do not
patronize the villages, but ship in goods from the east, and act
as wholesale grocery houses for themselves. They are also proba-
bly a drawback in the way of school privileges, which they do not
need, and if there are small farms wedged in between bonanza
farms the occupants of the small farms suffer. The bonanza farms
are divided up into different parts with a foreman for each part.
Each has a Httle village of its own. The hired help are usually
single men; only the foreman is married. The bonanza farms
are well conducted upon strictly business principles, the farming
is done more scientifically and economically than on the small
farms, and the percentage of profit is larger; but the general
results to the people of the country are not good, and the people
would generally favor the abolition of bonanza farming.

SOCIAL VIEWPOINT OR INDIVIDUAL VIEWPOINT ? 45

M. F. Greeley, Stock Farmer; Editor of the "Dakota Farmer/'
Gary, South Dakota. — Mr. Greeley considers bonanza farming a
curse to the country and to the man who tries it. If carried too
far, after population gets more dense, it will keep thousands of
men from having homes of their own. It employs men in squads,
thus eliminating their individuality and independence. Those
employed on these farms have to work with the worst kind of
men. The soil is abused and then goes to other people in small
holdings to be built up by careful rotation, stock farming and
tillage. The bonanza farms are owned by men who spend their
money in the cities or in other States. They rot the public schools,
and detract much from the social life of the country. Mr. Greeley
does not know of one very large farm that has been running for
some time that is now pajdng, and says bonanza farming is on
the decrease.

Franklin Dye, Farmer, Secretary of State Board of Agriculture
of New Jersey. — Mr. Dye believes that the subdivision of bonanza
farms into small tracts would be beneficial by increasing the
population and giving employment to more people. The oppor-
tunity to use improved machinery on a very large scale on these
farms tends to make their competition diastrous to Eastern farmers.

LeGrand Powers, Expert in Agriculture, U. S. Census Bureau,
Washington, D. C. — Mr. Powers says all the big farms, including
the Dalrymple farm in Dakota, are in the market for breaking
up, just as the big farms in Southern Minnesota have been cut up.

Social Viewpoint or Individual Viewpoint? — Thus far in this
chapter the question of the size of the farm has been considered
from the social standpoint. The views once held by Thomas
Jefferson on the subject of a rural versus an urban population
have undergone much change in the last hundred years.^ But
the question is still an important social problem, and one which
may well engage the powers of the true statesman. The social
aspect of this question takes on significance from the fact that the
rural population of to-day determines very largely the character
of the nation to-morrow. The country birth rate exceeds the city
birth rate. Children on farms are an economic asset, in the city
an economic liability. The children of the farm to-day recruit
the city to-morrow. Hence if the country is to be occupied by an

8 The popular usage of two words in our vocabulary throws an interesting
side light on this question of town and country. From the Latin urhs (a city)
comes our word ''urbane"; from the Latin rus (the country) comes our word
rustic. Webster's dictionary Mefines these two terms as follows: urbane;
courteous in manners, polite, refined; rustic; rude, awkward, rough.

/

<

46 THE "BACK TO THE LAND " MOVEMENT

inferior class to-day, the city and the nation of to-morrow will
consist of an inferior class. In two important matters the city is
now superior to the country, namely, public education and care
of public health. The child wanting a high school and college
education must go to the city. In matters of health, however,
from Jefferson's day down almost to the World War, popular
opinion seemed to hold that the open country with its fresh air
was the home of good health, and the city was the home of the
physically unfit. But the World War, with its mihtary draft and
consequent medical examinations of millions of young men from
both country and city, showed that although country people have
a better chance for long life, yet they also suffer from a greater
number of preventable physical defects. The city consumer who
would favor the bringing into our country and settling on the farms
there the cheaper labor of the Orient or even those European
peasants whose standards of living are low, has a sadly short-
sighted view of his country's welfare. Any public policy which
attempts to build up the city at the expense of the country, such
as a protective tariff on manufactured goods, may easily cause a
migration from the country to the city, or conversely, a migration
to the country of immigrants and others with an un-American
standard of living. The important thing, from the standpoint
of a noble and powerful nation, is to have a country population
with a high standard of Uving. And such a high standard of living
is fundamentally a question of the individual farmer's economic
welfare, although this standard includes wants of a so-called
higher order. In short, the private welfare of the farmer is the
public welfare of the state.

The question of the size of the farm may be briefly considered
from the standpoint then of the individual farmer. The funda-
mental question is the same — What will produce the highest net
returns? Under the law of survival of the fittest, those farmers
will survive whose farms conform most nearly to this economic test.

Family Size Farm. — Numerous investigations and ''surveys"
have been made recently, looking into the size of the farm business,
thanks to the newly discovered science of farm management. Only
a few of these can be mentioned here. W. J. Spillman, while
Chief of the Office of Farm Management, conducted such a survey
in Chester County, Pennsylvania. This study emphasizes the
''small-farm fallacy" (as some call it), and shows that less profits
come from small farms than from large farms. Farms of from 30
to 40 acres required for each crop acre $15.00 worth of machinery,

FAMILY SIZE FARM 47

as compared with $9.00 worth on farms of 160 acres and over.
Thus on small farms the expense of operation is much greater
per unit of product than on large farms of similar type. The
larger the farm the larger the total income, but the per cent of
profits is independent of the magnitude of the business. A Ne-
braska farm management survey reached the conclusion that a
"family size farm" pays best (Fig. 7). This is a farm which fur-
nishes work for the younger members of the family and varies in
size from two hundred to two hundred and fifty acres in eastern
Nebraska. A farm management survey in Missouri, on the "Size
of Farm Business," also finds that large farms yield more profits

\ family size farm, 200 acres.

than small farms (Figs. 8 and 9). On the large farm, 77.2 acres
of crops per man are produced as compared with 15.9 on a small
farm. The horse on a large farm cares for 21.2 crop acres, as
compared with 7.3 acres on the small farm. Numerous other
"surveys" in New York State and other states point to similar
conclusions. In the Weekly News Letter of the Department of
Agriculture for March 15, 1916, we find 'this statement, "Recent
farm-management surveys indicate that the farmer with but Httle
capital can, as a rule, make a better living by renting and operating
a comparatively large farm than by putting his money into a
small farm which he can buy outright."

Whether this statement be accepted for the whole truth or
not (and it likely is not), it wisely stresses the factor of the purely
commercial or economic aspect of a farm enterprise.

48

THE " BACK TO THE LAND " MOVEMENT

In Australia the 300-acre wheat farm has proved too small.
In Dakota the 7,000-acre wheat farm has proved too large. Only
actual experimentation can tell us what is the economical size of
a wheat farm, or of any other kind of a farm. The experimenta-

FlG. 8. — ^A large farm. View on the America Sharon Land Company's 4U,0UU acie fann ii
Red River Valley of North Dakota.

Fig. 9. — Some of the buildings and grain elevators on the America Sharon Land Company's

big farm.

-((

tion of the past, carried on in the various countries, as chronicled
in the preceding pages, tends to prove that while big farms have
bad features and good features, so also the small farms have good
features and bad features. The socially desired solution of this
problem coincides with the individually desired solution, namely,
that sized farm which yields its owner the highest net returns.

INCREASING CONSUMPTION 49

The Competition Question. — Following the World War there
was a tremendous demand in the metropolitan press to settle
retm-ning soldiers on the land. The Secretary of the Interior
sponsored a very large-scale plan to colonize soldiers on agricul-
tural lands in frontier districts. Without entering here into any
discussion of the merits or demerits of governmental colonization
schemes — a very large question — we may well face one phase of
the question of placing on the land suddenly a large number of
additional farmers. These new farmers would compete with the
present farmers. Any competition which increased the production
of staple crops, or other crops, faster than demand increased for
such crops, would tend to lower prices for such crops. In such
cases we would have overproduction — or what the Single Tax
school prefers to call ''under consumption." The effect on the
producer is the same. An increase in demand would be necessary
to offset the competition of the new farmer, assuming such new
farmer actually to be placed on tillable, productive lands. The
question of increasing the demand for food products, of increas-
ing their consumption, is a question of more than academic
interest. With two-thirds of the people now living in cities and
towns, and with their potential bu5dng power in the fields of
food products, manufactured goods, amusements, etc., it becomes
a matter of practical consideration as to how much they can
and ought to spend for their food supply as compared with their
other wants.

Increasing Consumption. — Under one condition could a system
of "small proprietor" agriculture flourish at the present time in
the United States, and that is, there must be an enormous increase
in the consumption of agricultural products to offset the increase
in production. With the staple crops there is an unknown margin
of increase. Cotton, with its hundred by-products, is an example.
Any one or more of these products may suddenly flare into world-
wide demand. So also with the various uses and by-products of
corn, wheat and oats. But clearly more is to be expected from the
increase in the consumption of the minor products of the farm,
such as milk, cheese, butter, poultry and poultry products, etc.
The French peasant, however poor, is said to enjoy his ''fowl in
the pot." Yet to our city dweller a roast chicken is a luxury.
The poultry crop now has about the same value as the wheat crop,
but the room for increased consumption here is very vast. But
increased consumption seems dependent on either improved quality
or lowered price, and lowered price in turn depends on economies
4

/

50 THE " BACK TO THE LAND " MOVEMENT

in production and marketing. In short, the poultry grower must
learn the lesson from the orange grower of California.

Milk is of all foods the most ideal — the one perfect "balanced
ration." Yet our daily consumption per person is only one-half
a glass! When national prohibition arrived, we were spending
S5.00 a year for the milk we consumed, and $8.00 a year for the
beer we drank! The coming importance of our condensed milk
trade is illustrated by the recent figures from our Commerce Re-
ports. The condensed milk exports ran in value at about $1,000,000
to $2,000,000 a year for some years prior to 1915, according to
these Commerce Reports. For the year 1915, the value of con-
densed milk exports was $6,000,000, most of these exports going
to Europe. In the year 1918 the condensed milk exports to the
one port of Hong-kong amounted to $3,611,500, indicating the
tremendous increase in the use of this food by the Chinese.

Cheese is a staple article of diet in foreign lands, being in all
respects a wholesome and cheap food. Yet our daily consumption
of cheese is only one one-hundredth of a pound per person. Con-
densed milk, fermented milk, and the various forms of milk by-
products suggest the possibility of developing an immense and
profitable market here.

Tobacco. — In tobacco we are spending, according to Harvey
W. Wiley, $1,200,000,000 a year.^ This is twice as much as is
spent for butter, condensed milk, and cheese. Some shifting of
demand is possible here. In such case, however, the tobacco
farmer, would need to shift his production to meet the change
in demand.

Jam. — Pratt tells us that the English farmers when America
and Canada ruined the wheat market for them, turned to more
specialized foods. Jam is one. The acreage in fruit trees increased
to three hundred thousand acres — an increase of sixty-three per
cent in thirty years. In America many of the farmers' apples,
peaches, pears, etc., rot on the ground. How much jam could,
for instance, New York City alone consume? Doctor Howe tells
us that New York is supporting commercialized leisure and amuse-
ments to the extent of eleven thousand, five hundred saloons,
eight hundred dance halls, and six hundred motion picture shows,
with an estimated expenditure on the people's part of $100,000,000
a year.io This merely illustrates the strength of market demand
for those things which the people happen to want or are educated

8 Good Housekeeping, Jan. 1916, p. 92.

^° Howe, Modern City and its Problems, p. 307 (published in 1915).

)

QUESTIONS ON THE TEXT 51

to want by successful advertising. Demand for food products is \
capable of almost unlimited expansion, provided the food article
is low in price, and of standardized grade and quality and pack
and the demand is carefully cultivated.

The city population is increasing three times as fast as the
country population. This table from the census (where every
place of fewer than twenty-five hundred inhabitants is considered
rural) illustrates this tendency.

Increase in Population, Rural and Urban, by Per Cent^.

1880-1890 1890-1900 1900-1910

Rural 13.7 12.1 11.2

Urban 54.4 35.5 34.8

The average size of farms for the whole United States shows
little if any tendency to decrease. Here are the figures: •

Average Size of Farms, U. S.

1880 133.7 acres 1900 146.2 acres

1890 136.5 acres 1910. 138,1 acres

The size of farms in the old, well-established farming section
(Ohio, Indiana, Illinois, Iowa, Missouri, Kansas) shows a gradual
increase, as given in the following table:

Size of Farms in Six Farming States.

1880 124.3 acres 1900 136.9 acres

1890 130.7 acres 1910 140.3 acres

And in four of these six states the rural population showed a
decrease in the decade 1900 to 1910, while the urban population
in all states in the union showed an increase. Hence we see that
the problem of increasing the rural population and reducing the
size of the farm is a problem that is not being solved.

QUESTIONS ON THE TEXT

1. What according to many, is this Republic's ideal landowning system?

2. State and explain Jefiferson's ideal.

3. Is the drift of population back to or away from the land?

4. State in full the arguments for small farms as given by Laing.

5. Give the views of Arthur Young; of John Stuart Mill.

6. State the findings of the Wilson- Wallace Report.

7. State in detail the position of Pratt, especially his comments on Denmark.

8. Give von Engelken's picture of German farming.

9. Describe the situation in Austraha; in New Zealand.

10. State the problem confronting the United States.

11. Show relation of size of land holdings to overproduction^ Quote Le

Grande Powers. Discuss flexibiUty of demand. Illustrate.

12. Quote G. Harold Powell on the overproduction problem. Show the sig-

nificance of "savings" rather than "profits." Show the place of adver-
tising in this connection.

13. Cite evidence to show where specialized farming tends to prevail and

where diversified farming tends to prevail.

52 THE " BACK TO THE LAND " MOVEMENT

14. What are the usual arguments, from the sdcial standpoint, against the

big farm? Quote big farmers on this point.

15. Why is the nature of the rural population of such vast importance to the

country as a whole?

16. Compare the sanitary conditions of city and country, as evidenced by the

military draft.

17. What economic law will, in the end, determine the size of farms?

18. State the findings of the following "Surveys": Chester County; Nebraska

survey.

19. Quote, with comment, the statement in the Weekly News Letter of the

Department of Agriculture concerning renting versus buying a farm.

20. Show significance of competition question in agriculture.

21. Would a system of smaller holdings bring in harmful competition?

22. Show possibilities of increased consumption of farm products, particularly

milk and milk products, fruit.

23. Cite statistics showing relative rates of increase of city and rural popula-

tion; of changes in average size of farms. Is the rural population in-
creasing? Is the size of farms getting smaller?

QUESTIONS SUGGESTED BY THE TEXT

1. Give an account of the strip system of land holdings in Europe.

2. Is Danish landholding a type of prosperity or lack of prosperity?

3. Should the farmer "specialize" or "diversify"?

4. Would "cheap food," supphed by a so-called peasant class of farmers,

be a benefit or a curse to the Republic?

5. What is the fallacy, if any, in Jefferson's views of a rural versus an urban

population?

6. What is a correct land poHcy for the United States? Do we have any

land policy at the present time? If so, what is it?

REFERENCES

1. Johnson, O. R.: "Big Farms or Little Farms — ^Which?" Farm Life,
Nov., 1916.

2. Farming's Future. Editorial, Farm, Stock and Home, Sept. 1, 1916.

3. For conditions in Europe, Asia, Africa, Austraha, South America,
Mexico, see publications of International Institute of Agriculture, Rome,
Italy, particularly International Review of Agricultural Economics,

4. For brief comment on current conditions and activities in all parts of
the world, see the daily Commerce Reports, issued by the Department of
Commerce, Washington, D. C.

5. Many books dealing with the problems of land settlement, closer settle-
ment, size of holdings, etc., have appeared in recent years. Hence the follow-
ing Ust deals chiefly with the older pubhcations: Young, Arthur, "Travels
in France"; "Land Tenure," Cobden Club Essays; Kay, Joseph, "Free Trade
in Land"; Sagerson, George, "History of Land Tenures and Land Classes
in Ireland"; Pratt, E. A., "The Transition in Agriculture."

APPENDIX

Migration from Denmark to the United States, Compared with Similar Migration

from the Netherlands and Belgium, showing Relatively High Per Cent of

Danish Migration.

Per cent of
Foreign born total popula-
Population in U. S. 1910, tion migrated
born in — to the United
States

Denmark 2,775,076 181.621 6.5

Netherlands 6,114,302 120,053 2.0

Belgium 7,571,387 49,397 .6

CHAPTER V

LAND TENURE

Introductory. — Many changes are going on in the United
States in respect to tenancy, mortgages, and size of farms. And yet
there is very little agreement as to the significance of these changes.

This may be illustrated by a few quotations. For instance, at
a recent meeting of the New York State Agricultural Society, one
prominent gentleman spoke as follows:

"The heavy drain upon the country for its best blood to what seemed more
attractive life m the city has left many fathers and mothers alone at an age
when they were no longer fitted to carry the burden of the farm. Hard work
in early life had made the day of retirement to the local town look bright. And
the renter took his place. Now the so-called tenant system is in the minds
of men a symbol of a degenerated agriculture, and I must confess that it has
as a rule been true. The facts are that farm rental is no more degenerate in
principle than the ownership of a building by one man and its occupancy by
another; the tenant in some way having paid the owner of the buildmg a fair
value for its use. We have deplored tenantry and prayed for the day when
prosperity would again come to the open country and the owner would become
the occupant of the land. I venture a prophecy that the millennium will never
come and furthermore that tenantry may increase. Tenantry leaves a bad
taste, not because the thing is wrong, but because it has developed through
unfortunate causes . . . The system of tenantry is here because the farm as
a business wall not pay cash for the labor and leave a balance."

The speaker is interrupted and interrogated as follows:

"I want to ask Mr. Cook one question : Does he think that our descendants
will stand for a thing that his ancestors and mine left Europe because of —
tenantry? Never, as long as we are Americans, will tenantry come into this
great and glorious country."

Mr. Cook repHes:

''The trouble is, it is here now. Come out into the country and see how
many tenant farmers we have . . . We have tenantry, and we are going to
have it, and let us undertake to improve rather than destroy, as we cannot
get rid of it." ^

Charles Stelzle, in reviewing the returns of the 1910 census,
takes this somewhat cheerful view of the situation:

"While the population of the United States as a whole increased 21 per
cent during the past ten years, the rural population increased only 11.2 per
cent. The increase in the number of farms during the period was 10.9 per cent.
The value of the farm property increased 100.5 per cent, but the greater part of
this extraordinary increase was in the land itself, the value of which increased

^ Bulletin 47. Proceedings of the Seventy-third Annual Meeting of the
N. Y. State Agricultural Society. Albany, 1913, pp. 1265-1268.

53

54 LAND TENURE

118.1 per cent. The average size of farms decreased from 146.2 acres to 138.1
acres. The tendency is slowly but surely towards the smaller farm." ^

These same figures are interpreted in quite a different manner
by students with socialistic tendencies. Thus A. M. Simons writes
of them as follows :

"If we disregard cotton, then nearly one-half of the agricultural staples
of the United States are produced within 500 miles of Chicago.

"Census bulletins are now available for three typical states in this terri-
tory. These bulletins show the same tendencies in every state. It is therefore
certain that what is true of these will hold good of this entire section, and prob-
ably of a much wider area. The three states are Indian^, Illinois, and Iowa.
In all of these the average number of acres per farm is increasing. During the
last ten years the average area of an Iowa farm has increased from 151 to 156
acres; of Indiana, from 97 to 98; and of Illinois, from 124 to 129 acres.

"This increase in size becomes still more evident when more closely
examined. In all three of these states the largest increase in the number of
farms has been in that of the httle, intensivelv cultivated garden patch of
less than ten acres. This would naturally tend to show a great decrease in
the size of farms, were it not offset bj^ the fact that the second group of farms
to show a rapid increase in number is that of those containing between 175
and 500 acres.

"In all three of these states the area embraced in farms of between 20
and 100 acres shows a considerable decrease during the last ten years. In
Illinois, which in all respects, shows a more advanced stage of development
than any of the others, this decrease extends to farms of less than 175 acres.
But it is the small farmer, owning between 40 and 160 acres, that has always
been pointed out proudly as the backbone of American agriculture, the great
conservative element in our society, the sohd middle class farmer for whose
salvation the pohtician loves to stand. Apparently, that ' backbone ' is
being broken ...

"The other type, whose importance is rapidly increasing, is that on which
it is possible to utihze the most efficient machinery. Hitherto this size has
been hmited by the system of using animal power. With the appearance of
the mechanical tractor these farms will at first gain in importance, and then,
in all probability, give way to a much larger size. The application of the power
to farming wiU at once increase the size of the farm unit which can profitably
be cultivated under a single management, and it is safe to say that the next
census will show a great acceleration of all tendencies toward concentration.

"Another set of facts evident in all three of these states lends support
and emphasis to the conclusion that we have entered upon a new era of con-
centration in farming throughout this territory. In spite of the rise in value
of farm products, in spite of the multitude of garden patches near cities and
all the general results of the 'back to the farm' movement, there has been a
decided decrease in the total number of farms. In 1900 those three states
contained 714,670 farms; by 1910 these had shrunk to 684,410.

"But whUe the farms had grown larger in size and fewer in number, their
value per acre had grown enormously. The farms of Indiana had increased
in value from $32 to $62 per acre; those of Iowa from $36 to $83; and of Illinois
from $55 to $108 per acre. The significance of these figures is seen when we
apply them to the farm as a unit. We then see that the average value of a
farm in Indiana has grown from $4,410 to $8,396; in Illinois from $7,588 to
$15,505; and in Iowa from $8,023 to $17,259. Combining these facts multi-
pHes their importance because they all tend in the same direction.

2 United Mine Workers' Journal, October 10, 1912, p. 3.

TENANCY 55

"A decreasing number of farms, an increasing size, requiring more expen-
sive equipment, and this more than doubling of values, means that an impas-
sable barrier has been erected between the landless farmer and the instruments
essential to his existence.

"It is scarcely necessary to turn to the section of the census bulletin that
deals with tenantry to be assured that such a condition would separate pro-
ducer and possession. In each of these states there has been a steady increase
in the number of farms operated by tenants for the last thirty years.

"The one big fact that stands out from an examination of the agricultural
situation in the north and south, is that it is about time to quit talking about
maintaining the small farmer in the ownership of his farm. Capitalism is
abohshing that condition in agriculture as it already has in industry." ^

Very clearly all is not well with agriculture in the United
States. Thoughtful persons are pointing out changes in our land
tenure situation which are fraught with very real and very immi-
nent dangers. Let us examine in detail the Tenancy and the
Mortgage questions, and then the two or three other matters
involved in these two problems.

Tenancy. — Our theory of a sound agriculture has quite gener-
ally been that every man should dwell under his own vine and fig
tree. And this happy situation actually existed for a short while
at the beginning of our great Repubhc. But now, at a progressively
increasing rate, we are departing from it. And the strange thing
in the situation is that our powerful neighbor, Canada, forming
with us an ethnological and economic unit, is moving in the oppo-
site direction. Renters are few in Canada, and are becoming
fewer. Renters are many in the United States, and are fast
becoming the majority of occupiers of farms.

Putting side by side the census figures from each country, the
situation is very vivid.

Farm Tenancy in Canada and the United States. Per Cent of Total Occupiers

Who are Tenants
Canada United States

Year

Per cent

Year

Per cent

1891

1901

1911

15.42

12.90

11.40

1880

1890

1900

1910

25.6

28.4

35.3

37.0

The fact is well estabhshed that tenant farming is increasing
in the United States. In a few counties .it exceeds 90 per cent of
all the farms. The conclusion is also reached by our best students
of the problem that farm tenancy will continue to increase in the
United States in the future. The position of the Federal govern-
ment investigators on this subject is very interesting. Thus we

3 Brauerei Arbeiter Zeitung, May 18, 1912, p. 2, " Recent Tendencies in
Agriculture," by A. M. Simons.

56

LAND TENURE

find in the Report issued by Mr. Spillman, who was in charge of
the office of farm management in 1912, this interesting statement:
*'The lack of future opportunity for taking up desirable public
lands in our western states and the consequent general rise in the
price of farm lands all over the country has resulted in an increase
in tenant farming, especially in those sections where land values
have risen to the point at which it is exceedingly difficult for the
purchaser of a farm to meet both living expenses and interest on
his indebtedness and also make payments on the principal. It is

Fig. 10". — Farming by a tenant.

hardly to be doubted that tenant farming will further increase in
this country and that ultimately the land will be owned by the
wealthier classes and be farmed by tenants with moderate capital."
The question naturally presents itself. What will be the social or
economic significance of an increase in farm tenancy? We have
conclusions on this subject presented to us in a great number of
rural life surveys made by various institutions such as the Depart-
ment of Church and Country Life, Board of Home Missions of
the Presbyterian Church of this country, by various State Uni-
versities, and by various other institutions and individuals. One
such survey, speaking of northwestern Ohio, says: "Tenancy
may not be a curse to agriculture and the country life, but under
the system of land tenure prevalent throughout the most of the

TENANCY

57

United States it usually is." In the section covered by this report
the average length of time that a tenant stays upon the same
farm is two and one-half years. This makes not only frequent
removals but also the constant effort on the part of the tenants to
take from the soil as much as possible while giving back to it as
little as possible (Figs. 10 and 11). Such a process if continued
must result in soil impoverishment and deterioration. Very few
of the renters succeed in acquiring farms of their own. For the
most part they remain a floating, discontented element in the
population. They 'are the marginal members of the community,
and their increasing numbers in northern Ohio constitutes not

Fig. 11. — When the owner farms

only a serious agricultural question, but a more serious social and
religious problem. The United States Industrial Relations Com-
mission probed the causes of unrest in the South and conducted
hearings there. The Survey Magazine of New York speaks of
these investigations in these words:

"About a thousand pages of testimony was taken in the five days of the
hearings. A study of this testimony will reveal a remarkable coincidence of
statement with regard to the actual conditions, and considerable difference of
opinion as to what remedies should be adopted.

"It was generally admitted that a remarkable concentration in the owner-
ship of land is taking place. With it are the attendant evils of a rising absentee
landlord class and a descending tenant farmer class. It was shown that this
concentration of ownership is aided by the farmers moving to town, by the
credit system, by speculation and holding of land, etc.

"The growth of landlordism has been aided by the one-crop system, which
in the South, makes it difficult for tenants to rise to the cash basis, and often
impossible for them to become home owners. Excessive valuations of farm

58 LAND TENURE

land have made the tenant's lot a harder one. Proprietors of large tracts have
also used indirect methods of pressure to force smaller owners to sell their
holdings. Seasonal depressions of crop prices throw thousands of mortgaged
home owners back into the ranks of tenants. Depleted farm hfe accelerates
the trend.

"The witnesses testified to considerable friction between landlords and
tenants in this area. Oppressive tactics of landlords, in the form of unwar-
ranted evictions, use of force to intimidate renters, arbitrary requirements
in the matter of cropping contracts, threats to raise the rents where land taxes
were involved if elections should carry in favor of the tax, and 'keeping the
tenants on the move' when their pohtical convictions might differ from the
landlord's were among the injustices named. Some of these were considered
general; others much less so.

"Tenants have been known to destroy the landlords' property and to
foul the land by sowing Johnson grass, a noxious growth among cotton and
grain crops. They have held mass-meetings of protest against rises in rent.
They have held meetings for the purpose of declaring moratoriums. Threats
of violence, and even the whipping of other tenants who had accepted increases
in rents have been resorted to.

"It was a great day for the radical tenants when their representatives
were permitted to take the stand and enter upon the records their side and
their story of the renters' movement. From the mass of evidence introduced,
some general truths were gleaned. Discontent of the producing classes has
been growing in the Southwest for several years. It changed into a class-
conscious movement in 1911 when the Renters' Union of America was founded.
This organization followed close upon a series of disturbances in Oklahoma
and Texas. The cause of the disturbances appeared to he in the movement on
the part of the landlords to raise the rents above the traditional one-third of
the grain and one-fourth of the cotton for the share of the landlord when he
furnishes only land and house.

"Notwithstanding this effort at resistance the movement to increase the
landlord's share of the crops has been steady, and several thousand tenants
have been required to pay the landlords as high as one-third of the cotton
instead of one-fourth, or to pay cash rent in addition to the share rent. A few
landlords have been able to charge as high as 40 per cent of the crop for
their share.

"It was the agitation of the land question by this organization that un-
doubtedly made it possible for James E. Ferguson to become the present
governor of Texas. He swept aside all opposition and was elected by an over-
whelming vote. One of the main planks in the governor's platform was to
restrict the landlords' share of the rents by law. The governor testified that
the rent plank was of great assistance in making him governor. On the stand
he defended this plank, which has since become a law. He maintained that the
cash system of renting land in the Southwest is unfair, because it places the
burden of risk upon the tenant and often bankrupts him in the attempt to
pay the landlord's share . . .

"It was urged that the holdings of land for speculative purposes handicaps
any effort to break the strangle hold of landlordism. It was interesting to
note that some witnesses looked to the advent of corporation farming as the
most efficient farming of the future. It was shown how the corporation or the
large owner tends toward the factory idea of production. Should large farms
be conducted on system methods by big capital, undoubtedly many tenant
farmers of to-day would become wage hands.

"The Coleman-Fulton Pasture Company was pointed to as an example
of the capital system. This company, which is controlled by the Charles P.
Taft interests, is a huge industrial enterprise of 80,000 acres on which Hves a
population of 4,000 souls. This company, through its associated corporations

f

TENANCY 59

and partnerships, operates ranch land and farm land, cotton gins, stores,
lumber yards, oil mill, packing-house plant, electric light plant, telephone,
water works, and other enterprises. By means of experimentation and cost-
cutting systems it has been able to reduce considerably the cost of operating
farm land. It is able to command labor on its farms at eighty cents per day.
And the laborers board themselves!" *

The final report of the Commission on Industrial Relations
summed up its findings on the Land Question in these words:

''It was obviously impossible for the commission to attempt a detailed
investigation of Agricultural conditions, but because of the very immediate
bearing of the land question on industrial unrest, it was felt necessary to make
as thorough an investigation as possible of the phases which seemed to have
the most direct bearing on our general problem. The phases selected for dis-
cussion were, first, the concentration of land ownership as shown by existing
statistics; second, the problem of seasonal and casual agricultural labor; third,
the increase and change in the character of farm tenancy; and, fourth, the
introduction of industrial methods into agriculture through the development
of corporations operating large tracts of land. The findings and recommenda-
tions with reference to the concentration of ownership and the problems of
seasonal labor are set forth elsewhere. At this point it is desired to present
the results of the investigations of tenancy and agricultural corporations.

''As a result of these investigations the following conclusions are fully
justified:

" 1. Tenancy in the Southwestern States is already the prevailing method
of cultivation and is increasing at a very rapid rate. In 1880 Texas had 65,468
tenants' families, comprising 37.6 per cent of all farms in the State. In 1910
tenant farmers had increased to 219,571 and operated 53 per cent of all farms
in the State. Reckoning on the same ratio of increase that was maintained
between 1900 and 1910 there should be in Texas at the present year (1915) at
least 236,000 tenant farmers. A more intensive study of the field, however,
shows that in the 82 counties of the State where tenancy is highest the per-
centage of tenancy will approximate sixty.

"For Oklahoma we have not adequate census figures so far back, but at
the present time the percentage of farm tenancy in the State is 54.8, and for
the 47 counties where the tenancy is highest the percentage of tenancy is 68.13.

"2. Tenancy, while inferior in every way to farm ownership from a social
standpoint, is not necessarily an evil if conducted under a system which pro-
tects the tenants and assures cultivation of the soil under proper and economi-
cal methods, but where tenancy exists under such conditions as prevail in the
Southwest, its increase can be regarded only as a menace to the Nation.

" 3. The prevailing system of tenancy in the Southwest is share tenancy,
under which the tenant furnishes his own seed, tools, and teams and pays the
landlord one-third of the grain and one-fourth of the cotton. There is, how-
ever, a constant tendency to increase the landlord's share through the payment
either of cash bonuses or of a higher percentage of the product. Under this
system tenants as a class earn only a bare living through the work of themselves
and their entire families. Few of the tenants ever succeed in laying by a sur-
plus. On the contrary, their experiences are so discouraging that they seldom
remain on the same farm for more than a year, and they move from one farm
to the next, in the constant hope of being able to better their condition. With-
out the labor of the entire family the tenant farmer is helpless. As a result,
not only is his wife prematurely broken down, but the children remain
uneducated and without the hope of any condition better than that of their
parents. The tenants having no interest in the results beyond the crops of a

' The Survey, April 17, 1915, pp. 63-64 (New York City).

60 LAND TENURE

single year, the soil is being rapidly exhausted and the conditions, therefore,
; tend to become steadily worse. Even at present a very large proportion of
J the tenants' families are insufficiently clothed, badly housed, and underfed.
Practically all of the white tenants are native born. As a result of these condi-
tions, however, they are deteriorating rapidly, each generation being less
efficient and more helpless than the preceding one.

"4. A very large proportion of the tenants are hopelessly in debt and are
charged exorbitant rates of interest. Over 95 per cent of the tenants borrow
from some source, and about 75 per cent borrow regularly year after year.
The average interest rate on all farm loans is 10 per cent, while small tenants
in Texas pay 15 per cent or more. In Oklahoma the conditions are even
worse, in spite of the enactment of laws against usury. Furthermore, over
80 per cent of the tenants are regularly in debt to the stores from which they
secure their supphes, and pay exorbitantly for this credit. The average rate
of interest on store credit is conservatively put at 20 per cent and in many
cases ranges as high as 60 per cent.

"5. The leases are largely in the form of oral contracts which run for
only one year, and which make no provision for compensation to the tenant
for any improvements which may be made upon the property. As a result,
tenants are restrained from making improvements, and in many cases do not
properly provide for the upkeep of the property.

"6. Furthermore, the tenants are in some instances the victims of oppres-
sion on the part of landlords. This oppression takes the form of dictation of
character and amount of crops, eviction without due notice, and discrimination
because of personal and political convictions. The existing law provides no
recourse against such abuses.

'' 7. As a result both of the evils inherent in the tenant system and of the
occasional oppression by landlords, a state of acute unrest is developing among
n;^ the tenants and there is clear indications of the beginning of organized resist-
ance which may result in civil disturbances of a serious character.

"8. The situation is being accentuated by the increasing tendency of the
landlords to move to the towns and cities, relieving themselves not only from
\ aU productive labor, but from direct responsibility for the conditions which
develop. Furthermore, as a result of the increasing expenses incident to urban
life there is a marked tendency to demand from the tenant a greater share of
the products of his labor.

''9. The responsibihty for the existing conditions rests not upon the land-
lords, but upon the system itself. The principal causes are to be found in
the system of short leases, the system of private credit at exorbitant rates,
the lack of a proper system of marketing, the absence of educational faciUties,
and last but not least, the prevalence of land speculation.

"10. A new factor is being introduced into the agricultural situation
through the development of huge estates owned by corporations and operated
by salaried managers upon a purely industrial system. The labor conditions
on such estates are subject to grave criticism. The wages are extremely low,
80 cents per day being the prevaihng rate on one large estate which was
thoroughly investigated; arbitrary deductions from wages are made for vari-
ous purposes; and a considerable part of the wages themselves are paid in the
form of coupons, which are in all essential particulars, the same as the "scrip"
which has been the source of such great abuse. Furthermore, the communities
existing on these large estates are subject to the complete control of the
land-owning corporation, which may regulate the lives of citizens to almost
any extent."

At the third national convention on Marketing and Farm
Credits in Chicago, 1915, various speakers dwelt on the menace
to our political and educational institutions which is even now

RENT CONTRACT 61

beginning to be apparent in connection with the tenant class in
certain sections of this country. For instance, items like the fol-
lowing in the daily press are becoming of greater frequency from
month to month:

"Cape Girardeau, Mo., Nov. 23. — Five night riders and two private
detectives were wounded in a pistol battle southwest of Clarkton, Mo., near
here, early to-day. Seven of the night riders were captured later after an all
day chase by bloodhounds and a posse.

"To-night virtually every citizen of Clarkton and every land owner in
the vicinity is armed in expectation of another attack by the night riders.
The latter are a secret band of tenants and farm laborers who have been waging
a feud-like war for higher wages and lower food prices.

" Detectives on Secret Mission. — The struggle between tenants and
laborers on one side and land owners and merchants on the other has been in
progress here for several months and has spread throughout New Madrid
county, in southeast Missouri. Six detectives have been camping secretly for
two weeks in a shack on a swamp which is part of the farm of T. S. Heisserer,
wealthy land owner and banker, against whom the night riders have centered
their attacks . . .

"Though called riders, the men participating in night raids usually travel
afoot, sometimes masked. The outrages attributed to them include arson,
murder, blackmailing, tarring and feathering and horsewhipping of men and
women. Nine of such several months ago were trapped at an organization meet-
ing by officers of the postal department, and seven of these were convicted of
sending threatening letters through the mails and were sent to the federal
penitentiary at Leavenworth, Kan." ^

The "1. W. W." (Industrial Workers of the World) disturbances
which occur not only in the east, but flare up in our prairie sections,
as in Minot, North Dakota, in 1914, may be considered as symp-
toms of agricultural unrest.

The amount of tenancy in different sections of the Union varies
greatly. Tenancy is greatest in the South. It is also great and
growing greater in the strictly agricultural states such as Indiana,
Ohio, Illinois, Iowa, Missouri, Kansas, Oklahoma, and Nebraska.
The table in the appendix to this chapter will indicate correctly
the amount of tenancy in these sections. The actual condition
of tenancy of each state in the Union as well as changes for better
or worse are also shown in this appendix.

Rent Contract. — The rent contract in the United States is of
two general types, the cash rent and the share rent type, and these
two fall loosely into four systems of tenure, namely; the cash
tenant, the share tenant, the share cropper, and the crop lien
system, all of which are illustrated below. The significant feature
however, of each form of rent contract is the short time of the
tenure. In other words, we do not have a stability of farm oper-
ators. Unhappily this holds true also of farm owners. The one

5 Des Moines Register, Nov. 24, 1915.

62 LAND TENURE

redeeming feature of farm tenancy in England and Scotland, where
it has apparently reached its perfection, is the long time tenure of
the renter. The significance of our too short time tenures is
brought out vividly in the various surveys alluded to above. Thus,
to quote from a survey of Montgomery County, Maryland:

"Speaking broadly, it is common experience that under a system of tenan-
try the land is usually not so well farmed as when operated by its owners.
The tenant usually has but a short lease on the land; inferior methods of farm-
ing are apt to be employed; the needs of the soil are not so carefully studied
or attended to; there is generally a smaller working capital; the cost of opera-
tion is somewhat greater. In consequence, the property is not kept up; the
fertihty of the soil is seldom increased or even maintained; and in the long run,
the net income is smaller. To have 45 per cent of the land operated under a ten-
ant system and to have that system on the increase, would thus seem to present
a problem worthy of consideration. The obvious solution would be along the
line of aiding the present operators to obtain the ownership of the land. In
Europe and to a lesser extent in some parts of the United States this need is
met by an ably managed and extensive system of cooperative banking.

"Another interesting angle of this question has to do with the length of
tenure. The average length of tenure for all farms is 12.4 years. But more
than half of the farms and considerably more than half of the total acreage
of farm lands, have changed hands at least once during the last ten years.
This means an unstable element in the population large enough to cause con-
cern. For all owned land, the average term of occupancy is 15 years, but for
land operated by tenants, the average term of occupancy is only 4 years. One-
fourth of the entire farming population, then is shifting, a fact which must
necessarily hamper all efforts toward the betterment of rural life conditions
along social, reUgious and educational Unes."

A rural survey in one Tennessee community brings out this
situation:

"Among the tenants 63 per cent rent land from neighboring farmers.
This land is in many cases under the direct supervision of the owner, who
designates what crops are to be raised, and sees to it that the soil does not
become too much worn out. In many cases the renters although retaining
their independence, are thus virtually hired men, who are paid in produce
instead of in cash. This is particularly the case with the 'share cropper,'
who owns neither land nor tools, but has tools, horses and seed furnished by
the owner of the land. The cropper as a rule cultivates from 20 to 30 acres,
and gives half the produce to the owner. Most of the croppers are negroes.
The 'share tenant' or 'renter,' who furnishes his own tools and horses, pays
to the owner one-third of the corn and one-fourth of the cotton. The cash
tenant pays usually $4,00 an acre. There are only ten hired men. Their
wages are from seventy-five cents to $1,00 a day and keep."

There is of course another side to this picture. The Federal
government has been quoted as accepting tenancy >s a permanent
institution. In line with this belief the Federal government has
issued a bulletin entitled, "A System of Tenant Farming and Its
Results." This bulletin shows a successful example of tenant
farming where the landlord has secured stability of farm operators.
An extended quotation is worth while in this connection. Accord-

RENT CONTRACT 63

ingly we print the following extract from this report, which was
issued in the year 1911.

"In the older sections of the eastern United States the necessity for con-
sidering permanent types of farming has long been felt and much effort has
been made to meet the need. A very good example of success in solving this
problem along general farming Hnes is that of a large estate in eastern Mary-
land. This estate is the more interesting because it represents a system em-
bracing 56 tenant farms under one ownership that has been in successful
operation for more than 30 years. During this period yields of wheat and corn,
which are the principal crops grown, have been maintained and in some cases
increased. A large number of tenants have been on the estate for more than
20 years; several have been there for more than 30 years, and their sons have
succeeded them.

"These facts show clearly that the relationship between owner and tenant
has been satisfactory. This is further brought out from the standpoint of the
tenant by the fact that many tenants have made enough money by farming
on the estate to buy farms of their own. In several instances, however, they
are so well satisfied that they continue as tenants and rent their own farms to
some one else.

"On the other hand, the estate itself is fairly well satisfied. It has been
able to keep up the productiveness of the different farms until many of them
yield better than when bought. Attractive dwellings and substantial barns
have been maintained on every farm, and all the fields are well fenced with
board, hedge, or -wore. Many fields have been enlarged by clearing waste
places and, made more productive by underdraining with tile. Every farm is
clean, neat and attractive in appearance.

"The returns from the farm have paid for aU these improvements, have
paid all taxes, and are now bringing in to the estate more than 5 per cent
interest on the total investment. Some of the farms have nearly trebled in
value in the last 30 years. These returns to both tenant and owner are unusual.
It is seldom that so large an estate is handled so satisfactorily, and a closer
study of the system followed may prove profitable.

"In detail, the estate consists of 15,630 acres, or about 24 square miles of
land, subdivided into 56 farms varying in size from 98 to more than 1,000
acres, an average of about 279 acres per farm. These farms are scattered over
a radius of about 12 miles from the central office. Considerable areas of waste
land are found on some of them, so that on the average only about 72 per cent
of the land is in actual cultivation. The price of cultivated land away from
the influence of towns varies from S40 to $65 per acre, and these farms will
probably show a hke variation in value. The soil of most of the farms varies
from a sandy loam to a clay loam, is comparatively free from stones, and is
generally well adapted to wheat culture. The land is sufliciently level for the
operation of labor-saving machinery.

"One of the interesting facts relative to these farms and their organization
into a profitable system of farming is that they were accumulated one at a time
and organized by a merchant who had no special knowledge of agriculture,
yet he formulated and put into practice over 30 years ago a system which
has maintained yields and given satisfactory profits to both owner and tenants
up to the present time. The latter is regarded as the most important fact in
this bulletin.

"At the time of the owner's death, 13 years ago, the system of farming
which he put in operation had become so well established that with practically
no change since then the yields of the farms have been maintained, a consider-
able indebtedness has been paid, the buildings and fences have been kept in a
good state of repair, and a net income from the farms averaging a little more
than 5 per cent has been paid to the estate."

64 LAND TENURE

This quotation raises the ever-occurring question of capitaHstic
farming versus the small-scale farmer. Evidence is given on both
sides of this much mooted question so that the reader may draw
his own conclusion. In the past it has been customary for a tenant
to purchase a farm, pay part cash and give a mortgage for the
balance. A study of statistics when such a condition existed
revealed the true situation. However, at the present time a care-
ful study of the census returns of owners free, owners mortgaged,
and tenants shows that the tenants are not increasingly becoming
buyers with mortgage encumbrances, but, on the other hand, the
owners are mortgaging their farms. In brief, those who have
occupied a farm from two to four years should show a large per
cent of owners with mortgages. Then in the course of time
these owners with mortgages would become owners free. Those
who have been on the farm ten years and over would in such
an event show a marked decrease in the number of mortgages.
However, statistics show that this happy condition of affairs does
not exist.

According to a bulletin issued by the Iowa Experiment Station :

"To obtain greater economic independence requires more years of saving
before ownership now than formerly. Hence, the age of ownership to-day
is about six years later in hfe than it was 25 years ago. Farmers make their
first payment on land now at the age of 34, while 25 years ago ownership was
obtained at 28 years of age." ^

A bulletin of the Texas Station (No. 21) asks: ''What chance
has the farm tenant in Texas to become a home owner? Some of
them have the same chance or opportunity to become home owners
that the average merchant in the town has to become a merchant
prince. The chances are sHght."

A study of the tenant systems of farming in the cotton belt
along the Mississippi River between Memphis and Vicksburg,
made in 1913, and covering many hundred records, found the
following situation:

Share Croppers, Share Renters, Cash Renters. — The study
makes a comparison among share croppers, who supply nothing
but their labor and receive one-half the crop; share renters who
supply their own implements and livestock and receive two-thirds
or three-fourths of the crop; and cash renters, who supply the same
items as share renters but pay a fixed rent in cash or lint cotton.
In this area the tenants form 92.0 per cent of all farmers. The
average labor income of share croppers was $333 ; for share renters

« Lloyd, O. G., Farm Leases in Iowa. Iowa Exp. Sta. Bui. 159.

SHARE CROPPERS, SHARE AND CASH RENTERS 65

$398; and for cash renters $478. The average rate of interest
received by the landlord from share croppers was 13.6 per cent;
from share renters 11.8 per cent ; and from cash renters 6.6
per cent.

A survey in Johnson County, Missouri, speaks of farm tenancy
there in these terms :

"A rural community where 80 per cent of the population is changing every
five years cannot have desirable social conditions."

"A study of the foregoing results (advantages and disadvantages of
tenancy) leads to the conclusion that the present system of land tenure is
undesirable, first because it encourages tenants to become shiftless, second,
because it depletes the soil, third, because it is very detrimental to the improv-
ing of rural social conditions."

The Wisconsin State Board of Public Affairs, in 1912, sought
a remedy for increasing tenancy. They first canvassed the actual
situation in Wisconsin, and found that in the new lands of the
north there is little tenancy, but in the older higher priced lands,
tenancy is large and growing larger. To quote, and condense
freely, from the Board's report :

"This suggests that in Wisconsin as in other parts of the Middle West
the proportion of farm tenancy increases as the cost of a farm becomes
greater . . . There is no convincing evidence of an increase in farm owner-
ship. On the contrary, the evidence seems to indicate that there will be a
continuous increase in tenancy generally throughout Wisconsin, unless steps
are taken to prevent it. It is the duty of the state to encourage the proper
settlement of its undeveloped farm lands. It is just as much the duty of the
state — and this is a duty of self-protection — to encourage farm ownership by
taking measures to check the growth of farm tenancy. These measures should
be taken in time while the proportion of tenant farmers in the state is still
relatively low and the problem of dealing with them, therefore, more simple
than it will be if left unattacked until a solution is absolutely forced on the
people of the state.

"Wisconsin should be taking warning from the experience of other states
in the Middle West. The 1910 census shows that already in Illinois more
than 41 in every 100 farms are operated by tenant farmers and that in some
counties in that state more than 60 in every 100 farms are so operated . . .

"The best that can be said for any system of farm tenancy involving any
large proportion of the agricultural population, is that it is better than some-
thing worse. It may be argued, for example, that it is better for the negro
in the southern states to be a tenant farmer than to be a slave or a casual
laborer. In comparison with farm ownership, there can be no argument for
farm tenancy as a system of land tenure. Statesmen and pohtical thinkers
the world over have for centuries recognized the truth in this statement and
have urged and enacted into law plans for governmental activity to check
landlordism and promote farm ownership by the actual farmers. To-day
some of the most important questions engaging the attention of the parUa-
ments of Europe, Australia and New Zealand are questions of land policy.
The people of Great Britain are at the present time engaged in a tremendous
struggle to free the land in England from the grasp of the landlord so that the
man who will farm it can have it to farm advantageously. In Ireland the
5

66 LAND TENURE

land is already being turned back to the ownership of the men who cultivate
the soil — but at the expense of a state subsidy costing the treasury of the
United Kingdom miUions of pounds. New Zealand and Australia have been
legislating for many years to break up large land holdings and prevent the
growth of landlordism.

"The State of Wisconsin cannot afford to permit the growth of a landed
aristocracy or the creating of a permanent class of tenant-farmers. World-
wide experience warns against the social and economic dangers in allowing
such conditions. The question is what preventative measure shall the state
adopt? ... It is a serious question, as urged by Dr. Richard T. Ely, whether
or not a state could maintain a system of state landlordism in the face of the
united opposition of the majority of its tenants.

"There are four ways of attacking the farm tenant problem," said the
Board: "(1) Assume farm tenancy to be inevitable. Make provisions to im-
prove the conditions of tenancy, such as long-time leases, legal regulation of
rights and duties of landlord and tenant. (2) Assume farm tenancy to be
inevitable. Make the state itself the landlord. (3) Assume tenancy to be
undesirable and unnecessary. The State may adopt a taxing system to break
up landlordism and land speculation. (4) Assume tenancy to be undesirable
and unnecessary. The State may use state-aided land purchase, on long time
farm mortgage loans at low rates of interest, thus enabling tenants to become
land owners. The fourth method is recommended by the Wisconsin Board as
the "only adequate method of attacking the problem which is capable of
immediate adaption to conditions in Wisconsin."

Corporation Farming. — Corporation farming has long been
known in all parts of the United States. No records are available
showing what per cent of such corporations fail and what per cent
succeed. An increasing number of railroad and industrial corpora-
tions are now operating large farms largely for experimental pur-
poses. The International Harvester Company is conspicuous for
its work in this line. The Portland Cement Company owns large
tracts of land all over the United States, not originally purchased
for agricultural purposes, but now being used for crop production.
A general manager supervises these farms, using up-to-date busi-
ness methods in developing farm properties, including cost account
keeping. A New York financial editor in speaking of this situation
expresses himself thus hopefully:

"If one company can operate farms all over the country under a central
office, using the most modern business methods of development and marketing,
the example is Ukely to be followed. Just why a big company could not buy
extensive land and work it in the same way is hard to understand. It might
be a relief to many struggling farmers whose incomes often become less and
less each year, to join the payroll of a Farm Corporation and be sure of a
salary every two weeks . . . The economic advantages are obvious, but the
social advantages would be equally great. An intelligently conducted farming
corporation would out of self interest finda way to make rural hfemore attractive
for its employees, and by both example and practice would be able to reverse
the city-ward tendency of our population, which is one of the great evils of
the present day in America. The picture of a great farm scientifically and
sympathetically conducted by a wise and progressive corporation is in fact

SIZE OF FARMS

67

so attractive to both the financier and the sociologist that we shall be surprised
if it does not soon take shape in the prospectus of such an enterprise and the
issuance of its securities under responsible auspices." "^

This roseate picture of a good and wise corporation, with the
farmer on its payroll, will not be likely to meet with the hearty
approval of the farmers themselves. But if '' efficiency" is on
that side, the corporation may in the end prevail.

Size of Farms. — What change is taking place in the size of
farms? Omitting the bonanza farms of the northwest, the plan-
tations of the south and the great ranches of the west, we find that
the size of the farm has apparently begun to grow bigger. This is
a further indication of our trend toward capitafistic agriculture.
For the complete statistics on this point the student is referred
to the table in the appendix to this chapter. The size of farms in
the strictly agricultural states is given in the brief table below:

Size of Farms in Six Typical Farming States. — Acres

Ohio

Indiana

Illinois

Iowa

Missouri

Kansas

1910

88.6

98.8

129.1

156.3

124.8

244.0

1900

88.5

97.4

124.2

151.2

119.3

240.7

1890

92.9

102.8

126.7

151.0

129.3

181.3

1880

99.2

105.3

123.8

133.5

129.3

154.6

1870

110.8

112.3

127.6

133.6

146.3

148.0

1860

113.8

124.3

145.9

164.6

215.4

171.0

1850

125.0

136.2

158.0

184.8

178.7

Average of Six States Above for Seven Decades:

1850 — 156 5 acres

1860—155.8

1870—129.8

1880—124.3 acres
1890—130.7
1900—136.9
1910—140.3

We may illustrate the tendency of the large farmers to absorb
the small farmer by the following concrete illustration: Shortly
after the close of the Civil War an ex-soldier by the name of John
McNiel moved from Ohio to the eastern part of Kansas and settled
on a farm. He located in a community settled almost entirely by
people from his section of Ohio. Here John McNiel with his wife
built a home on a 160 acre farm. He was a man of unusual indus-
try and of sterling honesty. They reared a family of two children,
one boy and one girl. They faced the privations of pioneer life
with courage. They lived through many months of discourage-
ments, but managed to save a little from year to year. By the

7 Theodore Price in Commerce and Finance, Aug. 23, 1916, Dec. 13, 1916.
For a statement of the case for corporation farming, by Pres. G. A. Vincent,
of the University of Minnesota, and a spirited reply thereto, see the Dakota
Farmer, Sept. 15, 1916, p. 972.

68 LAND TENURE

happy combination of hard work and good management this man
made a success of farming. He built a home far above the average
farm home both in beauty and convenience. His yard was decor-
ated with beautiful shade trees and pine trees. His out-buildings
were painted. Now the neighbors of John McNiel likewise built
themselves homes and also planted trees on the prairie. After
the lapse of twenty-five or thirty years these trees became groves
of immense shade trees. But these neighbors were not prosperous.
First John McNiel buys out the neighbor on one side. This house
is demolished; every tree is cut down; the place where once a
human habitation stood was reduced to cultivation and became
the site of green cornfields. And then the neighbor on the other
side was bought out. The well was filled up; the trees were cut
down; the houses removed; this home was obliterated from the
face of the earth. Likewise with a third farm. Now, this process
may be viewed as a process of growth or as a process of decay.
From the standpoint of John McNiel, farming is a success and the
large holding is better than the small holding; from the standpoint
of the three neighbors, however, farming is a failure. The writer
on a recent visit to this section was impressed with the process of
decay which is overtaking these homesteads, especially those
houses built from thirty to fifty years ago. He carries in mind
the vivid impression of one house in particular where the outbuild-
ings had fallen into decay and the house itself was converted into
a sheep fold. About the house and even passing in and out of the
doors were hundreds of sheep, suggesting the days of Queen Eliza-
beth, when enclosures had converted tillable lands into sheep
pastures to such an extent that laws were enacted against the
^' decay of villages.'* In this same neighborhood is another farm
which was given, "ready made," new house, buildings, equipment,
and all, to a young farmer and his wife by the mother of the farmer.
This place has changed hands, the present owner having greatly
improved it and enlarged it by adding two small farms to it.
The farmer to whom it was given could not make a living on it,
and is now working as a day laborer. This case simply illustrates
the human side of the problem of land tenure and of any scheme
of legislation intended to benefit small landholders. Some men
are tenants and ought to remain tenants, because they are not
qualified to be owners. Some are day laborers because of their
personal qualifications. There can never be a perfect system
of land tenure until there is a perfect race of men to occupy
the land.

FREE TRADE IN LAND 69

Mortgages. — The number of mortgages, like the amount of
tenancy, is increasing in the United States. Do mortgagors become
owners? This point has already been mentioned. Our conclusion
is that a smaller and smaller per cent of mortgagors become owners.
On the other hand, a great many present owners will in time
become mortgagors. Mortgages again like tenancy differ with
different sections of the United States. The chief class of tenancy
was given as the short-term tenure. The chief mortgage system
to-day (before the Federal Farm Loan system has had time to
change it) is the short-term mortgage, namely, five years. Custom
has apparently established the term of mortgage as about five
years. The rate of interest of course varies with different sections
of the country. When we consider manufacture, transportation,
or any of the other capitalistic forms of industry, we at once
think of their bonds as having a fairly long time to run. The
ordinary corporation bond, whether it be municipal, public utility,
industrial, mining, or other form, commonly runs twenty to forty
years. Agricultural bonds, in other words, mortgages on farms,
have the same reasons exactly for running long periods as the vari-
ous classes of bonds mentioned above. A five-year mortgage means
that the mortgagor very commonly must renew his mortgage
at the end of the five years or submit to foreclosure proceedings.
We have developed an institution in the United States sometimes
known as the "padded" mortgage and sometimes known as
the "fake" mortgage. For instance, a farmer desiring to partici-
pate in land speculation arranges to buy a farm for $8,000. He
pays cash $4,000. He then gives a mortgage for $12,000 making
the apparent cost $16,000 instead of $8,000. The seller of the
farm gives his promissory note for $8,000 as an offset to the ficti-
tious part of the mortgage. When the newcomer appears on the
scene to buy the farm he is of course impressed with the fact
that the farm is mortgaged for $12,000, which is represented
to him to be three-fourths of its actual value. He becomes the
buyer then at $16,000. This form of real estate speculation is in
vogue in certain sections of our country. The mortgage situation
under the Federal Farm Loan Act is discussed in a later chapter
dealing with Credit.

Free Trade in Land. — The English theory that no one can
secure absolute title in fee simple to the land has never obtained
in the United States. Neither has this country hedged the buying
and selling of land with restrictions or obstacles as in some of the
older countries, the government claiming original title to the land,

70 LAND TENURE

and giving the individual absolute ownership of the soil. The
owner of the soil may transfer the ownership at will and with
very little formality and with very little expense. This has pro-
duced in the United States an unorganized market for real estate.
In every city, in every village, in every hamlet, we have now
dealers in real estate. Some are stable dealers occupying perma-
nent quarters, guaranteeing the titles to the lands they handle and
rendering other services incidental to real property. Some dealers
are merely scalpers in the market looking for a few chance bargains
here and there, having no standard prices or commissions and
rendering no services of any kind to the community. It is this
class of dealers that charges a commission on land sales ranging
from $1.00 to $50 an acre. It may be truthfully asserted that
nowhere is speculation more rife or more injurious than in the
unorganized market. Oddly enough the farmers manifest a tre-
mendous and ardent interest in the activities of Wall Street, the
produce exchanges, and the grain exchanges of the country, which
have very little effect upon the farmer and at the same time they
remain largely unconcerned about the unorganized speculative
land market which lies at their door. In this unorganized market,
as intimated above, we have the rehable dealers, the scalpers, and
the out-and-out frauds. For instance, the Federal government
has but recently succeeded in convicting a group of prominent
men of frauds in connection with the sale of Florida lands. Misuse
of the mail brought the case into the Federal Court. This case is
typical of hundreds of others which are known to every reader of
our daily and weekly press.

Free trade in land has been undoubtedly the best thing for
the country in spite of the many abuses which have crept in. The
question now is how to remedy some of the obvious defects in our
methods of land trading. Some hopeful signs are now in evidence.
Two things are now being done. In some localities farmers*
organizations are now listing all farm lands which are for sale.
The list is prepared by the farmers and contains a correct and
honest description of the land and, what is more important, a
fair price. This list is brought to the attention of would-be settlers,
thereby precluding the chance for the middleman to take an unduly
large commission. Another step which has been taken may be
called state oversight of land sales. For example, in connection
with the state departments of agriculture in the states of Connec-
ticut, Pennsylvania, New Jersey, New York, Alabama, and others,
a booklet is issued from year to year giving a descriptive and accu-

LAND CERTIFICATION 71

rate list of farm lands for sale in these respective states. This
tendency to take charge of the marketing of land in such a way
as to eliminate the huge wastes of the middleman, the overcapital-
ization of land, the robbery and ruin of the immigrant, is one of
the most hopeful tendencies now discernible in connection with
this subject. Indeed, some attention is now being given to the
advisability of land certification.

The Torrens System. — The weak point in our land title system
at present is the cumbersome method of recording land titles.
The title is registered with some governmental functionary com-
monly known as the County Register of Deeds. The purchaser,
to be sure of the soundness of his title, usually is put to the expense
of securing what is familiarly known as an abstract of title. The
records are searched from the original grant of the land down to
the present moment of sale to see if there are any outstanding
claims which would cast a shadow on the title. Where titles have
changed hands many times as is the case in the older sections the
expenses of this investigation are considerable. Even then a flaw
may be discovered later in the title. A new system is coming into
use in the United States known as the Torrens System. It is now
in use in about half of our states. This system originated in South
Australia in 1858 and has spread widely throughout the British
Colonies. The most important features of this system are simple
enough, namely: Land owners record their titles to real property
with a Registrar. This official, after due examination, grants a
Certificate of Ownership which is an absolute and indisputable
title against all the world. From that moment on transfers of
real property can be made by the transfer of the certificate and
proper registration of this fact. The title is given to owners in
actual possession. If, however, another person should later estab-
lish his legal right to the property he can claim indemnity only
for his loss but cannot recover the property itself. Funds for such
emergency payments are usually furnished by the state and come
largely from the registration fees. The adoption of this system
in this country would offset all necessity for securing the so-called
abstract of title, and would eliminate the very expensive work now
performed by the title guarantee companies.

Land Certification. — Progressive traders in the real estate
market are proposing that the purchaser of farm land be protected
by receiving a certificate with his land title, correctly setting forth
the topography and the soil conditions (based on the federal soil
survey), climatic conditions, based on official statistics as to tem-

72 LAND TENURE

perature, rainfall, etc., and possibly economic statistics as to
assessed valuation, crop yields for a period of years, etc. Since
this is the age of ''blue sky laws," ''pure food laws," and certified
products of various kinds, it is logical to expect a development
of some form of land certification.

As Vermont Sees the Problem of Land Trading. — ^The
Agricultural Commissioner of Vermont, in a recent report,^
discussed the problem of the sale of farms in that State. Both his
experience and his conclusions are typical, and are worth quoting
in full:

"Land values in Vermont are so low in comparison with those in other
parts of the country that proper. advertising of our opportunities as carried
on by the pubhcity bureau of the Secretary of State's Office, coupled with
assistance in the way of giving specific information to prospective farm buyers
residing at a distance would undoubtedly enable Vermont to attract a large
number of people who would become good farmers and good citizens. It has
seemed to the commissioner of agriculture that as a preUminary to a satis-
factory program of this kind an example should be made of real estate agents
who are carrying on a campaign of farm sales which result all too often in
injustice to the purchaser.

*'We have in many sections of the State farms containing much rough
land which may be bought at low prices. This affords opportunity for a
certain type of real estate agent to purchase or secure options upon these
properties at small cost and then, by advertising them for what they are not,
sell them to unsuspecting persons at prices which will net the agent a large
profit. While the purchasers of these properties might succeed if the farms
were secured at their real value, they are unable to make a hving and pay inter-
est upon the excessive capitaHzation. Therefore, after a period of discourage-
ment they abandon the property in disgust. The State thereby losing the
possibihty of securing a desirable citizen.

"One such case was brought to our attention in the spring of 1913 by the
late Bishop William F, Weeks. An investigation showed that the real estate
firm of M. Susskind & Co. secured by option or otherwise the contract of
certain farms in Sandgate which were subsequently sold to some German
families. One of the farms, known as the Hamilton farm, was sold to one Paul
Gobel, who, after occupying it for a short time, was obliged to abandon it
after foreclosure of a mortgage on the personal property. The records of this
case seem to indicate that Gobel had been induced to buy this farm through
misrepresentation and fraud. A report was made to Gov. Allen M. Fletcher,
with a request that the matter be investigated by the legal department of
the State. An investigation by Attorney General Brown led to the indictment
of M. Susskind and Otto Trieb, members of the firm of M. Susskind & Co.,
at Manchester, June 1914. For various reasons the case was not brought to a
final issue until Aug. 15, 1916. On this date the respondents entered a plea
of nolo contendere, paid a fine of $200 each and paid Paul Gobel a sum of
money which partially reimbursed him for his loss. It is hoped that this
example will put an end to real estate operations of this nature in the State
of Vermont, because such sales profit only the real estate operator and are a
detriment to all others."

^Eighth Annual Report of the Commissioner of Agriculture, State of
Vermont, 1916, E. S. Brigham, Commissioner, pp. 13-14.

QUESTIONS ON THE TEXT 73

The buying and selling of land is more important than the buy-
ing and selling of the products of the land. It is high time that
earnest citizens gave it serious thought.

Real Estate Exchanges. — In the grain trade, as in the stock
and bond market, the responsible traders have found it wise, as a
protection to themselves and a protection to the public, to organize
and adopt strict trading rules. These associations or '^Exchanges"
operate under rules and commission charges open and pubUc and
known to all parties interested. In the real estate market there
is now apparent a beginning, here and there, of a Real Estate
Exchange, operating under definite and ethical rules, as a pro-
tection to the honest real estate dealer and to the public. The
honest dealers realize the scriptural truth that their enemies
are they of their own household, and so, by organizing exchanges
with severe membership requirements, are taking steps to weed
out the unscrupulous traders.

QUESTIONS ON THE TEXT

1. Illustrate the different interpretations of the increase of farm tenancy,

citing for this purpose the speakers before the meeting of the New York
State Agricultural Society.

2. Compare the views of Stelzle and Simons on the changes in the size of

farms.

3. What does Simons mean by "capitalism" in agriculture?

4. What has been our theory of a sound agriculture so far as land-ownership

is concerned?

5. Compare Canada and the United States as to changes in farm tenancy.

6. Is tenancy likely to increase or decrease with us? Quote Spilhnan in 1912,

7. On the social and economic significance of farm tenancy, cite the findings

of the Ohio "Survey"; of the United States Industrial Relations Com-
mission; the Cape Girardeau, Missouri, affair.

8. Name, define, and illustrate the different forms of rent contracts.

9. Show the economic and social significance of short time tenures (particularly

in Maryland, Tennessee, Iowa, Texas, Mississippi, Missouri, Wisconsin).

10. Illustrate successful farm tenancy in eastern Maryland, as described by

the Federal government.

11. What changes are taking place in the size of farms? Cite the case of

John McNeil, and state its significance.

12. Give examples of corporation farming. What is its success? State the

views of Theodore Price on corporation farming.

13. \Miat changes are talcing place as to the number of mortgages on farms?

14. Contrast the agricultural mortgages with the mortgages in other industries

as to the usual term of years each runs; as to rate of interest.

15. Explain the padded mortgage.

16. ^^^lat is meant by free trade in land? In this respect compare the United

States and England.

17. Show how the real estate market is usually conducted in the United States.

18. Explain and justify the Torrens System.

19. Show how some defects in our land trading may be remedied.

20. Cite the Vermont case of merchandising.

74 LAND TENURE

21. State the need of organized exchanges to deal in real estate.

22. Give the views of Henry Wallace on tenancy.

23. Give the main points in the "Declaration on Farm Tenancy" issued by

the Agricultural Commission of the American Bankers Association.

24. Cite statistics from 9 states illustrating the rule that cheap land means

few tenants, dear land many tenants.

QUESTIONS SUGGESTED BY THE TEXT

1. State your approval or disapproval of Simons's theory of capitalism in

agriculture, and give reasons for your position.

2. Formulate a land policy for the United States which will recognize and

preserve the good features of tenancy and eliminate the bad features.

3. Formulate a workable Land Certification program.

4. State the case for organized Real Estate Exchanges built up on principles

akin to those of the Grain Exchanges. Give the working of some such
Real Estate Exchange.

5. Complete the tables in Appendices by adding statistics from the 1920

census.

6. Prepare tables of statistics from the Census Reports, showing per cent of

farms mortgaged by decades, 1890-1920 (a) by Grand Divisions, and
(6) for each State separately.

REFERENCES

1. Benton, A. H.: "Farm Tenancy and Leases." Bulletin 178, Univer-
sity of Minnesota Agricultural Experiment Station, St. Paul, Dec, 1918.
Statistics are given showing that "Farm tenancy has been rapidly increasing
in Minnesota, particularly in the southwestern part of the State where the
average land values are highest."

2. Ely, Richard T.: "Private Colonization of Land." American Eco-
nomic Review, Sept. 1918, pp. 522-548.

3. Ely, Richard T., and Galpin, Charles J.: "Tenancy in an Ideal
System of Land Ownership." American Economic Review, Vol. 9, pp. 180-212
(March 1919). Also reprinted in bulletin form by the American Association
for Agricultural Legislation, Madison, Wisconsin, 1919.

4. Galpin, C. J., and Hoag, Emily F.: "Farm Tenancy: an Analysis of
the Occupancy of 500 Farms." Research Bulletin 44, Agricultural Experi-
ment Station, University of Wisconsin, Feb., 1919.

5. Haggard, H. Rider: "The Poor and the Land." London, 1905.

6. Pratt, E. A.: "Small Holders. What They Must Do to Succeed."
London, 1909.

7. Wendt, Dr. C. L.: "A Partnership, Not a Tenancy." The Dakota
Farmer, July 1, 1918.

8. Report of the Land Settlement Board of the State of Cahfomia. Sacra-
mento, June 30, 1918, and later annual reports. Farm allotments and farm
laborers' allotments in the Durham State Land Settlement. State Land
Settlement Board, Sacramento, May, 1918.

9. International Institute of Agriculture, Rome. "Monthly Bulletin of
Economic and Social Intelhgence" (changed to "International Review of
Agricultural Economics" January, 1916).

Finland. — "Results of Interior Colonization." Nov., 1916, 106-114; Jan.,
1917, 90-114.

Russia. — "Results of the New Agrarian Reform," Dec, 1916; Feb., 1917,
89-107. "Activity of the Peasants' Land Bank," Oct., 1917, 34-51. "Aboli-
tion of Landed Property," May, 1918, 437-438.

REFERENCES 75

Bosnia, Herzegovina. — "Agrarian Question," Oct., 1916, 69-83. Ferfalk,
Dr. F.: "A New Way to Solve the Agrarian Question in Bosnia." June,
1917, 80-86.

Portugal. — "Consolidation of Scattered Slips," Aug., Sept., Oct., 1919,
568-570.

Italy. — "Colonization in Somaliland," March, 1917, 94-116. "Italian
Colony of Erythrea," Feb., 1917, 67-89. "Collective Farms" of Italy, May,
1918 366—383.

South Africa.— ''Land Settlement in," Aug., 1918, 682-697.

Australia. — Peterson, J. W.: "Land Settlement and the Provision of
Credit in Western Australia," Dec, 1916. 93-104. "Land Settlement, South
Australia," May, 1918, 434-435. "Land Settlement in New South Wales,"
Aug., Sept., Oct., 1919, 525-535. "Closer Settlement in New Zealand," June,
1916, 109-113. "New Zealand, Land Tenure," etc., Sept., 1918, 743-764.
Jenkins, J. E.: "Land Settlement in Victoria," July, 1916, 87-95. "Land
Settlement, Queensland," April, 1916, 77-87. "New Zealand, Torrens Title,"
April, 1916, 92-113. "Land Settlement, Victoria," January, 1916, 85-97.
" Land Settlement," April, 1917, 100-101 . " Agricultural Conditions and Land
Tenure, Victoria," Nov., Dec, 1918, 911-921.

New Zealand.— "Credit for Land Settlement," Oct., 1918, 817-823.

Argentina.— "Land Problems," Aug., 1918, 645-663. "Rural Property
and the "Problems of Colonization," April, 1918, 329-337. "Subdivision of
Lands," etc., Nov., Dec, 1917, 677-678. "Present Agricultural Conditions
Affecting Land Settlement," Nov., Dec, 1919, 641-648.

Japan. — "Results and Progress of the Redivision of Lands Admitting of
Cultivation," May, 1918, 409-432.

Scotland. — "Land Tenure, Land Court and Its Work," June, 1917; May,
1919, 301-311. "Workings of Small Holdings Act of 1908 in Scotland, Eng-
land, Ireland," July, 1916, 107-116.

Ireland. — "Recent Statistics of Land Purchase Credit," Dec, 1919, 627-
636. "Land Purchase Credit in the Years 1912-1917," Mav, 1919, 280-301.

Sndtzerland.— "Land Settlement in," May, 1919, 311-319.

Korea. — "State Tenants Association," June, July, 1919, 351.

/^'rance.— "Consolidation of Strips," May, 1916, 116-129. "Law of 1918.
Redivision of Lands," Nov., Dec, 1918, 933-938.

Germany. — "Colonization," March, 1916, 124. "Prussian Legislation as
to the Rentengiiter and Its Results," etc., July, 1917, 41-46. "The Subdivi-
sion of Land in Old Bavaria," April, 1917, 77-84.

Hungary. — "Interior Colonization and the Future of Small Property,"
Oct., 1917, 72-77.

Spain. — "Distribution of Rural Property and Land Settlement in Their
Relation to the Agrarian Problem," May, 1916, 99-116.

Paraguay. — "Private Agricultural Colonization," Feb., 1916, 135-137.

India. — Douie, J. M.: "Land Tenures in the Punjab in Their Original
Form and as Affected by British Rule," July, 1917, 51-61.

SerUa. — "Distribution of Landed Property," Aug., 1916, 110-118.

Canada. — "Colonization by Pacific Railway," Dec, 1916, 133. "Coloni-
zation of Discharged Soldiers," April, 1919, 232.

Palestine. — "Jewish Agricultural Colonization," April, 1919, 206-223.

United States. — Hibbard B. H.: "The Settlement of PubUc Lands in the
United States," January, 1916, 97-118. Also "Farm Tenancy in the United
States," April, 1917, 90-100. "Reclamation of Uncultivated Land for Settle-
ment of Returned Soldiers," Nov., Dec, 1919, 648-660. "Large Holdings of
Southern Cahfornia," Aug., Sept., Oct., 1919, 574-578. "Land Tenure and
the Organization of Agriculture on Indian Reservations," May, 1917, 63-77.

"Russian Land Reforms," 4 (1914) No. 2, 119-134, Nov.; 5 (1914) No. 1,
132-160; 5 (1914) No. 2, 137-147, July.

76 LAND TENURE

"Russian Colonization in the Caucasus," 1908-1912, 1914, 125-140, Oct.

"Russian Agricultural Reforms," 1915, July, 97-118.

"Siberian Colonies," 1915, May, 96-115; 1915, March, 111-126.

"Home Colonization in Finland," 1913, Feb., 142-160.

"New Land Reforms" (Russian), Nov., 1913, 119-134.

f'in/and.— "Distribution of Farms," July, 1914, 137-147.

"Subdivisions of Land in Various European Countries," March, 1912,
217-225.

/Spain.— "Home Colonization," Dec, 1912, 175-195.

Switzerland. — ^"Restriping of Holdings, Its Present State and Practical
Results," March, 1913, 128-152.

Holland. — ^"Bill to Enable Laborers to Become Proprietors of Land,"
July, 1912, 199-203.

Belgium. — "Agricultural Economy, Including Organization of Small Rural
Holdings," Dec, 1913, 94-100.

Columbia. — '"Colonization," Aug., 1915, 118 ff.

Peru. — "Land Question and Colonization," July, 1913, 140-154.

Norway. — "Agricultural Organization, Large and Small Holdings," Aug.,
1914, 145-154. "Home Colonization," July, 1913, 129-140.

Prussia. — "Results of Legislation on Division of Lands Held in Common,
Uniting Scattered Strips," etc., June, 1911, 228-242; July, 223-228. "Home
Colonization in Northern Germany," May, 1913, 99-112; Sept., 95-119; Oct.,
93-103. "Purchase and Allotment of Landed Estates in West Prussia and
Posen," Dec, 1912, 133-174. "A New Law Against Subdivision of Land,"
Oct., 1912, 203-204.

Austria. — "Restriping of Lands in Austria," April, 1912, 205-214. "New
Agricultural Legislation," Feb., 1913, 85-100; May, 115-129. "Farm Ten-
ancy," May, 1915, 75-81; June, 95-103; Aug., 111-118; Sept., 77-85. "Con-
temporary Agricultural PoHcy," March, 1915, 73-92.

England. — "Compensation to Tenants," July, 1914, 89-103. "Rural
Depopulation," May, 1912, 163-186, also Jul}^ 161-179.

Scotland.— "Froposnl for Land Reform," Sept., 1915, 85-100.

ITaZes.— "Proposals for Land Reforms," Nov., 1915, 97-106.

Ireland.— "Congested Districts Board," Feb., 1915, 103-128.

South Africa.— "Land Settlement Act of 1912," April, 1915, 105-113.
"Provisions for SmaU Holdings," July, 1914, 103-109.

India.— "Tenure, Settlement," etc., Nov., 1914, 125-141, also Dec, 85-99.
"Holdings, Partition," etc., Jan., 1915, 102-121, also Oct., 87-96.

Australia. — "Various Forms of Land Settlement," March, 1913, 105-113,
also Aug., 137-151. "Land Settlement in Victoria," Jan., 1916, 85-97.

France. — "Enquiry in Reference to Metayage," etc., Sept., 1913, 120-140.
"Position of Small Holdings," July, 1912, 143-160.

Mexico. — "Land Tax, Distribution of Rural Landed Property," Nov.,
1914, 141-148.
>. Denmark. — "Colonization," April, 1915, 89-95.

10. Carver: "Selected Readings in Rural Economics." Land Ownership :
Broderick, "Law and Custom of Primogeniture," 352; Leslie, "Land Sys-
tem of France," 410; de Laveleye, "Land Systems of Belgium and Holland,"
433; Haggard, "State Small Holdings of Denmark," 478.

Tenancy: Holmes, "Tenancy in the United States," 487; Hibbard,
"Tenancy in (1) North Atlantic States," 498; (2) "Central States," 508; (3)
"Southern States," 523; (4) "Western States, 536. Same in Quarterly Journal
of Economics, X, 34; XXV, 710: XXVI, 105, 363; XXVII, 482; Bastable,
"Irish Land Purchase Act of 1903," 898-913. Same Quarterly Journal of
Economics, XVIII, 1.

REFERENCES 77

11. HoLMAN, C. W.: "Revolution in the Rural South — Story of the Mili-
tant Renters' Union andJts Remarkable Influence in SoHdifying the Tenants
to Resist the Aggressions of the Landlords," Twentieth Century Magazine,
May, June, 1912.

12. Yearbook Department of Agriculture. Spillman, W. J., and Golden-
WEiSER, E. A., "Farm Tenantry in the United States," 1916, 321-347; Hoijvies,
Geo. K.: ''Movement from City and Town to Farms," 1914, 257-275.

13. Mead, Elwood: "Government Aid and Direction in Land Settle-
ment." Discussion by R. T. Ely, G. F. Warren, C. F. Marbut. American
Economic Review, March, 1918, 72-113 (Vol. 8, No. 1).

14. Lease Contracts — Crop and Livestock — in Minnesota. Grain Growers
Guide, March 19, 1919.

15. Putnam, George E.: "Agricultural Credit Legislation and the Ten-
ancy Problem." — American Economic Review, Dec, 1915, 805-816 (Vol. 5,
No. 4).

16. Lloyd, O. G.: "Farm Leases in Iowa." Bulletin 159, September, 1915,
Iowa Ag. Exp. Sta.

17. Wilcox, E. V. : "Lease Contracts Used in Renting Farms on Shares."
Bulletin 650, United States Department of Agriculture.

18. Grimes, W. E.: "Farm Leases in Kansas," Bulletin 221, June, 1919,
Ag. Exp. Sta. Kansas.

19. Hudson, Manley O. : "Land Tenures and Conveyances in Missouri,"
Uni. of Missouri Bulletin, Vol. 16, No. 16, June, 1915.

20. Johnson, O. R., and Foard, W. E.: "Land Tenure" (Survey of 4
Missouri Townships). Bulletin 121, Dec, 1914, Ag. Exp. Sta., Missouri.

21. Wilson, James, and Wallace, Henry: "Agricultural Conditions in
Great Britain and Ireland." (No date). Published by the Iowa Dept. of
Agriculture, Des Moines (1913?).

22. Stewart, Chas. L.: "Land Tenure in the United States with Special
Reference to Illinois." University of IlUnois Studies in the Social Sciences.
Vol. 5, No. 3, 1916.

23. Froley, J. W., AND Smith, C. Beaman: "A System of Tenant Farm-
ing and Its Results." Farmers' Bulletin, Department of Agriculture, Wash-
ington, 1911.

24. "Industrial Commission." Vol. X, cvi-cx; Vol. XIX, 96-105.

25. "Survey" (magazine), April 17, 1915, 63-64.

26. "United States Commission on Industrial Relations, FinalReport," 1916.

27. SiGERSON, G.: "Land Tenures of Ireland," 1871.

28. Kay, Jos.: "Free Trade in Land," 1880.

29. "Corporation Farming." Commerce and Finance, Aug. 23, 1916; Dec,
13, 1916. "Dakota Farmer," Sept. 15, 1916.

30. "Annual Report, Secretary of the Interior," Washington, 1918.

31. Torrens Title. Niblac, W. C: "Torrens System," 1903; Cameron,
A. G.: "The Torrens System," 1915; "Laws Relating to Rural Credit and
Land Registration," 64 Cong. 1 Sess. Sen. Doc. 351.

32. "The Lease Contract "—Foard's Dairyman, Feb. 6, 1920. Black,
J. p.: "Landlord's and Tenant's Share." Black, J. D,: "Share Leases for
Dairy Farms." "Iowa Stock Share Leases." "Dairy Farm Lease."

33. Jackson, T. C. (3d. ed.): "Agricultural Holdings and Tenant Right
Valuations," Preface; 1-6; 181-344, 1917.

34. "Farm Lease for Grain Farming" — Suggestion from University of
IlUnois. Banker-Farmer, Jan., 1920, p. 10.

35. "Where Does Tenancy Lead?" Banker-Farmer, Jan., 1920, p. 12.

36. "Anti-rent War in New York," 1844. Niles Register, Vol. 67, pp.
256, 272.

78 LAND TENURE

37. "Scully Lands in Kansas." Commercial West, Feb. 15, 1919, p. 40.
Compare large holdings in Argentina, Daily Consular and Trade Report,
No. 165. July 16, 1919, 334-335.

38. ''Small Farms for Uruguay" — the beginning of the subdivision of the
large estates. Monthly Consular and Trade Reports. June, 1909, 86.

39. Mead, Elwood: "Summary of Soldier Settlements in English Speak-
ing Countries, Department of the Interior," Washington, 1918.

40. "Land Settlement in the Mother Country." Issued by the English
and Scottish Boards of Agriculture with the approval of the Admiralty and
War Office, 1919.

41. "Renting Land in Missouri, etc., with Model Forms of Lease." Bulle-
tin 167, Agricultural Experiment Station, Columbia, Mo., February, 1920.

APPENDIX

Corporation Farming. — Corporation farming is now being conducted in
many speciahzed crops in the United States. As an instance of this, mention
may be made of the American Fruit Growers, Inc., with headquarters at Pitts-
burgh, Penn.

The fruit and vegetable industry in the United States ranks next to grain
and meat in the volume and value of the food produced. The annual volume
of fruits and vegetables marketed aggregates more than 750,000 car loads,
and the annual value of this volume is some three bilhon dollars. Tremendous
wastes have been common in this trade, due to poor packing, poor distribution,
and other marketing defects.

The corporation above named owns and operates apple orchards and apple
packing houses and is also in the distribution business, to the end that certain
savings and economies may be introduced in standardizing and stabilizing
various departments of this great industry.

Henry Wallace on Farm Tenancy.— "Productive value cannot be main-
tained under our present system of leasing.

"It is useless to attempt to develop a social value when half our lands are
farmed by an unstable population.

"Country schools are declining in efficiency . . . and will so long as our
present system of leasing continues.

"Many leases are simply conspiracies against the voiceless land to rob
it . . . The land is silent now, but bides its time and takes its sure revenge." —
Henry Wallace, Address before Banker Farmer Conference, Chicago, 1915,

APPENDIX

79

Farm Mortgages. ^-Per Cent of Farms Mortgaged, Arranged in Order of Per
Cent Mortgaged, Showing Changes, if Any, in Twenty Years

1910

1900

1890

Iowa 51.8

Iowa 53.0

Kans. 55.5

50 per cent — 59 per cent

Wis. 51.4

N. J. 51.9

Iowa 53.3

N. D. 50.9

S. D. 52.4
Neb. 52.0

N. J. 49.6

Mich. 48.3

Mich. 49.4

Mich. 48.2

Vt. 46.9

N. J. 48.9

Vt. 46.9

N. Y. 46.3

N. D. 48.7

Minn. 46.3

Wis. 45.8

Minn. 46.4

Mo. 46.3

Neb. 45.4

Vt. 44.3

40 per cent — 49 per cent

Kans. 44.8

Minn. 44.8

N. Y. 44.2

N. Y. 43.7

Mo. 42.4

Wis. 42.9

Okla. 43.5

Kans. 41.8

Conn. 43.2

Conn. 40.7

Mass. 40.9

Cal. 40.5

1

Neb. 39.4

ni. 39.3

111. 36.7

111. 39.2

Mass. 38.6

Mo. 36.4

Ind. 38.8

Md. 36.8

Ind. 33.1

S. D. 38.2

S. D. 36.7

Cal. 32.5

Del. 37.2

Del. 36.5

Conn. 31.1

Md. 36.4

Ind. 36.5

Mass. 30.5

30 per cent— 39 per cent

Wash. 34.1

Pa. 32.3

Md. 30.0

Ore. 33.7

Cal. 32.2

U. S. 33.6

N. D. 31.4

Tex. 33.3
Idaho 33.4
Miss. 32.9
Pa. 31.1

U.S. 31.0

R. I. 29.6

Ohio 29.8

Del. 29.4

Ohio 28.9

R. I. 27.1

Ohio 28.9

Ala. 26.9

MLss. 27.1

U. S. 28.2

Me. 26.6

Colo. 27.0

Penn. 27.4

20 per cent— 29 per cent

Colo. 26.4
N. H. 25.6

Me. 26.7
N. H. 25.5

Wash. 26.8
Colo. 25.5

S. C. 24.0

Ore. 25.2

Ore. 23.4

Utah 22.9

Tex. 23.4

Me. 22.1

Ark. 21.4

Wash. 21.7

N. H. 21.8

Mont. 21.1

S. C. 20.6

Wyo. 19.7

Nev. 19.3

R. I. 19.1

Ky. 19.6

Ala. 19.2

Nev. 17.2

Ga. 19.0

La. 17.7

Idaho 16.3

La. 19.0

Idaho 16.4

Mont. 15.6

N. C. 18.5

N. C. 15.8

W. Va. 13.0

Tenn. 16.9

Ky. 15.2

Wyo. 13.0

Nev. 16.7

Va. 14.7

10 per cent— 19 per cent

Va. 16.0

Ga. 14.7

Fla. 14.8

Ark. 14.3

Ariz. 12.9

W. Va. 14.1

W. Va. 12.6

Mont. 14.0
Wyo. 12.2
Tenn. 11.5
Utah 11.1
Fla. 10.3

N. M. 5.4

Okla. 9.2

S. C. S.O

Ariz. 6.9

Miss. 7.7

N. M. 2.3

Ariz. 6.8
Tex. 5.7
Utah 5.5
N. C. 4.9
Ala. 4.4

1 per cent — 9 per cent

1

Ark. 4.2
Ky. 4.1
La. 4.0
Ga. 3.4
Va. 3.2
Tenn. 3.2
N. M. 3.0
Fla. 2.9

80

LAND TENURE

Farm Tenancy. — Per Cent of Farms Operated by Tenants, Arranged in Order
of Per Cents, Showing Changes, if Any, in Thirty Years

1910

1900

1890

1880

Miss.

66.1

Miss.

62.4

Ga.

65.6

S. C.

61.1

60 per cent — 69 per cent

S. C.
Ala.

63.0
60.2

La.

55.3

Ga.

59.9

S. C.

55.3

S. C.

50.3

Okla.

54.8

La.

58.0

Ga.

53.5

50 per cent — 59 per cent

Tex.

Ark.

52.6
50.0

Ala.
Del.

57.7
50.3

Miss.

52.8

N. C.

42.3

Tex.

49.7

Ala.

48.6

Ala.

46.8

Del.

41.9

Ark.

45.4

Del.

46.9

Ga.

44.9

40 per cent — 49 per cent

111.

41.4

Okla.

43.8

La.

44.4

Miss.

43.8

Tenn.

41.1

N. C.
Tenn.

41.4
40.6

Tex.

41.9

Del.

42.4

Neb.

38.1

111.

39.3

N. C.

34.1

Tex.

37.6

la.

37.8

Neb.

36.9

111.

34.0

La.

35.2

Kans.

36.8

Kans.

35.2

Ark.

32.1

Tenn.

34.5

30 per cent — 39 per cent

Ky.

33.9

la.

34.9

Md.

31.0

N. C.

33.5

Ind.

30.0

Md.
Ky.
Va.
Mo.

33.6
32.8
30.7
30.5

Tenn.

30.8

111.
Ark.
Fla.
Md.

31.4
30.9
30.9
30.9

Mo.

29.9

N.J.

29.9

Kans.

28.2

Va.

29.5

Md.

29.5

Ind.

28.6

la.

28.1

Mo.

27.3

Ohio

28.4

Ohio

27.4

N.J.

27.2

Ky.

26.5

Fla.

26.7

Fla.

26.5

Va.

26.9

N.J.

24.6

Va.

26.5

Pa.

26.0

Mo.

26.8

la.

23.8

20 per cent — 29 per cent

N.J.

24.8

N. Y.

23.0

Ind.

25.4

Ind.

23J

S. D.

24.8

Cal.

23.1

Ky.

25.0

Pa.

21.2

Pa.

23.3

Colo.

22.6

Neb.

24.7

Minn.

21.0

W. Va

.21.8

Fla.

23.6

N. Y.

20.8

S. D.

21.8

Pa.

23.3

Cal.

20.6

R. I.

20.2

Ohio

22.9

W. Va

.20.5

N. Y.

20.2

Colo.

18.2

Ore.

17.8

R. I.

18.7

R. I.

19.9

R. I.

18.0

Minn.

17.3

Cal.

17.8

Cal.

19.8

Mich.

15.8

Mich.

15.8

W. Va

. 17.7

Ohio

19.3

Ore.

15.1

Vt.

14.6

Vt.

14.6

W. Va

. 19.1

N. D.

14.3

Wash.

14.4

Mich.

14.0

Neb.

18.0

Wis.

13.9

Wis.

13.5

S. D.

13.2

N. Y.

16.5

10 per cent — 19 per cent

Wash.

13.7

Conn.

12.9

Minn.

12.9

Kans.

16.3

Nev.

12.4

Nev.

11.4

Ore.

12.6

Ore.

14.1

Vt.

12.3

Conn.

11.5

Vt.

13.4

Idaho

10.3

Wis.
Colo.

11.4
11.2

Ariz.
Colo.
Conn.
Mich.

13.2
13.0
10.2
10.0

Conn.

9.8

Mass.

9.6

Mass.

9.3

Nev.

9.7

Ariz.

9.3

N. M.

9.4

Wash.

8.5

Minn.

9.1

Mont.

8.9

Mont.

9.2

N. H.

8.0

Wis.

9.1

Wyo.

8.2

Utah

8.8

Ariz.

7.9

Mass.

8.3

Mass.

8.1

Idaho

8.8

Nev.

7.5

N. H.

8.1

Utah

7.9

N. D.

8.5

N. D.

6.9

N. M.

8.1

N. H.

6.9

Ariz.

8.4

Me.

5.4

Wash.

7.2

1 per cent — 9 per cent

N. M.

5.5

Wyo.

7.6

Utah

5.2

Mont.

5.3

Me.

4.3

N H.

7.5

Mont.

4.8

Idaho

4.7

Me.

4.7

Idaho

N. M.

Wyo.

Okla.

4.6
4.5

4.2
0.7

Utah
Me.

S. D.
N. D.
Wyo.

4.6
4.3
3.9
3.9

2.8

APPENDIX 81

Farm Tenancy in Canada. — Per cent of Total Occupiers Who are Tenants

1891
Per cent

1901
Per cent

1911
Per cent

15.42

26.77

9.47

5.53

10.32

21.56

11.87

7.30

7.22

5.56

12.90

19.70
6.25
3.89
11.08
19.78
9.94
5.82
1.93
5.82

11.40

Provinces :

British Columbia

14.19

Alberta

.7.95

Saskatchewan

Alanitoba

9.26
16.19

Ontario

17.68

Quebec ^

7.72
5.45

Nova Scotia

4.66

Prince Edward Island

4.47

Shifting of Farmers, or Term Farmer Spends on One Farm,
of Farm {Owners and Renters)

Term of Occupancy

5 Years and

over

Less than 4 years

United States

48.24 per c

ent

51.76 per cent
29.92

New England

70.08
63.34
59.00
49.59
46.92
46.67
40.79
39.93
33.48

Middle Atlantic

36.66

East North Central. . .

41 00 "

West North Central

50.41 "

Pacific

53.08

South Atlantic

53.33

East South Central

59.21

Mountain . . .

60 07 "

West South Central

60.52

Conference of the Agricultural Commission of the American Bankers Association,
Washington, February 26-27, 1919

Declaration on "Farm Tenancy." — -"Farm tenancy is a constantly in-
creasing menace to a permanent, prosperous, and safe agriculture, and a con-
tented country life. It has resulted in a loss of the priceless fertility of the
soil — ^the creation of an unsettled farm population — illiteracy — an inefficient
country school system — a drift from farm to city — and unprofitable methods
of agriculture.

" Means must be found by which the industrious young farmer of character
and skill in agriculture, even though of limited financial resources, can look
forward to becoming a farm owner.

"This conference recommends that committees on agriculture of the
bankers' State associations give serious attention to methods of correcting
this dangerous condition.

"To the committees is suggested the advisability of selecting a banker
leader in each county to bring together farm owners and tenants to devise
means for the purchase of farms, utihzing governmental and private agencies.

"The committees should also inspire better systems of leasing that will
provide protection for the fertihty of the soil, longer tenures, and provisions
for the maintenance of livestock." — Banker Farmer, April, 1919, p. 2.

82 LAND TENURE

Relation of Tenancy to Land Value. Dear Land Means More Tenants. Examples

of Largest and Smallest Amount of Tenancy, by Rural Counties, in Certain
States; Also Average Land Values in Same Counties. 1910 Census.

Tenancy Land value

Alabama: Per cent per acre

Average for State 60.2 $10.46

Dallas County 89.2 . 12.24

Winston County 23.7 4.24

Georgia:

Average for State 65.6 $13.74

Dougherty County 91.4 13.99

Glynn County 10.3 4.27

Illinois:

Average for State 41.4 $ 95.02

Ford County 66.9 148.97

Edwards County 20.1 47.46

Iowa:

Average for State 37.8 $ 82.58

Grundy County 56.7 117.36

Allamakee County 15.8 38.25

Mississippi:

Average for State 66.1 $13.69

Leflore County 95.4 43.64

George County 3.5 8.19

Oklahoma:

Average for State 54.8 $22.49

Osage County 89.2 13.21

Cimarron County 2.5 8.38

South Carolina:

Average for State 63.0 $19.89

Marlboro County 80.4 52.76

Georgetown County 21.1 5.67

Texas:

Average for State 52.6 $14.53

Robertson County 69.7 15.62

Winkler County 0.8 5.22

Wisconsin:

Average for State 13.9 $43.30

Rock County 32.4 68.85

Walworth County 32.8 69.38

Kewaunee County ^ 2.7 52.20

Lincoln County 2.9 31.69

1 Kewaunee County, Wisconsin, furnishes an interesting exception to the rule. Here
German and Bohemian farmers, owning small farms of high-priced land, are in the majority.

CHAPTER VI

ECONOMIC CONDITION OF THE FARMER

Introductory. — Whatever schemes may be tried to induce
people to go back to the land, the outstanding fact is and must
ever be that when the farm pay^ people will flock to the farm with-
out other inducements. The industries of the city offer greater
economic inducements than the farm does, either in the size of
income or in the certainty or continuity of income.

Does Farming Pay? — It is difficult to measure all the returns
of farming. These returns include among other things such non-
measurable things as independence, since the farmer has no em-
ployer to please; joy in labor, since the farmer labors for himself;
peace of mind, since panics in the business world will have no
influence on the farm's fertility. But the tangible return, the one
which can be measured, is the economic income. This economic
income goes far to determine the farmer's social status in his
community, the amount of leisure at his disposal, and to a large
degree his importance and opportunity in a political way. It is
the basic underlying factor in the farmer's life. Therefore the
importance of this question, ''Does Farming Pay?"

Income of $408 a Year. — A great many attempts have been
made to estimate the farmer's income; many investigations and
''surveys" have been made. The Federal government carried
on a careful investigation in the heart of our great farming section,
for instance. The following quotation from this investigation
illustrates very adequately all phases of this very complex question :

"The economic condition of the farming population is a matter of great
concern to everybody. According to the last census (1910), thirty-two per
cent of our population actually live on the farms, and the efficiency and pros-
perity of these directly affect the condition of all the rest. Farming has never
been regarded as a very remunerative business, and there have been obvious
reasons throughout most of our history why the direct and immediate returns
could not be large. With fertile prairie land practically free, it was not to be
expected that the common crops would bring much more than the labor cost
of producing them by the ordinary methods, for while there is a great oppor-
tunity in agriculture for the use of intelligence and scientific skill, it is also
true that routine farming can be learned and carried on by anyone. During
the period when good lands could be had by homestead entry, the opportunity
to obtain a farm free was in itself a great inducement to the settlement of
vacant lands, and a factor in making low prices on farm products.

"With the passing of the period of free lands, and as population gained
upon farm area, the prices of farm products began to advance. A pronounced

83

84 ECONOMIC CONDITION OF THE FARMER

change has taken place since the decade 1890-1899, with the result that there
has been a general outcry from consumers over the rise in the cost of living.
During the calendar year 1913 the twenty principal farm staples included in
the price tables of the Bureau of Labor averaged 165.8 per cent of the average
level of the same commodities in the period 1890-1899. It would be naturally
supposed that with this advance in the prices of his products, the position
of the farmer must have improved; but it is seriously argued that this is not so.
Statisticians and experts are contending that farming is still a business of
very poor returns."

Bulletin 41 of the United States Department of Agriculture
consists of a report of a survey of 520 typical farms in Indiana,
Illinois and Iowa made by representatives of the Department.
Of these farms 273 were operated by the owners, and it is reported
that after allowing five per cent interest on the capital investment,
these owners only received an average of $408 per year, plus house
rent and food supplied by the farm, for their labor and manage-
ment. The 247 renters did better, for they received an average
of $661, but this was because the landlords received only 3.5 per
cent interest on the value of their investment. This showing
leads the investigators to the conclusion that the assertion that
farmers are making large profits is erroneous. ''They are living
on the earnings of their investment and not on the real profits
of the farm." The report says:

"As farming is a business, investing both capital and labor, the farmer
should receive a fair income on his investment as well as wages for his labor."

The problem for the man on a farm is no different from that of the man in
a railroad office or a bank; it is to get himself into the class that is above the
average in efficiency. By so doing he will not only benefit himself but help
to raise the level of production and consumption for the whole community."

An Example of Successful Farming. — One of the well-known
bankers of the State of Iowa, Mr. Charles Shade, President of the
First National Bank of Rock Rapids, having referred incidentally
to the success of a young farmer of his acquaintance, as an example
of what was being accomplished by industry and good manage-
ment in the business of farming Iowa soil, was asked to give the
account in writing and did so, adding another instance, and his
statement is quoted below. It was written without reference to
the above discussion, but is given as explaining why farming lands
have been advancing in value.

" The young man referred to is a German by descent — ^was born and reared
in our own country. His people are hard working, frugal farmers so that he
has had the proper training in his profession and has been taught to make
the most of his opportunities in cultivating the soil. His name is John Busch.
The story runs as follows:

"After reaching his majority he began farming on his own account in the
Spring of 1908 by renting 80 acres of land from a neighbor, giving one-third

AN EXAMPLE OF SUCCESSFUL FARMING 85

of the small grain and paying cash rent of $4.00 an acre for all the land
put into corn. His father gave him two horses and he used his father's ma-
chinery to put in the crop. We loaned him $600 to be used in buying hogs
and cattle.

"In 1909 he rented a half section of land and out of the proceeds of his
crop of 1908 he purchased farm machinery of his own and more horses. The
seasons of 1909 and 1910 were good crop years, and during these two years he
added more stock to his farm and more fully equipped himself for the handling
of 320 acres of land by the purchase of more horses and more machinery.
During all of this time we continued to carry him on the first loan of $600 by
renewing the note each year, he paying the interest.

"In 1911 we loaned him an additional $500 making his total indebtedness
to us $1,100. The season's crop of 1911 was very large and the price was good.
Out of this crop he sold sufficient amount of grain to pay up all the money
borrowed from us and to Hquidate other small debts he had made in buying
machinery, cattle, horses and hogs, so that in the Spring of 1912 he had all
of his debts paid, with a good herd of cattle, a large stock of hogs, horses and
machinery sufficient to carry on the 320 acre farm. The crop of 1912 was not
an average one, so that the profits of that season were very light. He continued
farming this same land during 1913 and 1914, putting the larger part of it
into corn. The market price for corn was large, and as he had practically all
of the work done without outside help other than one additional farm hand,
his expenses were fight.

"Out of the crop of 1913, after paying current expenses and without selfing
the cattle and hogs, he had about $2,000 in money which he left with us
on deposit.

"During the crop season of 1914 he planted 200 acres of corn. This
crop averaged about 60 bushels per acre, making 12,000 bushel yield. This
corn was worth better than 50 cents per bushel. The accumulation of cattle
and hogs had been very rapid, so that by the first day of December, 1914, out
of the proceeds of this crop and the sale of cattle and hogs, after paying current
expenses he left with us $5,000 additional money, making in all $7,000.

"He purchased a 160 acre farm in November, 1914, and promised to pay
for it $28,000, eight thousand cash down and long time on the balance at 5 per
cent. The land was deeded to him and he gave a mortgage back for $20,000.
We loaned him $1,000 for sixty days, assisting him to make up the $8,000.
In January he disposed of hogs sufficient to pay back to us the $1,000. So that
this young man now has $8,000 paid in on a splendid quarter section of land
which is well improved and has ten years to pay the balance of it at 5 per cent.
He also owns eight head of horses, 25 head of cattle, 20 head of brood sows
and more than $2,000 worth of farm machinery with seed and feed ample to
carry him through this season.

"I make an estimate of the value of his personal property as follows:

8 head of horses at $150 per head $1,200

26 head of cattle at $60 per head 1,500

20 head of brood sows at $25 per head 500

Farm machinery 2,000

Seed and feed 1,500

Paid on land 8,000

Total $14,700

"Now that is the net profit from his farming operations in six seasons.
When you take into account that this young man started empty handed, it
seems to me that it is a remarkable case. This man has also been handicapped
by not being married and has done his own housekeeping.

"I also have another case which I might cite you of great thrift in our
territory. It is that of Fred Schimmel, a German whose ancestors as far back
as I know were farmers. This man started farming in 1900 by his father

86 ECONOMIC CONDITION OF THE FARMER

giving him a team and his renting 80 acres of land. In 1901 he was married.
He continued to rent land, giving to the landlord one-third of the crop raised
on the land until 1905 when he purchased 160 acres of land at $60 per acre,
making a payment of $3,000 at the time of the purchase with a promise to pay
$500 per year and interest. He moved onto this farm and erected good build-
ings during the next 3 years besides making payment of his $500 each year
and interest. In 1908 he traded this land for a half section of land, turning
this farm in at $125 per acre and taking the other land at $120 per acre. Last
January he refused $48,000 for this land. He has an encumbrance of $16,000
against it. He also has a short horn cattle herd of 65 head, 16 horses, 50 or 60
head of hogs, full equipment of farm machinery, with seed grain and feed to
carry him more than one year, in the grainery. Mr. Schimmel has the equiva-
lent of at least $40,000, and all of this has been the outgrowth of his farming
operations in 14 years, some of which have been lean years."

Best Practices Popularized. — 'A somewhat similar situation
was described by Bradford Knapp while with the Department of
Agriculture. Speaking before the First Annual Conference of the
Bankers Committees on Agricultural Development and Education
at Minneapolis in 1911, he said:

"The great problem of to-day is the dissemination of existing knowledge.
That is true not only of agriculture but of almost every other human endeavor.
If the existing knowledge with regard to human health were known and com-
monly practiced by the people generally, the ills of the human body would be
much decreased. If the knowledge that is in existence in every state in the
tlnion with regard to the best and most successful methods of conduct of
farms were to become the common practice of the average farmer, the agri-
culture of this country would be revolutionized. In every community, in
every county, in every state, you will find farmers who are making a distinct
success of the business of farming. Also in every community you will find men
who are merely scratching the surface of Mother Earth for a very poor exist-
ence. It is a lamentable fact that the best practices of a few are not the
common practices of many. In every community we find farmers of poorer
grade who are pulhng down the average production per acre, and therefore
whose return for their labor is very low indeed. It would astonish you if
you were to look into figures and find out what the average earning capacity
of the average farm worker of this country in the various states is or was.
We found the figures for the year 1900, I cannot give you the exact statistics
for 1910 yet, because the Census Bureau has not published the total number
of farm workers, but I can give you a few figures for the year 1900; for example
in the state of South Carolina the average earning capacity of the average
farm worker was but $146 per annum. In the state of Iowa in that year, not
including the Hvestock industry of that state, it was a trifle over $600 per
annum, and in North Dakota for that year it was a httle over $700 per annum.

"It is a well known fact and appreciated by all thinking men, that the
population of the country has practically stood still, or advanced very little,
while the population of our cities and towns of over two thousand population
have increased enormously simply because men have been going from the farms
to the cities. The great cities and centers of population have paid tribute to
the best blood that has been upon the farm. Without going into the figures
to show these things, and without commenting upon the statistics which could
be produced, it is a lamentable fact that this tendency exists to-day, and has
existed in this country for the past twenty years.

"If you were to ask me why this thing has been I would say it was for
three reasons.

THE "SURVEY" METHOD 87

1. Because the average earning of the average farmer has netted too small
a return for his labor.

2. Because he lacks education and social advantages.

3. And by no means, least, in many parts of the country what he did
earn was earned at too great a personal sacrifice — labor for long hours and
no recreation."

The Farmer's Income — Other Estimates. — In recent years
many studies have been made of the farmer's income. Farmers'
Bulletin No. 746, by Goldenweiser/ is one of the best estimates
we have, because it is based on several different investigations
carried on by various bureaus of the federal government. An
exact statement in money of the farmer's income is not possible,
since the farmer has such earnings as house rent, value of foods
and fuel supplied by the farm, and other earnings not on the money
basis. The average earnings of the farmer, says this Bulletin,
are about $600, made up of cash, $200, and about $400 supplied
by the farm. This $600 may be compared with the $460, earned
by the factory hand, and with the $663 earned by the average
clergyman. About two-thirds of the farmers are landowners. ''In
view of the lower cost of living on the farm," says Goldenweiser,
''and the fact that two-thirds of the farmers have interest in addi-
tion to wages it appears that farmers, as a class, are better off
than the majority of persons engaged in other pursuits." Paul L.
Vogt, formerly of Ohio State University, one of our trustworthy
investigators, discussed the farmer's income in an economic maga-
zine.^ He shows the difficulty of comparing a farmer's income
who combines in himself three factors of production (ownership
of the business, management of the business and the labor) with
the incomes of breadwinners in cities where these factors are more
sharply differentiated. Vogt cites average farm incomes of $439,
$423, and other amounts. There is a tendency, he says, for changes
in gross income to manifest themselves in rises in land values
rather than in labor income. He also sees a tendency toward
equalization of labor incomes in all parts of the country. His
conclusions are that the farmer now is better off than the great
majority of breadwinners in the cities, and is also better off than
such salaried professional men as clergymen and school teachers.

The " survey " method of determining the farmer's income has
come into vogue very much in recent years, particularly since the
publication of that very able piece of farm management pioneering

^ Farmers' Bulletin No. 746. United States Department of Agriculture,
July 6, 1916.

2 The Farmers' Labor Income. Paul L. Vogt; American Economic Review,
Dec, 1916.

88 ECONOMIC CONDITION OF THE FARMER

in this field by Professors G. F. Warren and K. C. Livermore of
Cornell University, namely, ''An Agricultural Survey, Townships
of Ithaca, Dryden, Danby, and Lansing, Tompkins County, New-
York," and published in March, 1911, as Bulletin 295. Since this
survey covers a partially deforested area, very much the worse
for the wear and waste of a century, and competing but badly
with the fresh lands of the newer states, this study may be said
to represent about the average conditions of New York State.
The principal topics covered in this survey are as follows : profits,
capital, receipts, expenses, size of farms, value per acre, soils,
distance from market, labor, crops, woodlot, livestock, dairy
herds, poultry, bees, systems of farming, forms of tenure, women
as farmers, education of farmers, size of farm families, abandoned
farms, farm buildings, roads, rural free delivery of mail, telephones,
farm as a home for persons otherwise employed, summary of
recommendations. While the survey is primarily an economic
study, yet it does deal to a small extent with other social problems,
such as education, transportation and communication. However,
the chief point of interest to be emphasized here is the "labor
income" of the farmer. On the 615 farms operated by owners,
the average labor income was found to be $423; on the 134 farms
operated by tenants the labor income was $379.

The various terms used in this study, such as ''labor income,"
"capital," etc., are all clearly defined. The more important defi-
nitions are the following:

" Capital includes the value of all farm property, land, houses,
buildings, stock, feed, seed, tools and cash necessary to keep the
farm running. It does not include house furnishings that are not
used in farming. The average of the amount at the beginning and
at the end of the year is considered to be the capital invested in
the business."

" Receipts include all money received from the sale of any
farm products, also receipts from outside work, rent of farm build-
ings, etc. If the value of the buildings, stock, produce, or equip-
ment is greater at the end of the year than at the beginning, the
difference is considered a receipt."

" Expenses include all farm expenses. If the value of the
buildings, stock, produce, or equipment at the end of the year is
less than at the beginning, this loss is included with expenses.
Household or personal expenses are not included, but the value of
board furnished to hired help is counted. Expenses, therefore,
include all business expenses. Taxes are not included in expenses.

CALCULATING LABOR INCOME 89

" Farm income is the difference between receipts and expenses.
This is the net return as a result of the use of the capital and unpaid
labor. It does not represent what the farmer earned, because both
the farmer and his money were working. In order to see what was
produced by the unpaid labor, we must subtract the amount that
the capital would have earned if placed at interest."

" Income from xmpaid labor is the farm income less 5 per cent
interest on the capital."

" Labor income. — Often the farmer is helped in the farm work
by members of his family. If such help has been given, the amount
that it would have cost to hire it is deducted from the income from
unpaid labor in order to get the amount that the farmer earned
by his own labor. If a farmer's labor income is $500, it means that
as a result of his year's work he has made 5 per cent interest on
his capital and has cleared $500 above all farm expenses, besides
having the use of a house and such farm produce as the farm furn-
ished for consumption in the house. I'his figure can, therefore,
be compared with wages paid to a hired man who is given a house,
garden, etc."

These definitions are stated in simple, direct terms, familiar
to farmers who are not learned in the mysteries of accounting
principles and practices. Modern farm accounting, it may be
added, is as yet neither a science nor an art. Hence these defini-
tions quite naturally run counter to certain usages observed by
some accountants in other lines of business. However, the account-
ants do not agree among themselves.

Calculating Labor Income. — The following case from the survey
above described illustrates concretely the method of determining
the farmer's ''labor income":

Capital invested $10,183

Receipts 3,494

Made up as follows:

Crops $766

Stock 536

Stock products 2083

Inventory increase 109

Expenses 1,323

Farm income $2,171

Interest, 5 per cent on capital 509

Labor income $1,662

It will be observed that interest on ''capital invested" is deducted
in arriving at the farmer's labor income. This is correct. Account-
ing practice in other lines of business which refuses to allow interest
on investment as one of the legitimate items of expense seems to
be an error. Obviously the farmer could invest his capital in bonds

90 ECONOMIC CONDITION OF THE FARMER

and secure a job (or a ''position ") yielding him wages (or ''salary").
The above statement of income makes no allowance for the rent
of the house which the farmer occupies or for the garden truck
and general farm produce which he consumes at his table. This
fact must be borne in mind when comparing "labor income" on
the farm and labor income in the city. The value of the house and
garden is very difficult to determine with any approach to accuracy.
In Farmers' Bulletin, 635, the Federal Department of Agriculture
has attempted to find the value of the farm-grown foods consumed.

What the Farm Contributes. — The Farmers' Bulletin, 635, con-
sidered the interesting subject of what the farm contributes directly
to the farmer's living. If it were not for those products, says this
bulletin, contributed by the farm without any actual cash expendi-
ture, a great many farmers would not have a comfortable living.
Extensive investigations relative to the profits in farming indicate
that the average labor income of the farmer probably differs little
from ordinary farm wages, but in addition to this he has the
"products" contributed by the farm. Statistics were secured by
means of a house-to-house canvass among 483 families living in
ten states. An earnest effort was made to get a faithful estimate
of the amount which the farm itself contributed. The conclusion
was reached that the average annual price of food, fowl, oil and
shelter actually consumed by our farmers was $595.08, of which
$421.17 was furnished by the farm and the balance purchased.
The " family ration " varies not only with the season of the
year, but also from state to state. The consumption of cereals
varies with the fancies of the individual families. Approximately
one head of poultry per month for each person is the average for
all sections. Each person consumes annually 3.1 bushels of apples.
In the southern states more sweet potatoes than Irish potatoes
are used. The average consumption per person for all sections
is 5.7 bushels of Irish and one bushel of sweet potatoes. For those
sections not using sweet potatoes, the average consumption of
Irish potatoes is 7.3 bushels per person. The house labor is per-
formed chiefly by members of the family, only 4 per cent being
hired. The average annual value of this labor is $203 per family.

Comparison With City Incomes. — The farmer's "labor income"
has been found in many different States, under many varying
conditions, by means of the "survey" method. These surveys
omit certain very definite and tangible parts of the farmer's income,
such as his garden produce, and also omit, as imponderable, what
may be termed his psychic income. It must be borne in mind in

EDUCATION AND HEALTH 91

this connection, that all similar statements of the city man's
income omit certain factors of his income which are very real and
very important, and yet cannot be stated in terms of dollars and
cents. To turn first to the commoner '^ public utilities" of the
city, which the city man enjoys, and for which he says he pays
in the form of taxes or otherwise.

City versus Country. — The city man has the use of city water,
sewers and electric lights. For these he pays a certain amount of
money, to be sure. But would not any farmer gladly pay, not
merely what the city man pays for these services, but at least three
times what the city man pays, if these services could be had in his
farm house? Few farm homes can afford modern conveniences.
A recent rural survey in Iowa ^ listed the following modern con-
veniences sometimes found in farm homes: running water; bath
tubs; indoor toilets; electric lights; power washing machines;
electric irons; furnace heat; refrigerators. While these are very
rare in farm houses, they are fairly common in city homes. In
favor of the city home may be named the delivery of groceries,
of ice, milk, etc., the use of sidewalks, and pavements, street car
service, etc. Other attractions furnish the city man a ''psychic
income," but which can be enjoyed by the country man only at
the sacrifice of time and money necessary to bring him to the city.
These attractions include the theater, opera, concerts, amusements,
moving picture shows, lectures, clubs, libraries, art galleries,
museums, etc.

Education and Health. — But far more important than any of
these factors are two others, namely, medical aid and education.
The country child cannot secure an education in the country.
The few country children who do go on with their schooling beyond
the pathetic ''education" they secure in the "little red school
house," usually do so only through some sacrifice on the part of
their parents, such as renting a temporary home in the city (thus
maintaining two homes at a financial sacrifice), or such as paying
for the board and room of the child in the city (thus seeing with
anguish of heart a child of tender years go from the protecting
shelter of the home, that he may enjoy the education that is free
to the city child). The factor also of medical attention must not
be forgotten in this connection. It is certainly well known that
hospitals are not found in the country; that medical aid when sum-

3 Bulletin No. 184, Iowa State College of Agriculture, "A Rural Social
Survey of Orange Township, Blackhawk County, Iowa." December, 1918,
by George H. von Tungeln.

92 ECONOMIC CONDITION OF THE FARMER

moned, particularly in the night, is slow to arrive, or may not come
at all. Indeed many country homes do not use the services of a
doctor at all, but depend in part on neighbors (particularly in
obstetric cases) and partly on the Hberal use of ''patent medicines."
True, these patent ''pain killers," rheumatism "cures," cancer
"cures," rupture "cures," blood "purifiers" are so adroitly adver-
tised in most rural papers (and in some "respectable" (?) periodi-
cals) that the readers are converted to the belief that their symp-
toms, under their own diagnosis, show them to have these dire
diseases. Hence not only is money wasted for useless nostrums,
but physical and mental harm is done by consuming various
chemical mixtures for imaginary diseases. The city man is near
a doctor, and usually near one or more good doctors. Likewise,
in cities of any size, hospital facilities are available, and trained
nurses. It is only natural, therefore, that the city born and bred
youth to-day is more fit physically, than the country born and
bred youth.

Other Attractions. — Given enough income, the farmer can have
a "modern" house with most of the city conveniences. But this
means an income considerably in excess of that now received by
the average farmer. Other attractions of the city, however, he
can have only by going to the city, just as the city man can enjoy
certain pleasures of life only by going to the country.

Conclusions. — Considering the risks involved and the amount
of labor and capital expended, the farmer's economic income
is too low. Economic income, it is necessary to emphasize, is
used here in a strict sense. What other income has the farm
family? The sociological economists have worked out a trinity of
happiness which comprises these three factors: Health, home,
security of income. Health is considered the chief requisite to
the human being's happiness. Without this he would be unhappy
under any conditions. The home is considered essential to a fully
developed human personality. Security of income but not a big
income is considered essential to a certain degree of peace of mind
which contributes to his happiness. To these three factors we
must add a fourth, namely, hope. The individual must see an
opportunity for himself or at any rate for his offspring to rise to a
higher level than that which he at the moment occupies (Fig. 12).
This ambition need not be economic but may be social, educational,
political or of any other kind which will bring some recognition to
the individual. Does the farm promise to satisfy these four funda-
mental needs as completely as the city promises to satisfy them?

CONCLUSIONS

93

The judgment of those competent to speak seems to differ on this
point. An authority in American education, reared as a boy on
the farm, educated in a common country school and in the State
University, a traveler, a sojourner in many great cities and finally
Dean of the School of Education in a State University, has given
us his conclusions in the book entitled ''Rural Life and the Rural
School." In this book he points out all the shortcomings of country
life. Then, turning to the other side of the picture, he shows that
there are fewer hours of labor than formerlv on the farm, that the

A prosperous Icelandic farmer and son in North Dakota.

mental factor is growing, that, so far as the boy is concerned, the
farm boys enjoy time to go fishing, hunting, skating, coasting,
trapping; that he learns the ways and habits of beasts, birds and
fishes; that the lessons now taught to the Boy Scouts with so much
effort and learned easily and early by the farm boy, that even his
daily and regular work under most strenuous conditions is of a
large and varied kind — not like the making of one-tenth of a pin,
which has a tendency to reduce the worker to one-tenth of a man.
''On the farm" says this writer, "the worker begins and finishes a
piece of work. He sees it through. The whole of it receives
expression in him. It is his piece of work, and it faces him as he
has to face it. The tendency is for both to be honest." In view
of the circumstances and opportunities just mentioned, life in the

94 ECONOMIC CONDITION OF THE FARMER

country is the best and most complete life possible to a human
being. ''Country life" continues this writer, "is the best cradle
of the race. To have a good home and rear a family in the heart
of a great city is well-nigh impossible for the average laboring man.
The struggle for existence is too fierce, and the opportunity in
childhood and youth for self-expression and initiative is too meager.
The environment is too vast, complex and overwhelming, with
nothing worth while for the child to do. Individuals may stand,
but generations will slip on such an inclined plane of life." ^ While
the surface attractions of the city are more alluring, yet country
life is "the finest life on earth" is the Dean's conclusion.

We have already mentioned in this book that George Washing-
ton was a successful farmer. He enjoyed not only the economic
but all the other returns of agriculture. In the closing years of
his life he wrote as follows to the great English student of farming,
Arthur Young: "The more I am acquainted with agricultural
affairs the better I am pleased with them, insomuch that I can
nowhere find so great satisfaction as in those innocent and useful
pursuits. In indulging these feelings, I am led to reflect how much
more delightful to an undebauched mind is the task of making
improvements on the earth than all the vain glory which can be
acquired from ravaging it by the most uninterrupted career
of conquest."

QUESTIONS ON THE TEXT

1. What is the significance of the economic factor in drawing people to or

away from the farm?

2. Does farming pay? What factors are to be considered in answering this

question?

3. Cite the findings of a federal "survey" giving the farmer's annual income.

Does this study include the value of house rent and the use of a garden?

4. Cite the examples of successful farming given by Mr. Shade.

5. According to Bradford Knapp what is the great problem of to-day? Give

the facts on which he bases his statement. State his three reasons for
the city drift of population.

6. Cite Goldenweiser's conclusions as to the relative prosperity of the farmer.

7. Cite the conclusions of Vogt on the same subject.

8. Explain the "survey" method, as exempUfied by Warren and Livermore.

Define these terms: capital; receipts; expenses; farm income; labor
income.

9. What has been the estimated money value of those products contributed

by the farm to the farmer's living?

10. Show difficulty of comparing farm and city incomes. Illustrate. What

are the chief advantages of city life, not represented by money cost?

11. Is the farmer's income too low? Indicate the kind of "income" you are

discussing.

12. Cite the conclusions of Dean Kennedy.

13. Quote from letter of Washington to Arthur Young.

* Kennedy, Joseph. Rural Life and the Rural School, Ch. 15.

REFERENCES 95

QUESTIONS SUGGESTED BY THE TEXT

1. In calculating the farmer's income give reasons for and against allowing

interest on his investment; for and against allowing income for house
rent and garden produce.

2. As used in agriculture what is included in the term "capital"?

3. What conclusions are we justified in reaching concerning the relative

income of farmers and city dwellers?

REFERENCES

1. Funk, W. C: "What the Farm Contributes Directly to the Farmer's
Living." Farmers' Bulletin 635, United States Department of Agriculture.

2. GoLDENWEiSER, E. A.: "The Farmer's Income." Farmers' Bulletin
746, United States Department of Agriculture.

3. VoGT, Paul L.: "The Farmer's Labor Income." American Economic
Review, Dec, 1916.

4. Warren, G. F., and Livermore, K. C: "An Agricultural Survey,
Township of Ithaca, Dryden, Danby, and Lansing, Tompkins County, New
York." Bulletin 295, College of Agriculture, Cornell University, March, 1911.

5. Von Tungeln, George H. : "A Rural Social Survey of Orange Town-
ship, Blackhawk County, Iowa." Bulletin 184, Iowa Agricultural Experiment
Station, Dec, 1918.

6. Kennedy, Joseph: "Rural Life and the Rural School."

CHAPTER VII

AGRICULTURAL LABOR

Several Aspects of the Farm Labor Question. — Reference is fre-
quently made to the problem, so called, of farm labor. Is there such
a problem, and if so what is it? A very brief investigation convinces
anyone that there is such a problem. It is illustrated by the report
made in 1913 by our Consul at Leeds, England, on the "English
Farm Labor Problem." In this report our Consul speaks as follows : .

"The northern counties of England are experiencing an inconvenient
condition caused by a dearth of farm labor. General opinion voiced by mem-
bers of chambers of agriculture indicates that it is realized that farm servants
do not get sufficient relaxation; cottage accommodation is often poor, and there
is little incentive generally for a man to settle to a life's work of labor on the
farm. Some say that most farmers would be quite agreeable to granting, at
convenient seasons, sufficient relaxation to their servants to make up for any
compulsory half holiday such as most other industries enjoy. Others think
that the possibihty of one pound ($4.87) a week as wages and cottage would
keep men from moving into the town.

"Big batches of farm laborers are emigrating; often 20 to 30 together.
In many cases Canada or Austraha is the destination.

"Agitation is afoot to form a Farm Workers' Union. Meetings of farm
laborers have been addressed by officials of the Workers' Union for enrolling suf-
ficient men and women to warrant forming branches. A press statement says:

" 'The aim of the Workers' Union, or the agricultural section of it, as set
out in the literature disseminated is to secure a working week of not more than
60 hours, payment for overtime work, and extra pay for all Sunday labor;
limitation of hours for all women workers; fixing of a minimum wage rate, both
for piecework and day-work, all employees to know at the time of hiring the
rates they will have to work at; and to secure the freedom of laborers' cottages.'

"Comparisons have been drawn between the earnings of the women of
agricultural sections of the county, making 30 to 37 cents per day at some
classes of work, and the earnings of the women weavers of Lancashire, who
can make $6.70 per week. From the news reports it appears that the farm
laborer is slow to respond to the agitation. All his characteristics prepare
one for that attitude, but every fresh hiring timo is showing him his position
of vantage for making terms.

" At the recent Whitsuntide hirings higher prices had to be paid all around
for farm hands, who then hire out for a six-months' term. The next term
commences Martinmas, November 11. The following are some of the hiring
wages paid at the chief centers; board and lodging in addition:

Place and Wages for Six Months ^

Best
men

Second
men

Boys and
youths

Girls and
women

Appleby. W^estmoreland

$83-$102

78- 117
80- 107

$68-$80

68- 83
63- 78

$46-$68

24- 68
29- 54

$36-$66

Cockermouth, Cumberland (wages highest

known)

Thirsk, Yorkshire

24- 58
41- 92

1 Daily Consular and Trade Reports, July 12, 1913, p. 238.
96

SIMILAR CONDITIONS IN UNITED STATES 97

This report indicates the several aspects of the farm labor
question. There was published at London in 1913 for official use
by the Board of Agriculture and Fisheries a Report on Migration
from Rural Districts in England and Wales. This report, like the
consular report above quoted, indicates the situation confronting
England. This London report says that there certainly appears
to be a fairly general deficiency of skilled farm hands. The manual
arts of agriculture are being neglected even by those who still seek
employment on the land. To quote the words of the report, we
have the following:

" The low wages in the rural districts are mentioned as a cause of discon-
tent, but it may be doubted whether this in itself is so powerful a factor as
the lack of opportunity, and, in fact, there appears no evidence that emigration
is greatest in districts where wages are lowest. More than once in these
reports it is observed that many who emigrate would prefer to stay at home
if they could see a reasonable prospect of advancement in Ufe. Better educa-
tion, and, as is remarked by some, a kind of education which gives a distaste
for country hfe, is referred to; while the desire for shorter hours of work, for
free Sundays and for more holidays is also mentioned; but these are causes
for leaving the country which are more likely to lead to migration to the town
than emigration to the colonies. The lack of housing accommodation is
frequently mentioned as influencing men to leave the villages. It appears
paradoxical that complaint should be made at the same time of dwindling
population and insufficient cottages, but there can be no doubt that the ques-
tion of rural housing is acute." ^

Similar Conditions in the United States. — These reports bring
before our mind conditions in England. Similar conditions exist
in the United States. The chief difference is that with us the
difficulties are more sharply accentuated. A great many reports
and a great many books have been printed dealing with agricul-
tural labor in the United States. It seems to me, however, that
the two following letters, written with no thought of publication,
throw considerable light on the question. The first letter is from
a young man who had been working on a North Dakota farm in
the summer time. The second letter is from a social worker in
Chicago and goes into the problem of taking the unemployed man
from the city and placing him on the farm. The letters are printed
exactly as they were written.

" Doubtless it will surprise you to hear from me in this town, but I came
up here last night. I couldn't stand the pressure of the farm any longer.
The man I worked for was a fine fellow, but Uke all North Dakota farmers he
had no respect for the Sabbath. We worked the last three Sundays and had
good prospects for working four more, and I did not like that, so I left.

"Yesterday was the first time I had a bath in over three weeks. Last
Sunday morning after breakfast I shaved myself before I went to work. I

2 Board of Agriculture and Fisheries. Report on Migration from Rural
Districts in England and Wales, 1913, p. 3.

7

98 AGRICULTURAL LABOR

expected him (the farmer) to say something, but he did not. If he had I
certainly would have told him what was on my mind. And then another
thing that made me sore was that they served beer at the table.

When we started harvesting we got up at four bells and worked in the field
until eight. Then I had ten horses to care for so I never got to bed before
ten P.M. I was about all in.

"I am undecided just what to do, but think I will come to MinneapoUs
and get work.

Sincerely," etc.

The second letter, from the Chicago social worker, follows:

"Your letter indicates that you do not fully understand the situation
with unemployed men. How are these men to reach Minnesota? Will you
send the railroad fare for ten men and take your chances as to whether the
ten are good men, and as to whether they will stay after they reach you? Do
you realize that more than two-thirds of these men have never worked on
the farm^ and that if you and your friends found them to be incompetent you
would dismiss them? Usually when they are dismissed they are without
money for railroad fare to return to the city. These men are laboring men,
mechanics and their helpers, in so far as they work. Hundreds of them are
only temporarily out of work, and, for a variety of causes, have no money.
Not many of them are too lazy to work. A large number of them are inca-
pacitated by drink and other bad habits.

" If you will send me the money for the railroad fare and take your chances
on these men, I will send you twenty men, or more. We will buy the tickets
ourselves and take the men to the train.

" I know you will treat your men kindly, but I know, also, from personal
knowledge, that some farmers compel them to sleep in the attic, or in the barn,
give them poor food, and work them, without any privilege of going to the
town, or seeing anything but the farm. These men are human and they want
to see other men have some amusements, and be treated with some respect.
Hundreds of farmers show them positively no consideration and give them the
same care that they do their mules. If the farmer does not like them, he dis-
charges them at once, but he grumbles if they leave him because they do not
Uke him.

"I can pick out a number of men that I think will work, but I have often
been mistaken, and may be again. Yours very cordially," etc.

Seasonal Nature of Work. — Let us now direct our attention to
some of the details of the problem of agricultural labor. The first
and one of the most important aspects of the problem is the seasonal
nature of farm work. Farm crops are planted, cultivated, and
harvested, as a rule, in the summer-time. The winter is the dull
season on the farm. Therefore, a very large part of the labor
which is necessary in the summer-time cannot find employment
on the farm in the winter-time. That gives us the pathology of a
floating population. This evil is greatly aggravated in sections
devoted largely to one crop such as the wheat sections of the North-
west and of the Middle West. Take for example the State of North
Dakota. In the winter season men find employment in the woods
as lumber-jacks. With the approach of spring logging operations
in the woods largely cease. These men drift into the harvest fields

RECORDS OF CRIME 99

in the summer-time. When the harvest and threshing season is
over these men drift back along the main routes of travel into the
woods and into the cities to the east of them. This makes an army
of laborers numbering many thousands of men. They congregate
in the villages and small cities. With this army of laborers goes a
smaller army of criminals preying on the larger group. In the
northwest in October and November police officials always expect
and prepare for a wave of crime. Desperadoes who follow the
army of workers returning with wages on their person do not stop
at violence and even murder.

Records of Crime. — The daily press of this section at this season
is full of accounts of the misdeeds which are a by-product of this
floating labor population. As a sample let us take one issue of a
northwestern paper published at a point on one of the main routes
of travel between the farms and the woods where the wagon roads
and railroads cross the Red River of the North. Taking the issue
of the Grand Forks Herald for October 12, 1915, which may be
considered typical, we find accounts like the following. The first
news item on the first page is dated Carrington, North Dakota,
a railroad junction:

"With armed posses still scouring the country-side for the two bandits
who escaped after one of their comrades had been killed in a desperate gun
fight, and another captured, the fugitives were still at large at a late hour
tonight. The condition of Carl Nelson, chief of poHce, who was shot in the
stomach during the battle, which took place in the Gilby rooming house shortly
after 2 o'clock Sunday morning, was reported no worse to-night at the St.
Paul hospital, where he was rushed on a special train following the shooting,
and it is beheved that he has a chance for recovery. The battle was the cul-
mination of a bold holdup Saturday night when the four outlaws hned up
seven men in the J. Hopkins pool hall here and reUeved them of approxi-
mately $250."

Another headline reads as follows:
"Man is held up at the point of a gun."
This dispatch is sent from the village of Hamilton, N. D.

Another dispatch bears the headline:

"Wanted to carve up a threshing crew. On rainy days men receive a
shipment of booze with bad results."

This dispatch is dated Velva, N. D.

Another dispatch from Velva reads as follows:

"County jail is filled to Umit. Officers have been very busy in Towner."

Another dispatch illustrates how the transportation difficulties
are sometimes involved. The headline reads as follows:

" Conductor and men have a long fight with hoboes. Shoot at brakeman."

100 AGRICULTURAL LABOR

In this connection it may be stated that it sometimes happens
that the returning harvest hands capture a freight train and force
the train crew to carry them without compensation. Indeed it
seems to be a common practice with the returning laborers not
to pay carfare. They prefer to steal a ride in empty freight cars.
This in turn gives the robbers a better chance to ply their nefarious
trade. This illustrates the situation as it is in the fall of the year.
A situation very much similar to this exists in the spring when the
men are drifting westward to the farms. It seems fair, therefore,
to consider the seasonal nature of farm work as one of the most
serious problems which those concerned in agriculture are called
on to solve.

I. W. W*s. — The Industrial Workers of the World, first organ-
ized as an industrial union, began to have significance for farmers
shortly after the year 1910. This group remains, as these lines
are written, as one of the unsolved problems in the farmer's labor
situation. The States of the Northwest find their peaceful workers
and often their civil authorities in collision with wandering bands
or members of this organization. Repressive measures fail to
repress them. They must be viewed as symptoms of some under-
lying unrest. Yet legislative and administrative measures dealing
with them aim at their ''suppression," but do not touch any of
the causes which produce them.

The spirit of the farmer towards the I. W. W. is expressed in
the following resolutions adopted at the tenth annual convention
of the Farmers' Cooperative Association of South Dakota, held
at Sioux Falls in December, 1916:

"Whereas, there is in existence an organization known as the I. W. W.,
consisting in many instances of a lot of worthless men who go about the
country intimidating its citizens and preventing honest labor from coming
into our State, and

"Whereas, the farmers of South Dakota are depending at different times
of the year upon what is known as transient labor, therefore, we recommend
the passage of some law that will rid the State of this band of lawless and
ruthless fellows."

The I. W. W. members, on their part, demand larger pay and
shorter hours, as a general rule. Refusal to meet their demands
leads to strikes, sabotage, and various forms of destruction to
property and life.

Wages of Farm Labor. — It is a matter of common observation
that wages of farm hands have been increasing for many years past.
By referring to statistical publications we find this increase has
been fairly constant for at least 150 years. For instance, in Massa-

THE DECLINE OP WOMli^N'S WORE SINCE 1871

101

chusetts, a farm laborer was paid for a day's work without board
in 1752, thirty-three cents; by the time of the Revolutionary War,
he was receiving forty cents. The Federal government has made
nineteen investigations of wages of farm labor. In the year 1912
the report of the Federal government on this subject makes this
statement concerning day wages:

"For day labor other than harvest work, with board, the rate in 1866
was sixty-four cents in the United States. It reached sixty-eight cents in
1874 or 1875, and dechned during the industrial depression of the 'seventies,
so that the subsequent increase reached seventy cents in 1881 or 1882. From
that year to 1898 the rate of day wages for labor other than harvest work
with board remained about stationary except for the depression of the 'nineties.
In 1898 the rate was seventy-one cents; in 1899, seventy-five cents; in 1902,
eighty-three cents; in 1906, one dollar and three cents; and in 1909, the same
amount, one dollar and three cents."

This shows a very substantial increase in wages in recent years.
This increase has been accompanied with an increase in the cost
of living. However, wages had risen faster than the cost of living
up to the time of the World War. To quote further from the
same report :

"These comparisons establish the conclusion that the money wage rates
of farm labor have increased during the 18 years covered in a considerably
greater degree than the wages of working-men in non-agricultural operations.
In the purchasing power of wages in terms of retail prices of food the working
men barely gained from the first period to the second, the mean index number
for the second period being 101.4. For the farm laborer the gain was from
about 10 to 15 per cent, so that, notwithstanding the great rate of increase of
retail prices of food, the rates of wages of farm labor increased in degrees
sufficient to make as a net result a substantial rate of increase."

The Federal government published the following table com-
paring the years 1909 and 1915:

Farm Wages Per Year Without Board

1909

1915

Per cent
increase

United States. . .

329.16
404.16
241.56
394.80

262.20
566.88

361.80
424.68
257.64

4 i 9.20
454.80
277.08
579.72

9 9

5.07

South Atlantic

6 65

North Central

East of Mississippi

7 22

West of Mississippi

6.22

South Central

5.67

Western

2 27

The Decline of Women's Work Since 1871. — The Federal gov-
ernment has reported on the subject of Supply of Farm Labor.

''The outdoor labor of women on farms has undergone an immense reduc-
tion within a generation or two. In 1871, the department of agriculture
investigated the subject in all parts of the country and these results were
published in the report for that year. At that time reports from the following

102

.AGRXCULTtJRAL LABOR

sections are typical, indicating clearly the reports from all the states. In New
England very little regular labor in the fields is performed by women. Cana-
dian women, and occasionally Irish, hire out or work on shares in different
parts of New England, though the number employed is not large, and. they
wiU undertake nearly all kinds of farm work. Similar customs prevail in
New York, comparatively httle outdoor service being rendered by American-
born women. In many districts in Pennsylvania very Uttle outdoor employ-
ment is undertaken by women, while in others, especially in those less im-
proved, or with a large foreign element in the population, much and various
farm work is done by women. Among the poorer classes of whites in some

Fig. 13. — Women of foreign birth doing farm work.

counties in Maryland, the Germans especially, the women assist in such labor
as planting, hoeing corn, weeding tobacco and raking grain. Sometimes they
obtain men's wages, but usually about three-fourths as much. In such work
they are often quite as efficient as men. Negro women have been accustomed
to all kinds of farm labor, though generally employed in the lighter branches.
Throughout the Southern States a large portion of the females among the
negroes were accustomed to general farm labor, most of whom now decline it,
appearing to regard it as a relic of slavery and not 'suited to ladies.' It is
stated of some States that not more than a fourth part as many do outdoor
work as formerly. Very little farm work is done by native Americans in all
the States of the Ohio Valley and the Lakes, that Httle being casual assistance
in emergencies, as a matter of convenience and sometimes of necessity, as is
reported of all other sections of the country. Gardening and fruit picking
are preferred, and hop picking, where hops are grown. Immigrants do more
outdoor work, 'expecially for a few years after coming here. As they become
Americanized they work less on the farm'" (Fig. 13).

WOMEN AND WAR WORK 103

At the present time about one agricultural laborer in seven
is a woman. Her work has been reduced largely to domestic
affairs, and even in domestic affairs there seems to be a reduction
of work in the manufacture of food, clothing, and supplies. Con-
tinuing the same report to which we have alluded, we have the
following interesting situation:

"With regard to very recent years census statistics of female agricultural
labor afford no satisfactory conclusions. A general knowledge of farming
conditions throughout the country, past and present, is more definite. The
outdoor work of white women on the farms of medium and better sort has
very greatly declined from early days, and the dechne was more especially
marked after the Civil War. Farmers' wives and daughters no longer milk
the cows and work in the field and care for the Hvestock. They do not work
in the garden as much as before, nor assist so much in fruit and berry harvest ;
they are making less butter, and cheese making on the farm has become a
lost art. They may care for the poultry and the bees, do housework and
gather vegetables for the table, and cook and keep the dwelling in order.
Their domestic work is substantially the limit of their work on the farm.

" Decline of Household Labor. — In farm household matters the situation
is acute with regard to the supply of hired labor. Country girls as well as
city girls, no matter how humble their lot in life, regard household labor for
hire as unrespectable. Joined with this fact is the other one that the women
of the farmer's family are neither able nor wilHng to repeat the manual
labor performance of their grandmothers on the farm. Besides this, the
farmer's standard of hving has risen, certainly on the medium and better sort
of farms in the North and West; and in a perceptible degree the women of the
farmer's family have engaged in social functions which are beginning to be
incompatible with the performance of household labor without the aid of a
servant. The social obligations undertaken by them are for the Grange, the
woman's clubs, the Maccabees, the Women's Christian Temperance Union,
the local church, the farmers' clubs, a fist that might be much extended.

" Domestic Industries. — ^The old-time domestic industries are all but
forgotten. The women of the farm make no more soap, candles, or lye, and
so on with a long fist of the domestic products of former days; it is rare that
one of the younger of the women knows how to knit. Throughout large areas
the pride of the housewife in great stores of preserved, dried, and pickled fruits,
berries, and vegetables exists chiefly in history, and dependence is placed mostly
upon the local store for the products of the cannery and the evaporator.

Women and War Work. — The World War brought tremendous
social readjustments in all fields, one phase being the employment
of women for outdoor work on farms. The Woman^s Land Army,
so called, rendered a very distinct service. But how permanent
this participation of women in farm work will be it is impossible
to forecast.

The social and labor needs of farm women have been studied by
the Federal Department of Agriculture. ''Where the farm woman
is the mother of three children or more," writes a Massachusetts
farm woman, "she should have an aid, and thus be allowed to give a
large part of her attention to her work as mother, at least until the
children are of age to help. A ' hired woman ' is as essential as a

104 AGRICULTURAL LABOR

'hired man/ where there are several small children. This does not
seem to have occurred to either the farmers or their organizations."

Number and Supply. — In 1910 we had six million, four hundred
thousand farmers (including 2,350,000 tenants). These farmers
employed 3,000,000 transient laborers during the year. Adding
this number to the number of tenants and owners who move
every year, we have a total of 5,000,000 persons who are more or
less transient. Laborers who seek employment for the entire
season are generally sons of farmers. For the seasonal demand
of the harvest, however, the country must call on the city for
labor as it does for money to move the crops. But the shipment
of currency from the city bank to the country banks is now
reduced to a system simple and adequate. But the labor question
is still far from solution. Only a few of the more important
proposed or attempted solutions can be discussed here.

Private Emplojnnent Agencies. — These agencies operate in the
larger cities, and undertake to supply unskilled labor for any and all
kinds of jobs. To a small extent they furnish agricultural laborers.
The farmer applying here for help must take his chances — a big
risk — of getting what he wants or needs. Thus a Bohemian farmer,
living in a Bohemian colony in North Dakota, applied at a Chicago
agency for two ''hands," stipulating that they must be Bohemians.
Two Austrians were sent. They were released after one week's
work. Often the men sent quit the job at once and seek for other
employment, or for transportation to new fields. Indeed, some of
them seem endowed with a tourist-instinct.

The Unorganized Movement. — The harvest season brings a
so-called "army" of laborers, each worker following his own lead.
This "mob," arriving thus in hit-or-miss fashion, may greatly
oversupply or undersupply the farmers' demands. When the
supply is large, farmers of course select the best and get them at a
"fair" wage. On the other hand if the supply is a httle scarce,
and the crops are ripening fast, the laborers become very severe
and lofty in their demands. They congregate in the railroad village
and wait for the farmer-bidders to come in, with rigs to haul them
to the fields. They may even assume an arrogant tone, and ask
the farmer "to bring in his farm" and let them have a look at it
before accepting employment. During the pressure of the harvest
and threshing seasons, these casual laborers may sometimes
demand an increase from the ordinary two-dollar-a-day wage
(prevailing before the World War) to a wage of five or even ten
dollars a day.

IRREGULAR EMPLOYMENT 105

National Farm Labor Exchange. — The National Farm Labor
Exchange was organized at Omaha in 1915. Its second annual
convention was held at Kansas City in 1916. It is the plan of this
National Exchange to ascertain through the means of sub-agencies
the needs of the harvest fields of the several States, from Oklahoma
to North Dakota, in their order as grain ripens. Next, it plans
to direct the laborers to the place where they are needed, and
to inform them as to the conditions and nature of their employ-
ment. It is believed that through this method it will serve the
unemployed advantageously.

Federal Government and Farm Labor. — The United States has
adopted the policy of directing laborer to employer, and employer
to laborer. This is done by means of Employment Bureaus estab-
lished in cities and towns throughout the country. Such a vast
administrative scheme will need careful attention to save it from
the usual bureaucratic extravagance. There is danger of a maxi-
mum of outlay and a minimum of results.

The County Farm Bureau. — The counties that are enjoying the
services of a county Farm Bureau and a county agricultural agent
are conducting employment bureaus for farm laborers. Since these
county bureaus are in direct contact with the farm labor problem,
their services bring the maximimi of result with the minimum
of outlay.

Mr. H. J. Hughes, former editor of the Farm, Stock and Home,
diagnosed the need of the State as comprising a state-wide clearing
house of labor, functioning and cooperating with the farmers'
clubs, the commercial club of the village or city, and the railroads.
And five conditions, says Hughes, are essential to the satisfaction
of the hired man, namely: (1) good food and regular meals; (2)
good sleeping quarters; (3) not over nine or ten hours of work per
day; (4) fair wages; (5) steady time from day of hiring till job is
done. Yet usually not more than two of these conditions are met.

Irregular Emplojrment. — As long as any community depends
chiefly on one or two or three staple crops, a situation is created
whereby irregularity of employment of labor is inevitable. ''Long
hours, small pay, and irregular employment are what the immi-
grant can expect on the farm," says Hourwich.^ Hence the
laborer's preference for work in the city. In consequence of limited
demand for it, says the Industrial Commission Report,^ ''agricul-
tural labor is the least paid of all great groups of occupations, even

^ Hourwich. Immigration and Labor, p. 112.
* Report of Industrial Commission, vol. X, p. xx.

106 AGRICULTURAL LABOR

allowing for the laborer's garden and other privileges." Hourwich
thinks a market for agricultural labor may grow up in the future
with the eventual spread of intensive agriculture. But now even
many American farmers are migrating to Western Canada. In
1910 there were 103,984 emigrants from the United States to
Canada. Since the American farmer cannot keep his own sons on
the farm, there is certainly not demand enough there to attract
laborers from the city, except during the high demand and high
wages of harvest seasons.

Transportation and Distribution Problem. — One of the most
sensible remedial measures for dealing with the labor supply
problem has been proposed by W. R. Porter, Superintendent of
the Demonstration Farms of the North Dakota Agricultural
College. In his opinion the United States should find the same
solution that Canada has found in securing transient labor for
her great western harvests. The laborers live in eastern Canada —
more than a thousand miles from the grain fields. The Canadian
laws strictly forbid the '^ stealing of rides" on trains, the custom
so universal in the United States. The Canadian railroads run
''excursion trains" from the East to Winnipeg and the West,
charging ten dollars to go and twenty-eight dollars to return at
the end of the summer. This practice, now twenty years old,
has resulted in the farmers of western Canada securing an abundant
supply of labor of the best quality. Many thousands of these
industrious young men, who went west to see the country, re-
mained as permanent settlers. In the United States this class of
young men will not pay the regular first class fare to go to the
western fields, neither will they "beat their way" on the railroad
trains. Consequently they do not go at all. A solution of this
transportation problem, in conjunction with the subsequent dis-
tribution of the worker, would go a long way towards solving the
farmer's labor problem. For factory work, like farm work, is in
many cases seasonal.

Drift to the City. — It has long been recognized that persons of
ability and capacity for leadership, born on farms, usually move
to the city. Thus during the hearings before the Industrial
Commission in 1899, the question was asked of Le Grand Powers:

"Is it not true that the bankers, lawyers, doctors, the leading
men in all pursuits, in every city in the United States, were origin-
ally farmers?"

Mr. Powers answered, "Yes, very largely so." It is now a
matter of common observation that if we call the roll of the mer-

DRIFT TO THE CITY 107

chant princes, the captains of industry, the railroad magnates,
the coal and oil barons and the notables in the various lines of
human endeavor, a large percentage of them were once country
boys. It should be more generally recognized that many and
various forms of farm labor have now been transferred to the city.
What is now the division of labor between farm and factory and
what was it formerly? The American farm of the first half of the
nineteenth century was really a diversified business in itself, com-
prising not merely the production of the raw materials of food
and clothing and tillage tools, but the actual manufacture and
preparation of foods, shoes and clothing, and the ruder implements
of tillage.

Wakefield, in 1833, describes the American farmer for us in
these words:

"Free Americans, who cultivate the soil, follow many other occupations.
Some portion of the furniture and tools which they use is commonly made by
themselves. They frequently build their own houses and carry to market, at
whatever distance, the produce of their own industry. They are spinners
and weavers; they make soap and candles, as well as, in many cases, shoes
and clothes for their own use."

But now where are their shoes and clothes made? In the city.
So also with their soap, their candles, their lumber, their furniture.
And transportation by steam and electricity has likewise centered
in the cities. In short, farm activities have largely been trans-
ferred to the city. There are now 800,000 persons in cities engaged
in manufacturing automobiles and tractors — most of which ma-
chines are for farmers. It is no wonder then that the industrial
growth of the United States has taken leaders and laborers from
the farms to the cities. The manufacturing States of the East
were the first to show a decrease in rural population. Thus in
the decade ending in 1890, New England and New York showed a
loss in rural population. In 1900 New Jersey, Delaware, Ohio
and Kansas showed losses. Out of the ninety-nine counties in
Iowa, the 22 urban counties showed gains, while the 77 rural
counties showed a loss. The great farming country of the Middle
West now shows a loss in rural population. Thus in 1910 the
following losses were registered:

Illinois 7.0 per cent

Indiana 9.5 "

Iowa 12.1

Kansas 0.5 "

Michigan 0.8

Missouri 8.0 "

Ohio 5.3

Wisconsin 0.7 *'

108 AGRICULTURAL LABOR

More remarkable still is the loss shown in the newer agricultural
States, such as Oklahoma and North Dakota. Four counties in
North Dakota showed losses in rural population, ranging from 4
to 17 per cent. In Oklahoma eight counties showed a falling-off
in their population, ranging from 2.9 per cent to 23.2 per cent.
Four of these counties lost over 10 per cent apiece. Seven counties
gained less than five per cent each. Yet all the cities of the State,
with the exception of one increased over '200 per cent in population
during the decade. The contrast in the growth of rural and urban
population is seen in this table :

Increase in Population, Oklahoma, 1900-1910

Cities of 25,(XrO inhabitants or more in 1910 526.1 per cent

Cities of 2,500 to 25,000 in 1910 • 208.2

Rural Territory 41.4 "

The better market for labor in the city causes, in large part, this
emigration from the country to the city. And it is a loss to the
country of native Americans of American stock.

Labor-saving Machinery. — Le Grand Powers, testifying before
the Industrial Commission, expressed his belief that machinery is
displacing labor on the farm. But, he continued, the effect is to
elevate labor. ''Speaking of the effect of improved machinery on
labor," said Powers, ''I would say that the introduction of im-
proved machinery, in my opinion, has been an important factor
in the elevation of labor. It has called, first, for greater intelligence
on the part of the workingmen on the farm ; it has stimulated that,
and it has otherwise improved the intellectual status of the
American farmer."

H. W. Quaintance has undertaken to estimate how much
farm labor has been displaced by the modern ''labor-saving" farm
machinery. He tells us that it formerly required 11 hours of man
labor to cut and cure a ton of hay; it now requires 13^ hours.
The quantity of labor saved by machinery in producing the farm
crops of the last decade of the nineteenth century, as compared
with hand methods in use fifty years earlier, is estimated at
450,000,000 days. This saving would represent the labor of
one and a half million men the three hundred working days of
the year.

The writer, as a boy on the farm, assisted in "butchering"
the winter's meat. What a slow, heavy and laborious process
butchering on the farm was! Now in the great packing houses of
Chicago or Kansas City a gang of 150 men butcher 105 cattle
per hour. Since this and other branches of farm work have

IMMIGRATION AND FARM LABOR 109

gone to the city, the hired man has gone to the city too, in ever
increasing numbers.

H. E. Hoagland has described the movement of rural popula-
tion in Illinois.^ According to this author the poverty of rural
social life has not been the cause of rural depopulation, since the
regions with a decrease in population are not found to be the ones
where the farmer's life is duller or more monotonous than thos^
in which the rural population has increased. The exodus from
rural communities has been fully as active since the introduction
of rural free delivery, the telephone, and better roads as before.
The increased use of machinery, increase in the relative number
of horses, and in saving of time by use of the telephone and by
improving the roads have done much towards increasing the effi-
ciency of the farmers, so that it takes fewer of them to produce a
given quantity.

City Labor for Farms. — The question was put to Le Grand
Powers concerning placing the city man on the farm. He saw
little hope of success here, since it takes time to learn the business
of farming.

Immigration and Farm Labor. — The ''old" immigration from
the British Isles and Northwest Europe settled very largely on
the land. The ''new" immigration does not do so. "After their
arrival in the United States," says the Federal government, "these
immigrants (Italians, Slavs, Hungarians) do not seek employment
in agriculture, partly because of the difficulties in the way of secur-
ing it, but mainly because of the higher rates of wages in other
industries. In transportation, manufacturing, mining, and in
building, the demand for common labor has been very great." ^

Colonies of the older immigrants are so common in all parts
of the United States as to excite no comment whatever. The
English speaking immigrants — Irish, Scotch, English, Canadian,
are soon Americanized and absorbed. Bohemians, Germans, and
Scandinavians in rural colonies slowly but surely become Ameri-
canized. According to Le Grand Powers, the Germans seek to
maintain their language, especially when they are settled under
semi-religious auspices. This is doubtless true of the others, yet
the foreign language rarely survives a second generation.

Professor Cance of the Massachusetts Agricultural College
has made a very extensive investigation of immigrant rural com-
munities, particularly of the Americanization and assimilation

5 Journal of Political Economy. Vol. 20, pp. 913-927.
' Labor Bulletin, No. 72, p. 406, September, 1907.

110 AGRICULTURAL LABOR

problem. ''In general," says Cance, "all foreign rural communi-
ties in the East, particularly Hebrew farm colonies, where not
very large nor closely segregated, manifest a lively desire to speak
and read English, to adopt American dress, customs and methods
of farm practice, and where encouraged, to seek naturalization
as quickly as possible. There is no question that Americanization
and assimilation take place more rapidly among the less segre-
gated rural immigrants than in congested industrial groups in
urban localities. Land ownership confers dignity, imposes financial
and social responsibility, stimulates activity in civic affairs, and
awakens community interest and personal pride. In short, so far
as the immigrant is concerned, rural life in most instances has had
a most salutary effect. It has frequently taken an ignorant,
abject, unskilled dependent foreign laborer and made of him a
shrewd, self-respecting, independent farmer and citizen. His
returns in material welfare are not great, but he lives happily,
comfortably and peaceably, and in time, accumulates a small
property. The second generation of these south European immi-
grants are frequently not less progressive than Americans." But,
says Cance, leadership and encouragement are needed, and some
opportunity for land ownership — an opportunity, however, now
fast disappearing. ''Between the Italian cotton tenants of the
Mississippi Delta region," concludes Cance, "among whom are
few citizens, numerous illiterates, few children in school, very
meager community institutions and no political interest and their
kinsmen in upland Arkansas, with a majority of naturalized citi-
zens, a most lively participation in pubHc matters, exceptionally
fine educational and religious institutions, little illiteracy, and a
rapidly rising standard of comfort, the contrast is most striking.
The social superiority of the upland Arkansas colony is due largely
to efficient leadership and individual ownership of land. Other
instances might be cited to demonstrate the very significant truth
that progress is much more rapid and satisfactory where there is
some one to lend a friendly hand from the beginning." ^

Life of Farm Laborer. — "How are farm laborers cared for
generally? What privileges or helps do they get besides their
wages?" This question was put to Mr. Powers by the United
States Industrial Commission. "In our section," said Mr. Powers,
"the average farm hand lives with the family of the employer, in
the same house, boards at the same table, and is one of them."

^ A. C. Cance, "Immigrant Rural Communities." Annals, March, 1912,
pp. 79, 80.

QUESTIONS ON THE TEXT 111

The conclusions reached by John Lee Coulter on this subject are
substantially the same. ''It is impracticable," says Coulter, "to
furnish a separate house or building for these hired laborers, and,
therefore, the common thing is for the hired laborers to be assigned
rooms in the family residence or sleeping quarters in some of the
stables or hay barns. At the same time it is very customary for
the hired laborers to sit at the table for meals with members of the
family unless the number is large enough to warrant setting the
table twice. Where only one or two laborers are employed, it is
almost a universal practice for these one or two laborers to live
in the homes with the resident farmers." ^

QUESTIONS ON THE TEXT

1. Is it correct to speak of an "agricultural labor problem"?

2. What concrete aspects of the farm labor problem were mentioned by the

American Consul at Leeds?

3. Cite the conclusions of Board of Agriculture and Fisheries in its Report

on Migration from Rural Districts. What factors, other than low wages,
are mentioned?

4. What general conditions of farm labor are set forth in the two American

letters quoted?

5. Show the meaning and significance of the seasonal nature of farm work.

Show the social pathology of such a condition.

6. Show the relation of the I. W. W. movement to agriculture.

7. Discuss wages of farm labor as to increases, and purchasing power.

8. Discuss in detail the decline of women's work on farms since 1871.

9. Discuss the number and supply of farm laborers.

10. Name and describe the various employment agencies in the field : private

agencies; national farm labor exchange; federal agencies; farm bureaus.

11. Show the evils of an unorganized movement of seasonal farm labor in

"mobs."

12. Describe and comment on the solution offered by Mr. Hugh J. Hughes,

particularly his five points making for the satisfaction of the hired man.

13. What fundamental conditions Ue back of irregular employment on farms,

and what effects do these conditions have on immigrants?

14. Show the place of transportation and distribution in solving the labor

problem.

15. State some of the fundamental factors underlying the drift to the cities,

commenting in particular on leadership in cities, and the division of
labor between city and farm now and formerly.

16. Cite statistics showing decreases in rural population and increases in

urban population.

17. Show economic and social significance of labor saving machinery in agri-

culture. Cite findings of H. W. Quaintance.

18. What is the outlook for using city labor on farms, according to Le Grand

Powers?

19. Compare the "old" and the "new" immigration as to farmers and farm

laborers.

8 John Lee Coulter, Agricultural Laborers in the United States, Annals,
March, 1912.

112 AGRICULTURAL LABOR

20. What records have been made by our immigrant farm colonies? Show

the economic, social, and civic significance of the different nationalities.

21. The life of the farm laborer has what social advantages and disadvantages?

22. What six States show no loss in rural population in the decade 1900-1910?

QUESTIONS SUGGESTED BY THE TEXT

1. Formulate a plan for meeting the seasonal requirements of agriculture for

labor. Is it possible to coordinate this demand with the city's seasonal
demand?

2. To what extent should we endeavor to abolish the problem of seasonal

demand for labor by diversification of crops and smaller sized farms?

3. Is the I. W. W. movement in agriculture a cause or an effect of pathological

conditions in agriculture? Discuss this movement carefully, both as a
symptom and as a cause. Suggest remedies, both suppressive and con-
structive. Criticise the position taken by the South Dakota farmers on
this subject.

4. Show to what extent farm labor (in the old sense) is now being done in

cities, and the social significance of this condition. {E.g., manufacture
of the farmer's food, clothes, implements, suppHes, etc.)

5. Why should three New England States show no loss in rural population,

1900-1910, while all the neighboring States showed such a loss?

6. "The farm labor problem is a problem of transportation and distribution."

Debate.

7. Complete the table in the Appendix of this chapter.

REFERENCES

1. Coulter, John Lee: "Agricultural Laborers in the United States,"
Annals, March, 1912.

2. Cance, a. C: "Immigrant Rural Communities," Annals, March, 1912,

3. HoAGLAND, H. E.: "Journal of Pohtical Economy," Vol. 20, pp. 913-
927.

4. HouRWiCH, Isaac A.: "Immigration and Labor."

5. Labor Bulletin 72, United States Bureau of Labor Statistics, Sept., 1907.
G. Report of the United States Industrial Commission, Washington,

1898-1902, Vol. X.

7. Board of Agriculture and Fisheries, Report on Migration from Rural
Districts in England and Wales. London, 1913.

8. Daily Consular and Trade Reports, Washington, July 12, 1913, p. 238.

9. New York State Boys' Working Reserve Circular No. 1. New York
State Food Commission, Albany, March, 1918.

10. Wilcox, E. V. : " Plan of the Department of Agriculture for Handhng
the Farm Labor Problem." Am. Ec. Review, March, 1918, 158-171.

11. Barnes, C. B.: "Employment and the Labor Market." Am. Ec.
Review, March, 1918, 171-177.

12. Seager, H. R. : " Coordinating Federal, State and Municipal Employ-
ment Bureaus." Am. Ec. Review, March, 1918, 141-147.

13. Discussions of above three papers by App, Willard, Barnett, BiUings,
Wileman, Lescohier, Am. Ec. Review, March, 1918, 177-194.

14. OsBORN, Chas F. : "Methods of Meeting the Demand for Labor."
Monthly Review, U. S. Bureau of Labor Statistics, Sept., 1917.

15. Leiser^ion, W. M.: "MobiHzing and Destributing Farm Labor in
Ohio." Monthly Review, U. S. Biireau Labor Statistics, April, 1918.

REFERENCES 113

16. Agricultural Wages Board. Report of the Committee Appointed by
the Agricultural Wages Board to Enquire into the Financial Results of the
Occupation of Agricultural Land and the Cost of Living of Rural Workers^
London, 1919.

17. Wages and Conditions of Employment in Agriculture. 2 vols. Vol. I,
General Report; Vol. II, Reports of Investigators, London, 1919.

18. Stoddard, C. T.: "How the United States Employment Service is
MobiHzing Workers." Monthly Review, U. S. Bureau Labor Statistics,
May, 1918.

19. Abstract of the Report on Recent Immigrants in Agriculture, 1-75.
The Immigration Commission, 1911.

20. Hasbach, W.: "A History of the EngUsh Agricultural Laborer,"
London, 1908.

21. Savage, W.: ''Rural Housing." London, 1915.

22. Heath, F. G.: "British Rural Life and Labor." London, 1911.

23. Kebbel, T. E.: "The Agricultural Laborer." London, 1893.

24. Farm Wages in North Dakota in 1919. Commercial West, January
3, 1920, p. 49.

25. New Agricultural Laborer's Code in Germany. Labor Gazette (Can-
ada), November 1919, p. 1313.

26. Yearbook Department of Agriculture, 1911. Seasonal Distribution
of Labor on Farms, 247-256.

27. Yearbook Department of Agriculture, 1910. Supply and Wages of
Farm Labor, 189-201.

28. Yearbook Department of Agriculture, 1918. McCormick, E. B.:
"Housing the Workers on the Farm," 347-357.

29. Industrial Commission, Vol. X, xxiii-xxiv, cxlvi-chv, xciii-xcvii; Vol.
XI, 73-144; Vol. XIX, 115-123.

30. Jenks and Lauck: "Immigration Problems." See chapter on Immi-
grants in agriculture.

31. Bailey, L. H. (editor): "Cyclopedia of American Agriculture."

32. Putnam, Bertha H.: "The Enforcement of the Statute of Laborers
During the First Decade After the Black Death" (Columbia University
Studies, 1908, Vol. 32).

33. Hammond: "The Village Laborer, 1760-1832." A study in the gov-
ernment of England before the Reform Bill, 1911.

34. International Institute of Agriculture, Rome. International Review
of Agricultural Economics: "Minimum Wage for Agricultural Labor in
England and Wales," Aug., Sept., Oct., 1919, 543-564. Holland— " Wages
of Rural Labor," Aug., Sept., Oct., 1919, 564-568. Great Britain and Ireland,
"Supply and Conditions of Agricultural Labor," Nov., Dec, 1919, 660-677.
Spain— "Labor Exchange," Nov., Dec, 1919, 688-690. Australia— "An
Interesting Award Affecting Labor in Sheep Farming" (same pay as city labor),
March, 1918, 234-240. United States—" The Problem of Agricultural Labor —
Summary of Nine Discussions." June, 1918, 494-522. Denmark — "Average
Working Hours and Wages in Agriculture in 1915," Nov., Dec, 1918, 921-928.
France— "The Condition of Rural Labor in France," 1913-1914, July, 1917,
68-79. California — "Improvements of Conditions Among Immigrants into
California," Dec, 1917, 66-74.

35. Wyckoff, Walter A.: "The Workers; An Experiment in Reality."
IV, A Farm Hand. Scribner's, Nov., 1897, 549-560. With Iowa Farmers,
Scribner's, May, 1901, 525-536.

8

114 AGRICULTURAL LABOR

APPENDIX

Falling off in Rural Population for the Decade 1900-1910 by Per Cents
Table showing (1) total increase in population of each State; (2) total increase in urban

population for each State; (3) total increase or decrease in rural population for the State

as a whole; (4) decrease in rural population in certain counties. Any place having fewer

than 2,500 inhabitants is called "rural."

This table shows that of our 48 States, only 6 show no decrease in rural population for

the decade. These 6 States are Arizona, Connecticut, Idaho, Massachusetts, New Mexico,

Rhode Island.

Alabama State increase 16.9 per cent

Urban increase 55.9 "

Rural increase 11.1 "

County decreases in rural population.

Barbour 7.0

Bullock 10.8

Cherokee 4.1

Colbert 0.3

Dallas 13.5

Greene 6.1

Hale 10.1

Lowndes 10.5

Perry 1.8

Russell 6.5

Sumter 12.3

Wilcox 5.1

Arizona State increase 66.2 per cent

Urban increase 195.5 "

Rural increase 39.0 "

County decrease in rural population, none.

Arkansas State increase 20.0 per cent

Urban increase 53.9 "

Rural increase 16.3 "

County decreases in rural population :

Boone 12.7

Carroll 11.0

Fulton 5.6

Little River 1.0

Madison 19.2

Marion 10.3

Newton 15.4

Ouachita 1.5

Polk 11.2

Sharp 4.2

Washington 2.6

(Note. — This table is to be completed by the student by adding statistics for the remaining
45 States. Also construct a similar table for the decade, 1910-1920.)

CHAPTER VIII

AGRICULTURAL MACHINERY AND THE TRUST QUESTION

Agricultural labor, as we have seen, is scarce, and growing
scarcer. Keeping pace with this growing scarcity of labor is an
increase in labor-saving machinery on the farm. Testifying before
the Industrial Commission in 1900, a Georgia planter said that
now one man and "a, McCormick reaper and two mules do the
work of eight good men." The same changed condition was
pictured by M. F. Greeley of South Dakota, in these words:
*' When I first worked out it took five binders to follow a machine,
one man to rake off, and one to carry the bundles together. Now
the hired girl frequently drives a machine that does the whole
business." Without accepting the literal truth of this rhetorical
statement of Mr. Greeley's we can safely believe the basic fact
that there has been a tremendous increase in the use of agricultural
machinery in recent years.

Industrial Revolution in Agriculture. — The "Industrial Revo-
lution in Agriculture" has come about one hundred years behind
the revolution in the manufacturing industry. Since the Civil
War we have witnessed a great increase in the use of farm
machinery. The following interesting table shows the change in
three decades:

Value of Agriculturol Machinery Per Acre of Farm Land

1880 % .76

1890 79

1900 89

1910 1.44

A calculation made by the Department of Labor in 1899
showed that improved agricultural machinery had reduced the
labor cost of corn per bushel from 35.77 cents to 10.57 cents, or
70.5 per cent, and had reduced the time of human labor from 274
minutes to 41.3 minutes, or 84.9 per cent. David A. Wells esti-
mated that the labor of three or four men in the Dakota wheat
fields would annually produce 1,000 barrels of flour, delivered at
the seaboard, or enough flour to furnish bread to one thousand
persons for one year.

Effects. — Investing more money in agricultural machinery has
made this industry more ''capitalistic." There is now less of
drudgery in farming and more of business. The capital invest-
ment of the farmer must now be rightly apportioned to each of

115

116 AGRICULTURAL MACHINERY AND TRUST QUESTION

the four factors, such as land, buildings, machinery, and livestock.
The management of ''capital," therefore, rather than the manage-
ment of. land, becomes the uppermost consideration, and in that
sense, agriculture becomes ''capitalistic." Among the beneficial
effects of improved machinery are two very important ones,
namely, increased yields and lessened cost of production. Crude
implements admitted only of crude tillage (Fig. 14). With im-
provements in tillage tools came increase in yields. An increase
in the yield of the products of the farm, without an increase in
the demand for such products, would of course, merely result in

Fig. 14.

-Evolution of the reaper. Cyrus Hall McCormick's first successful reaper, invented
in 1831 and patented in 1834.

lowering their price, and hence, in lowering the rent of the land or in
putting the poorer grades of land out of use altogether. It is of
course true that the consumer's demand for bread and meat
may increase or decrease from decade to decade. Or the increase
in production is disposed of by way of the foreign markets. Thus
our great staples — wheat, meat, and cotton — feed and clothe many
people in many foreign lands. These products in turn are ex-
changed in part for food products, in part for other things. But
the result of increased production at home, therefore, is seen to
be an increase in food consumption, but food of many varieties
from many corners of the world. Tropical fruits that were once
a luxury for the rich are now a commonplace on the tables of the
working man.

THE PURCHASE OF FARM MACHINERY 117

The Purchase of Farm Machinery. — Since the industrial revo-
lution in agriculture, the farmer normally buys most of the tillage
tools used on his farm. This fact is best appreciated when we
contrast the situation to-day with that of the time of George
Washington, when tillage tools and household supplies were made
on the farm. For instance, a neighbor of Washington's has left
us this description of the work done on a farm near Mount Vernon:

"My father had among his slaves carpenters, coopers, sawyers, black-
smiths, tanners, curriers, shoemakers, spinners, weavers, and knitters. His
woods furnished timber and plank for the carpenters and coopers, and char-
coal for the blacksmith; his cattle killed for his own consumption and for sale,
supphed skins for the tanners, curriers, and shoemakers; and his sheep gave
wool and his fields produced cotton and flax for the weavers and spinners,
and his own orchards fruits for the distillers. His carpenters and sawyers
built and kept in repair all the dweUing houses, barns, stables, ploughs, bar-
rows, gates, etc., on the plantation, and the outhouses of the house . . . The
blacksmiths did all the iron work required by the establishment, as making
and repairing ploughs, barrows, teeth, chains, bolts, etc."

As described elsewhere in this book, the division of labor be-
tween town and country has taken away from the farm most of
the processes of manufacture. This has given rise, at frequent
periods, to chafings and mutterings of discontent on the part of
the farmer, particularly as to the quality and cost of the imple-
ments purchased by him, and the high cost of repairs. As described
elsewhere, the "farmers, through the National Grange actually con-
templated entering upon the manufacture on a large scale of farm
implements, placing the factories near the centers of farm crop
production. This scheme however, finally fell through. The
manufacture of most forms of farm machinery has therefore come
to be in private hands. The exception to this rule may be found
in those States where prison labor is used for making certain farm
machinery. The sale of farm implements is chiefly in the hands
of private dealers. However, the purchase of farm machinery
collectively by organized groups of farmers, through various forms
of cooperative associations, is gradually increasing. The outlook
is very favorable for the use here of cooperative purchases by the
combined farmers in dealing with the manufacturers or the dis-
tributors. Since farmers are slower to form combines than are
manufacturers, the problem which has for some years confronted
the farmer is this, namely : What is the correct economic policy
for the scattered, unorganized farmers to adopt towards the com-
binations of manufacturers of tillage tools? Shall farmers combine
and deal with the combined manufacturers on a basis of equahty?
Or shall farmers, through the processes of the courts, seek to dis-

118 AGRICULTURAL MACHINERY AND TRUST QUI^STION

solve the combines of manufacturers? Since this question is one
of fundamental economic and social significance, it is here con-
sidered at length. And furthermore, farmers are now combining in
large groups, and wisely so, for the purpose of collective activities,
and hence this question has more than academic interest for them.

The " Harvester Trust." — Every farmer who uses tillage tools
is interested in the so-called '' harvester trust." No large industrial
corporation has been more discussed in the farm press than the
International Harvester Company. But a small part of this dis-
cussion has shed any light on the subject. Yet there are literally
thousands of pages of sworn testimony available, setting forth the
history and methods of this company in the minutest detail. The
history of this company has wide economic and social impKcations.

Its History. — The International Harvester Company was
organized in 1902 as a consolidation of five manufacturers of
harvesting machines in the United States, namely, the McCormick
liarvesting Machine Co., Deering Harvester Co., Piano Manu-
facturing Co., the Warder, Bushnell & Glessner Co., and the
Milwaukee Harvester Co. The companies thus consolidated had
in 1902 about 90 per cent of the total production of grain binders
in the United States and about 80* per cent of the total production
of mowers, the two chief kinds of harvesting machines. The inter-
ests included in the combination had previously 'been in keen
competition. An attempt made in 1890 to establish a general
consolidation of makers of harvesting machines was a failure, and
from that time on until the merger, competition was severe, result-
ing in costly duplication of sales agents and traveling salesmen.
After its organization, the International Harvester Company at
once began to acquire competing makers of harvesting machines.
In January, 1903, it acquired control of D. M. Osborne & Co., its
chief competitor. Ry 1904 control had been secured of several
other concerns, including the Minnie Harvester Co., the Aultman-
Miller Co., and the Keystone Com.pany. From manufacturing
harvester machines the company pushed on into new lines. Among
the most important of such lines were tillage implements, manure
spreaders, farm wagons, gasoline engines, tractors, and cream
separators. In order to obtain its raw materials more economically,
efficiently and promptl}^, and to save the margins taken by useless
middlemen, the company entered the fields of raw material and
transportation. It secured control of ore lands in Wisconsin,
Minnesota, and Michigan, coal lands and coke ovens in Kentucky;
blast furnaces for the production of pig iron, steel mills and rolling

EXCLUSIVE CONTRACT 119

mills at South Chicago; timber lands in Missouri and Mississippi;
saw mills in Arkansas and Missouri; 27.18 miles of trackage of the
Illinois Northern Railway, serving the McCormick works; 24.75
miles of trackage of the Chicago, West Pullman and Southern
Railroad Company which serves the company's steel mills and
the Piano Works at West Pullman. In 1905 the International
Flax & Twine Company of Minnesota was organized as a subsidiary
company of the International Harvester Company, for the purpose
of manufacturing binder twine from flax straw, so as to substitute
in large measure fiber from American-grown flax straw for the
sisal and manila fibers imported from Yucatan and the Philippine
Islands. In addition to the foregoing steps, the company developed
an important export trade in harvesting machinery. Over 30,000
local dealers handle the machinery of this company outside the
United States. Agencies have been established throughout the
various countries of Europe, in Northern and Southern Africa, in
South and Central America, and in Siberia. For instance, the branch
house at Omsk, Central Siberia, did a business for the company
in the year 1912 amounting to more than three million dollars.

Investment and Capitalization. — The extraordinary overcapi-
talization which characterized most of the large industrial con-
solidations formed in the period of combines (1898-1902) was
absent in the case of the International Harvester Company. The
original capital stock was $120,000,000. The cash stock of
$60,000,000 appears to have been paid up in full. The appraisal
value of the plants, inventories, etc., for which the remaining
$60,000,000 of stock was issued was $67,000,000. The bankers
and promoters received $3,700,000 stock for their expenses and
services. In 1910 the capital stock was increased to $140,000,000,
by the issue of a common stock dividend of $20,000,000. The
purpose of the merger, according to the company's testimony,
was "to reduce operating expenses and decrease competition."
The federal government, reporting on this company, summarized
its conclusions in these words: ''It appears therefore, that the
International Harvester Company's position in the industry is
chiefly attributable to a monopolistic combination in the harvesting
machine business, certain unfair competitive methods, and superior
command of capital."

Exclusive Contract. — ^An objectionable competitive method
was the use of the so-called ''exclusive contract," or exclusive
clause in agency contracts. This practice was discontinued
after 1905.

120 AGRICULTURAL MACHINERY AND TRUST QUESTION

Quality and Price. — In the ouster suit in Missouri, the Supreme
Court of that State spoke on the subject of the price and quahty
of binders in this manner: ''So in the case at bar, the price of
harvesting machines has not increased in proportion to the in-
creased cost of construction or the increased merit of the machines. '^
In the suit before the Supreme Court of Kansas, the State referred
the case to a Commissioner, to report his findings of fact, and his
report includes the following statements as to quahty and pi-ice:
When the Harvester Company began business in Kansas in the
fall of 1902, certain reductions in price were made on binders and
mowers. No increases in price were made till the season of 1908,
and then an increase of 5 per cent was made. In the same period
the prices of commodities in general were in the State of Kansas
considerably increased. The average increase in the costs of all
raw materials for producing farm machinery, from 1902 to 1907,
was from 16 to 42 per cent. Using exact figures (from the Missouri
suit) we find the following price changes for the six-foot binder :

Average Prices for 6-foot Binder
Year Price to farmer Price to dealer

1878 $360 $270

1879 340 278
1881 276 225
1884 240 195

1890 140 112

1891 125 100

1892 140 112

1895 to '98 135 to 130 105 to 95 .

1900 130 100 to 105

1901 130 100

1902 125 97.50

1903 to '08 120 95
1908 125 to 130 100.00

The Kansas Commissioner gave retail cash prices for the period
1903-1907, as follows:

8 ft. grain binder with tongue truck $145.00

4K ft. mower 45.00

On the question of quality and improvements, the Kansas
Commissioner finds as follows:

" Improvements in Machines. — The experimental department is main-
tained at an annual cost of from $300,000 to $350,000. The specific improve-
ments of machines making for efficiency and durability have been too numer-
ous to cite in detail. In brief the evidence shows that the basic patents on
binders and mowers have all expired, but that the International Harvester
Company of New Jersey constantly endeavors to procure new devices for
improving the machines it manufactures for the company; that on an average
it takes out seventy-five patents a year. The evidence shows that the local
dealers and farmers in Kansas consider that the machines sold by the defendant
are distinct improvements over the machines sold in the state prior to 1903.
The evidence further is clear that the machines are constantly improving,
that they are now more efficient and durable. They do not have to be repaired
as often, and are less comphcated (Figs. 15, 16, and 17).

PRICES AT HOME AND ABROAD

121

"Repairs. — Prior to the time the defendant commenced doing business in
Kansas, both the farmer and the retail dealer often experienced difficulty in
obtaining machines and repairs during a busy harvest season. None of the
companies doing business in Kansas prior to 1902 had general agents at Con-
cordia, Hutchinson or Parsons. They were forced to send to Kansas City,

Fig. 15. — Evolution of the reaper. The 1S47 niodol, MoCorniick rcnpcr at work.

1- iG. Iti. — Evolution of the reaper. The 1858 model, McCormick automatic self -rake reaper.

Wichita or Topeka for repairs. The defendant is the only company doing
a farm implement business in Kansas that adopts the system described. To
get repairs from other concerns the dealer must send to Kansas City, Missouri.
This often involves a delay from which damage to crops results."

Prices at Home and Abroad. — The Kansas findings are in these
words: ^'The prices of the company on its goods sold in foreign
countries are higher than those charged to the domestic trade.''

122 AGRICULTURAL MACHINERY AND TRUST QUESTION

Earnings. — ^A correct table of earnings of this company for
its first eight years is found in the Petition of the United States
in the federal district court for Minnesota, and is as follows:

Dividends on Capitol Stock

Per cent

1903 3.00

1904 4.00

1905 4.00

1906 4.00

1907 3.50

1908 3.50

1909 3.50

1909 stock dividend 16.66

1910 5.29

Average 5.92

Fig. 17. — Evolution of the reaper. The modern self-binder.

The Case for and Against the Harvester Company. — As these
lines are being written a suit is pending before the United States
Supreme Court for the dissolution of this Company. The dissolu-
tion is sought under the Sherman Anti-Trust Act, the official title
of which is ^'An act to protect trade and commerce against
unlawful restraints and monopolies." Attempted enforcements
of the Sherman Act are putting the question squarely up to the
voter, which one of four possible economic orders of society does
he desire, namely, (1) Competition, (2) Combines, regulated by
pubUc authority, (3) Cooperation, (4) State Socialism. Since the
aim of the pending suit, just mentioned, is to destroy a combine
and restore competition, it is very timely at this point to state
both sides of the controversy.

For the Harvester Company. — In its numerous lawsuits, the
International Harvester Company has averred that it has caused
the following distinct advantages to the public over the conditions

FOR THE HARVESTER COMPANY 123

and methods existing in the trade prior to the formation of the
merger, nearly all of which benefits have grown out of its large
resources, facilities, and organization:

(1) Harvesting machines have been improved in quality, dur-
ability and efficiency much more in the years since the merger than
in the same number of years before the merger. The best features
in each of the machines formerly made by the different companies
have been incorporated in all the machines made by the Company,
and the advance in improvements has been broad and rapid. The
Company has maintained an experimental department to develop
new machines and improvements at an average annual expense of
more than $500,000, which none of the old companies could or
would sustain, and during its first nine years it expended, in im-
proving its six types of binders and mowers more than $600,000.
By producing specially for its own uses the lumber, iron and steel
for making harvesting machines, the Company has been able to
eliminate certain expensive middlemen, to the advantage of the
farmer, and thus to increase the efficiency and durability of the
machines without a corresponding increase in cost.

(2) The methods and facilities of distribution have been greatly
improved and enlarged; and, by the wider distribution of harvest-
ing machines and all repair parts on a commission basis, local dealers
are better enabled to carry large stocks of both. These repairs
are more accessible to farmers than was formerly the case. A
large corps of experts and repair men is maintained whose services
are quickly available to the farmers and often without charge.

(3) Large economies have been made by the development of
new lines of farm machinery. The harvester plants merged in
1902 were making only binders, reapers, mowers and rakes, and
were practically idle several months of the year because the selling
season in those lines in the United States is only about four months.
By developing new lines an all-year employment has been given
to very much larger manufacturing and selling forces than were
employed by the old companies. Among the new lines developed
are wagons, manure spreaders, gasoline engines, cream-separators.

(4) Foreign trade in agricultural implements has been devel-
oped and expanded from $10,000,000 in 1902 to $42,000,000 in
1911 (Figs. 18 and 19).

(5) Wages and conditions of employees have been improved
by the Company. Tn the first nine years wages were increased
twenty-seven per cent. Sanitary and safety appliances have been
installed and maintained with the most rigid system of inspection.

124 AGRICULTURAL MACHINERY AND TRUST QUESTION

(6) The Company avers that, unhke the illegal trusts and
combinations, it is controlled and managed by men whose fathers
originally developed the harvesting machine business in which
there has been continuous management and development for a

Fio. 18. — ^American farm nuuhinery m Siberia.

Fig. 19. — Farming in Italy — using American mowing machines.

period of more than fifty years; that it was organized without
excessive capitalization and without any purposes of securing
quick fortunes from stock sales or excessive earnings, and that
beneficial results have been secured to the public in greater meas-
ure than to the stockholders. The company avers that during
the twenty years prior to its organization in 1902, more than fifty
competitors had been eliminated from the harvesting machine

AGAINST THE HARVESTER COMPANY 125

business, and that since that time there has been no such elimina-
tion of competitors. The cost of raw materials and labor increased
fully 25 per cent since 1902, yet the prices of harvesting machines
were not raised until 1908, and then only 7 per cent, and for 1912
there was a reduction of about 5 per cent. The net earnings of
the company for this time averaged 5.91 per cent.

In short, the Company says, ''The Government ought not to
be permitted to urge in a court of equity that such a corporation
is in itself, and without regard to its practices and effects, illegal
and should be destroyed."

In other words, a ''good" trust is better than competition, and
hence should not be dissolved.

Against the Harvester Company. — There is no such thing as a
good or benevolent trust, the government contends. All combina-
tions which break down the competitive system are in restraint
of trade. It is apparent, says the government, that the objections
to substituting a despotic orgsftiization of industry for the competi-
tive system were quite as much social and political as economic,
and therefore it would not have satisfied Congress to be told, as
the Company now is saying, that the power which they feared
was thus far being exercised benevolently, that prices had not
been raised, nor wages lowered nor the quality of the products
degraded, nor competitors oppressed. In their minds the mere
existence of such powerful combinations was an evil — a continuing
danger — from which in the long run, if not immediately, would
come disaster. For, as in the organization of government, benevo-
lence can never justify absolutism, neither can it do so in the organ-
ization of industry. The fundamental contentions of the company
(that the anti-trust law prohibits only combinations injurious to
the public by raising prices, limiting production, deteriorating
quality, decreasing wages, or oppressing competitors) loses sight,
says the government, of the broader purpose and basis of the act.
It fails to take into account that the view of public policy upon
which Congress legislated was not to wait until the evils of undue
concentration of economic power have occurred or become imminent
and then attempt to restrain them, but to prevent their occur-
rence by striking at undue concentration of economic power itself.

Here the reader has both sides. He will make his own choice,
for or against competition.^

^ Since the above statements were written, the International Harvester
Company has voluntarily formulated a plan for dissolution satisfactory to
the federal courts.

126 AGRICULTURAL MACHINERY AND TRUST QUESTION

The Independent Harvester Company.— A few years ago
twenty-seven thousand farmers brought suit against the Inde-
pendent Harvester Company of Piano, Ilhnois. These farmers
held over six million dollars of stock in this company. Since this
company was so widely advertised as a cooperative concern, and
as a farmer's company, and in this guise secured the farmers'
support, a brief account of its operations is in place here. It was
neither a farmers' company nor a cooperative concern.

Troubles under the old management of this company came to
a head when a committee of farmer stockholders in the summer of
1913 brought in a report and filed a bill in the United States Dis-
trict Court at Chicago, containing seventy-one counts against the
management and praying for relief. Some of these counts set
forth that the then management of the company had ''organized
a stock seUing campaign, and for four years or more have devoted
all the time and energy of the officers and a large number of em-
ployees of the corporation to selling stock, have expended large
sums in advertisements, employed sales agents for stock, commis-
sions as high as thirty per cent of the sales . . . That stock sales
were conducted for the sole purpose of paying salaries, expense
accounts, and profits to the individuals in the management; that
more than $3,000,000 worth of stock has been sold during the past
two years; that the management diverted the corporation's
purpose from manufacturing machinery to the sale of stock;
that it conspired to continue stock sales and neglect manufac-
turing; that the mismanagement and fraudulent misrepresenta-
tions of defendants so injured the reputation of the company
and its products that advertisements were refused by farm and
other journals," etc.

This company gave the impression in its advertising that it
was a farmer's cooperative company. Some so-called cooperative
journals carried this fraudulent advertising. Many refused it.
The president of the company in reply to a letter from the editor
of a genuinely cooperative journal, wrote: "We do not consider
ourselves strictly cooperative, and whether we can be made so is
problematic. We have tried to figure it out from all standpoints,
but it seems as though the law at the present time and the way in
which we are organized would not permit of it in the same sense
as the Rochdale plan ... On the other hand, we have about
three thousand farmers that are voters of the company, and the
balance, about thirteen thousand, are non-voters. . . . We are
expecting to spend $30,000 in advertising between now and March

THE INDEPENDENT. HARVESTER COMPANY 127

1, and took it for granted that it would be patronizing men that
we believe in, and, by sending you an advertisement, at the
same time be a help in the efforts which you and your paper are
putting forth." ^ The president of the company, in fact, acknowl-
edged it to be not cooperative. One very widely circulated pam-
phlet issued by the company bore these words prominently on
the front cover: ''Cooperative Manufacturing of Implements.
General Farm Machinery and Gasoline Engines — What the Farmer
is Doing for Himself — The Farmer's Company — Not in the Trust."
On the inside cover we read such sentiments as these:

"Bujdng from the Trust means prosperity for the Trust. Why not
cooperate for your own independent profit? Chapter one in the battle for
farmer's independence. Striking the blow for farm freedom at the psycho-
logical moment of history. Every fight has its crisis — the moment when a
feather's weight one way or the other turns defeat into victory. The struggle
of American farmers for freedom from trust tyranny is at that crisis to-day.
The Harvester monopoly, by tightening its grip on the situation, has forced
thousands of individual farmers to submit to its demands."

This same pamphlet, issued about the year 1912, describes the
beginning of the Independent Harvest Movement, and goes on to
describe its management. ''From the beginning," says the pam-
phlet, "the same conservative methods have prevailed in the
Independent Harvester Company's management— a conservatism
that is ever alive for the latest progress in machinery manufactur-
ing, but holds fast to the old fashioned ideals in its dealings with
every customer."

About the time this pamphlet was issued, describing the com-
pany's "conservative management," a committee of three men,
representing various groups of stockholders, made a "Committee's
Report to Stockholders" under date of December 18, 1912, and
set forth the details of a meeting which they had held with some
representatives and stockholders of the company at Piano, Illinois.
Among other things, the report states: "Various phases of the
harvester company were discussed. The millions contributed by
the investors, and the few machines to distribute after seven years
of promise were data for serious consideration ... It was appar-
ent from the first, however, that there was no disposition to meet
our inquiries with full and complete answers. No very definite
estimate was made as to the company's output of machines Jfor
the present year, excepting that there was a substantial increase.
Questioned as to the cost of the output of last year, Mr. B. elabor-

2 Letter to Editor E. M. Tousley, "Cooperation" (MinneapoUs), July,
1913, p. 275.

128 AGRICULTURAL MACHINERY AND TRUST QUESTION

ated on the necessity of a cost system, and the length of time
required to put one in, saying it would take about a year. When
pressed as to the per cent of profit in the manufacturing end of
the business, nothing definite was forthcoming except beads of
perspiration on the brow of the auditor. We do not know whether
the business is on a paying or losing basis, so far as figures obtained
. . . Mr. T. (the president of the company) stated that he owned
seven hundred and eight shares of the stock in the company.
Upon being questioned as to his salary as president, he said, ' One
thousand dollars per month, and that is not enough.'"

The suit against the former officials of the Independent Har-
vester Company came to an abrupt end in 1917, when the govern-
ment, after four years of preparation, went down to defeat. The
United States District judge took the case from the jury and threw
it out of court. The court held that the goverrmient had failed
to prove that there was any intent on the part of the defendants
to defraud purchasers of stock in the company as charged, and
that the evidence, on the contrary, showed that the defendants
were sincere in their belief that the company would be a glowing
success, a clear case of '^ sincere even if visionary optimism."
When the company got into trouble, an entirely new management
took charge of it (in June, 1913). The manufacturing end of the
business was systematized, and a sales organization was built up.
A *'through-the-dealers-only" policy of distributing the products
was adopted and adhered to. The twenty-four thousand farmer
stockholders buy the product through regular dealers. A full line
of binders, mowers, and general farm machinery is offered by the
company. But the reorganized company is suffering from the
handicap imposed by the early exploitation of the word ''coopera-
tion" in connection with heavy promotion costs. Damage was
done both to the cause of real cooperation and to this company
as a manufacturer and distributor of farm machinery.

The financial affairs of this company, however, went from
bad to w^orse, after the company once got into the courts. In the
year 1918 the assets of the Independent Harvester Company of
Piano, Illinois, were sold to the Independent Harvester Company,
Limited, for $604,506.21. Other items of expense put the cost up
to about $1,000,000. Under this reorganization neither the pre-
ferred nor the common stockholders could hope for any return of
any part of their investment unless they advanced 20 per cent of
their original investment for notes of the new company, running
one year.

REFERENCES 129

In some foreign lands the promoter is required to put forth
his prospectus in printed form, and is then held civilly and crim-
inally liable for all statements therein. Such a ''Blue Sky Law"
in this country would doubtless save the farmer from being victim-
ized on many an occasion.

The question is still unsolved, however, of cooperation and
combine, on the one hand, versus competition on the other hand.

QUESTIONS ON THE TEXT

1. Show briefly the increase in use of labor saving machinery. Cite concrete

examples — the Georgia planter; M. F. Greeley's testimony.

2. Show increase in value of agricultural machinery per acre.

3. Show how this machinery lowers cost of production (figures for com,

hay, wheat).

4. Show in what sense agriculture is now "capitalistic."

5. Explain the probable effects of a greatly increased production.

6. Show the change, during the last hundred years, in the method of obtain-

ing tillage tools. This change has brought forth what economic and
social problems? State briefly diff'erent schemes used by farmers for
improving the methods of obtaining tillage tools? What method or
methods prevail to-day?

7. Give the history of the International Harvester Company.

8. Cite the six advantages in manufacturing and distributing farm imple-

ments claimed by this Company.

9. Cite the objections to this form of manufacturing and distributing,

formulated by the Government in its suit against this Company.

10. What, in brief, is the issue involved?

11. Give the history of the Independent Harvester Company, and show what

economic and social problems were involved.

QUESTIONS SUGGESTED BY THE TEXT

1. Show relation of increased production to an increase in rent; to a decrease

in rent. Formulate a rule governing this relationship.

2. What would be the ideal method for farmers to obtain their tillage tools?

3. Should combines among manufacturers of tillage tools be prohibited or

encouraged? Reasons for your answer.

4. State chief reasons for combines among farmers ("cooperative associa-

tions") for large-scale deahngs. Do these same reasons apply to others
than farmers? Reasons for your answer.

5. Should "all combinations" be prohibited? Should some combinations

be prohibited? Formulate a rule in the interest of pubhc pohcy.

REFERENCES

1. Report of the Industrial Commission, Vol. X, Washington, 1898-1902.

2. QuAiNTANCE, H. W. I "The Influence of Farm Machinery on Produc-
tion and Labor." Publications American Economic Association, 3d series,
Vol. 5, No. 4, Nov., 1904.

3. Report of the Bureau of Corporations on the International Harvester
Company, Washington, 1913.

4. Briefs of the International Harvester Company and of the federal
attorneys, in the various suits involving this company.

CHAPTER IX

MARKETING AND THE MIDDLEMAN

Four Steps in Marketing. — In recent years the discussion of
marketing has taken the form of a crusade against the middleman.
However, the so-called ''marketing problem," when studied, is
found to break up into four separate problems, namely, produc-
tion, storage, transportation, and credit. In other words, when
these four problems are solved, the ''middleman problem" will
disappear. (1) The production of a good product is the first and
most important step in marketing. It is never difficult to sell
products of the best grade. The daily market reports and price
currents indicate brisk demand at good prices for the better grades
of farm products, but, at the same time, the markets are often
glutted with poorer grades. To put a high-grade product on the
market, particularly if it be inspected and graded and standard-
ized, is to take the first and biggest step in marketing. (2) Storage
is a step made necessary with most farm products by reason of
their production in the summer time and their consumption at
other seasons. These crops accordingly must be stored some
place by somebody, and the middleman accordingly usually enters
at this point to begin his services. Some highly perishable products
show a tremendous shrinkage in storage. Thus the southern sweet
potato, needing warm dry storage in winter, shows an annual loss
in storage estimated at one hundred million dollars. The white
potato of the north, calUng for cool, dry winter storage, also shows
a heavy waste. Other farm products, such as eggs, poultry, grain,
cotton, and so on, all call for particular forms of storage to bridge
the gap between time of production and time of consumption.
In the last analysis, considering farmers' cooperative storage ware-
houses, public and private storage warehouses of all kinds, and
the consumers' own cellars, the retailer is doubtless the chief
storer of food products. The retailer must actually own and store
nearly 100 per cent of the food products which the ultimate con-
sumer buys. Here is an important function of the retailer. One
investigator has estimated that the annual waste by decay of
perishable food products is 40 per cent. (3) Transportation is,
next to retailing, the most expensive link in the chain of marketing.
And the most expensive phase of transportation is the haul over
130

STATE MARKETING ACTIVITIES 131

poor country roads before the product reaches the railroad station.
Lower freight rates may be brought about by using fleets of motor
trucks for short haul business, provided country roads are im-
proved. An enormous leak in railway transportation is due to
the shipper himself, namely, the shipping of poorly packaged
perishable freight. It is appalling to witness the loss and damage
in foodstuffs arriving at big city markets, losses due to shipping
in frail containers, or to improper loading of correct containers.
(4) Credit is the fourth step in marketing, and is vitally important
under our present system of doing business with the smallest
possible use of money. We live in a credit age. Credit is a promise
to pay money. Farmers' crops go to market shortly after harvest,
as a rule, and are paid for in cash — with money borrowed from the
banks. Hence credit must carry the crop till it is bought and paid
for by the consumer, months later in many cases. It is commonly
the middleman or dealer who finances the farmer by securing
credit from the bank. For this service a "toll" is charged. If the
farmer, in buying his supplies, uses book credit (''charge" account
at the store), he is using the most expensive form of credit known.

The reformer of our present market system must successfully
solve the four problems named above, if he hopes to displace our
present system. Getting the farm products from the producer
to the consumer — in the right quantity, of the right quality, at
the right time, at the right place (usually his kitchen door) is
now carried on by the middleman in a remarkably efficient manner,
when you take into consideration the whims and fancies of the
consumer, and the more basic fact that consumption is not rational
and never can be. (De gustibus non est disputandum — ''There is
no disputing about tastes.") Let us now turn our attention to
the concrete attacks being made on the marketing problem by
the various States.

State Marketing Activities. — The year 1915 may be given as the
date when the States of the Union began actual marketing activi-
ties. The high cost of living in recent years doubtless contributed
to this step by the States. The long crusade against the "middle-
man" may be considered as a further cause for the States under-
taking to deal with the marketing problem in a new and somewhat
concrete way. A partial survey of the State marketing activities
may be considered at this point, before examining the actual costs
and services of the middleman.

Most of the States are now undertaking some marketing
activity. It is a new field, and they are feeling their way, each

132 MARKETING AND THE MIDDLEMAN

trying its own ideas. Only a few of the typical State systems can
be given in any detail here. Among the first States to enter this
new field is Idaho.

Idaho. — The Idaho law creates the office of markets for the
State of Idaho, in charge of a director appointed by the Governor.
The law contemplates three chief activities: (1) a free State
employment bureau; (2) supervision of land promotion schemes,
particularly of misleading advertisements intended for home-
seekers; (3) a State market department. The Director in charge
of this work, W„ C. Scholtz, confined his marketing activities at
first largely to community and state-wide problems, working along
broad and fundamental lines, leaving the individual work for later
consideration. This work may be illustrated by the following
two examples.

Dairy Products. — The Director found unsatisfactory conditions
prevailing in the dairy industry, despite the State's natural ad-
vantages in this field. He founded a butter and cheese scoring
organization, thereby leading to a standardized and higher quality
of produce. Uniform accounting systems were introduced and
likewise cooperative buying of supplies. Along with these activ-
ities went a vigorous campaign against the unscrupulous creamery
promoter.

Potato Marketing. — The 1915 potato crop was large, in most
sections of the country, and prices low. The Director found that
Idaho buyers were getting the Idaho crop at from 45 to 50 cents
per hundred. He circularized the growers and advised them to
hold for higher prices, for 80 cents at least, assuring them that
prices would soon rule higher. Within about two weeks the price
actually rose to about 80 cents a hundred. It should be stated at
this point that the actual forecasting of market prices is rarely
undertaken by State marketing officials as part of their official
duties.

Califomia's law, passed June 10, 1915, is the one which, without
doubt, has been enforced most vigorously of all of the State
marketing laws. And California, like New York, has had its
market bureau subjected to a torrent of very able and very con-
tinuous criticism. Nothing shows more clearly the strength, the
weakness, and the limitations of California's market work than
this battle of the critics. California's first law created a State
Commission Market, so called, under the ''management and con-
trol of a governing body of one person," known as the State Market
Director, appointed by the Governor. The Governor appointed,

CALIFORNIA'S LAW 133

as first Market Director, Harris Weinstock, a man of mature years
and wide business experience. A State Senator of California began
a fight against the administration of this Act, which battle of words
throws much light on the question of correct State policy in engag-
ing in marketing activities. The permanent value of this debate
justifies its reproduction, in part, at this time.

"The Senator believes," says the Market Director, "that the
end in view can best be achieved by State Markets, the creation
of which he contends is made mandatory by this law. I contend,
on the other hand, that the best results can be achieved by encour-
aging producers to keep on producing, by getting more people to
produce, by cutting out speculation in farm products and by col-
lective marketing. These things I hold can be best brought about
by cooperative organization on the part of producers, rather than
by State markets, which under the law are made discretionary on
the part of the State Market Director — and not mandatory, as
the Senator would have us believe." In other words, self help
must not be weakened, but rather strengthened.

The Senator charged the Market Director with organizing the
growers into marketing associations, and that these producers'
"combines" were oppressing the consumer and increasing the
cost of hving.

The Market Director admitted having organized the following
groups of growers: California Peach Growers; Poultry Producers
of Central California; Poultry Producers of Southern California;
Associated Milk Producers; Pacific Rice Growers Association;
Prune and Apricot Growers; California Associated Olive Growers.
The Director denied, however, that such organizations oppressed
the consumer. The Director denied that these "combines" raised
prices to the consumers. Collective marketing lessens the cost of
distribution. The Director, in answering the Senator, claimed
that products raised by unorganized farmers, such as onions,
potatoes and beans, increased in retail price on the San Francisco
market in the two years 1915-1917 one hundred and twenty-six
per cent, but that, at the same time, products raised by the organ-
ized farmers, such as raisins and dried peaches, decreased in retail
price five and one-half per cent. The market is stabilized, says
the Director, by the organization of the producers. "While it is
in the interest of the speculator in food products," he says "to
squeeze out the highest possible price wherever this can be done,
regardless of the welfare of the producer or the consumer, farmers'
marketing associations are in quite a different position. The

134 MARKETING AND THE MIDDLEMAN

producer has much to lose and only a temporary advantage to
gain should he, when working cooperatively, artificially force
prices upward. The future welfare of the industry depends upon
increasing consumption. Abnormally high prices diminish con-
sumption, and the temporary profits due to abnormally high prices
stimulate overproduction, both of which effects seriously react
against the producer. Experience shows that cooperative seUing
on the part of producers has in no instance put any unfair buxden
on the consumer."

Considering that cooperative marketing is on trial in California,
the Director gives these benefits which come to the consumer
through this form of marketing:

• Cooperative marketing stands for standardizing qualities, so
that only products fit to eat are allowed to go to market.

Cooperative marketing stands for inteUigent and more economic
production, so that the cost of production is lessened.

Cooperative marketing stands for better packing so that prod-
ucts reach the consumer in better condition.

Collective marketing plans for collective buying of all things
needed in production and in preparing products for market, thus
again lessening costs.

Cooperative marketing stands for eliminating wastes in the
cost of distribution.

Cooperative marketing spells the death-knell of speculation in
food products, thus stabilizing prices.

Cooperative marketing means making national advertising
possible, such as has been done by the Citrus Growers Association
and the California Associated Raisin Company, which have
enormously increased the consumption throughout the country
for these California products, thus greatly adding to the prosperity
of California and to its people.

The consumer must inevitably fall heir to his fullest share of
all these savings, benefits, and advantages, as has been demon-
strated in the California citrus industry, the raisin industry, the
peach industry, the almond industry, the walnut industry, and
others, not any of which movements have ever put one cent of
unfair burden on the consumer; but, on the contrary, have been
the means of furnishing him with products, the best of their kind,
at the lowest prices.

Functions of a State Market Director. — The director, after
study and experience, decides that the functions of a State Market
Commission should include the following duties and functions:

LOUISIANA 135

"(a) Gather and disseminate information concerning supply, demand,
prevailing prices and commercial movements of farm products, including
common and cold storage.

"(6) Promote, assist and encourage the organization and operation of
cooperative and other associations and organizations for improving the relations
and services among producers, distributors and consumers, of any such products.

" (c) Foster and encourage cooperation between producers and distribu-
tors of any such products, in the interest of the general public.

"(d) Foster and encourage the standardizing, gradmg, inspection, label-
ing, handling, storage and sale of any such products.

'' (e) Investigate the practices and methods and any transaction of com-
mission merchants and others who receive, sohcit, handle on commission or
otherwise, any such products, and to protect and conserve the interests of
the consignor.

" (J) Act as a mediator or arbitrator, when invited, in any controversy or
issue that may arise between producer and distributor of any such products.

"(g) Certify, for the protection of owners, buyers or creditors, when so
requested, to warehouse receipts for any such products, verifying quantities
and qualities thereof, and charge for such service fees sufficient to make the
service at least self-supporting.

"(h) Issue labels bearing the seal of the State Market Commission for
any such products for which State labels have not otherwise been authorized
by law, under such rules and regulations as the Director may deem necessary,
and charge for such labels such fees as in the judgment of the State Market
Director may be proper.

" (i) Act on behalf of the consumers of any such products in conserving
and protecting their interests in every practicable way.

"0) Act as advisor for producers and distributors, assisting them in
economical and efficient distribution of any such products at fair prices.

" (k) Improve, broaden and extend in every practicable way the distri-
bution and sale of any such California products throughout the markets of
the world.

" (/) Reduce in every practicable way the expense and cost of marketing
said products, that the producer may secure more adequate returns and the
consumer a lower cost.

"(m) Promote in the interest of the producer, the distributor and the
consumer, economical and efficient distribution and marketing of all or any
agricultural, fishery, dairy and farm products produced, grown, raised, caught,
manufactured or processed within the State of California."

The first California law was replaced by a new law, creating a
''State Market Commission," embodying the principles laid down
by Director Weinstock. The same director was continued in
charge. In other words, the principles of self help and the collec-
tive bargain were endorsed and accepted.

Louisiana. — The Louisiana law provides for a Commissioner of
Agriculture and Immigration, whose chief function is to foster
direct dealing between producer and consumer. He secures lists
of producers and their products for sale, and these lists are then
published broadcast throughout the State press and also in the
form of weekly bulletins, and in this form sent by mail to such
persons as request them. Henry D. Wilson, the first appointee,
considered the work not simply worth while, but very important.

136

MARKETING AND THE MIDDLEMAN

Michigan. — The Department of Markets in Michigan was or-
ganized under a 1915 law, and James N. McBride became the
Market Director. The work is under official cooperation with the
State Board of Agriculture, and the United States Department of
Agriculture. The work consists largely in investigation and in
giving advice. As in California, cooperative marketing is fostered,
and particularly the standardization of products and their certifi-
cation by the State. Price fixing by the Bean Growers associations

is one of the concrete problems
which quite early confronted the
Director of Markets.

The New York marketing work
came into prominence through the
vigorous efforts of its first direc-
tor, John J. Dillon (Fig. 20), to
conduct apple auction markets
for the farmers. The State De-
partment of Foods and Markets,
located in New York City, in
charge of Commissioner Dillon,
began marketing work in 1915
under a law passed in 1914. This
department cooperated with the
State Department of Agriculture,
the State Agricultural College, the
county farm bureaus, the granges
and cooperative associations, and
the United States Department
of Agriculture. The chief functions were to investigate; to conduct
auctions; to study transportation matters and delays; to estabUsh
markets, general and local; and to encourage cooperative associa-
tion work. The direct marketing activities of this Department
attracted nation-wide attention. By cooperating with the Fruit
Auction Company, a considerable quantity of peaches and apples
were sold at auction. Commissioner Dillon considered the auction
method to be correct in principle, and entirely feasible and desir-
able in large market centers.

The New York Department of Foods and Markets pursued a
militant course from the start. The New York bakers were forced
to restore the five-cent loaf of bread, after raising it to six cents.
The price of cold storage eggs was attacked. Jobbers and retailers
were required to post signs on ''cold storage" eggs. To help the

Fig. 20. — John J. Dillon of New York
(Underwood & Underwood.)

NORTH CAROLINA 137

milk production interests, an auction of dairy cows was held under
the supervision of the Department. Farm shippers used the De-
partment in investigating claims against transportation companies.
A hay auction in New York City was undertaken but abandoned.

Commissioner Dillon conceived the need of his State to be as
follows: ''The first need of the producers of New York State is
to help them to organize into geographical or industrial groups, and
then to federate these units into one strong central agency. This
agency, by the help of the Department, would catalog the principal
crops of the State; know where they are located; know their condi-
tion and see that they are properly graded and packed. It would
keep advised of the conditions of the markets in the principal
cities of the country, and be in a position to direct shipments
where the best prices prevail."

New York passed a new law in the year 1918, consolidating
the old Departments of Agriculture, Foods and Markets, Weights
and Measures, and the Cold Storage Administration of the Health
Department into a new Department of Farms and Markets. This
new Department in turn was divided into two Divisions, Division
of Agriculture and Division of Foods and Markets. Under the
Division of Foods arid Markets were created seven Bureaus, as
follows: Bureau of Markets and Storage; Bureau of Cooperative
Associations; Bureau of Food Standardization; Bureau of Food
Products; Bureau of Licenses; Bureau of Weights and Measures;
Regulative Bureau. Under this law the Stnte of New York is
equipped ^vith the most complete administrative machinery in
the field of marketing to be found in the United States. Aside
from investigation, advice, etc., provided for in all recent market
laws, this New York law provides for the establishment of public
markets in cities, towns and villages, and for State financial aid to
these markets to the extent of fifty per cent of the expense.

North Carolina. — This state is very active in its marketing
work. This work is done by the Division of Markets and Rural
Cooperation, located at the Agricultural Experiment Station, and
its Chief is responsible to the Director of the Experiment Station.
This marketing w^ork is done in official cooperation with the State
Department of Agriculture and the Bureau of Markets of the
United States Department of Agriculture. The chief work falls
under four heads — publication of weekly lists of farm products for
sale; investigations into marketing practices; promoting coopera-
tive organizations, particularly credit unions; and demonstrating
proper cotton grading.

138 MARKETING AND THE MIDDLEMAN

Ohio's law, enacted in 1917, creates a Bureau of Markets
under the supervision of the State Board of Agriculture. The
law is apparently designed to insure cheaper products to the con-
sumer rather than to aid the producer. This law provides for a
bureau which shall investigate the cost of production and market-
ing of Ohio food products, to make rules and regulations for grad-
ing, handling, storage and sale of food; to investigate the practice
and methods and any specific transactions of commission mer-
chants and others who buy or handle food; to act on behalf of
consumers in conserving and protecting their interests in every
practicable way against excessive prices; to develop direct dealing
between producers and consumers; to encourage consumption of
Ohio grown products; to inspect and determine grade and con-
dition of farm products both at receiving and shipping centers;
to act as moderator or arbitrator in controversies between farmers
and shippers which affect the interest of consumers; and to gather
and disseminate information concerning supply and demand, pre-
vailing prices and shipments, including common and cold storage
of food products.

Pennsylvania. — This State was one of the many states which
passed marketing laws in the 1917 sessions of the legislature. The
Pennsylvania act creates a Bureau of Markets for agricultural
products within the State Department of Agriculture, in charge
of a Director of Markets appointed by the Governor upon the
recommendation of the Secretary of Agriculture. The law aims
to help both producer and consumer at the same time. The
Director's duties include the following:

(a) Investigate methods and practices in the production, handling, stand-
ardizing, grading, classifying, sorting, weighing, packing, transporting, storing,
inspecting and sale of agricultural products.

(6) Gather and disseminate market information to both producers and
consumers.

(c) Publish market price bulletins.

(d) PubUsh Usts of names of producers with produce for sale.

(e) Cooperate with the State College and with the Bureau of Markets
of the United States Department of Agriculture.

(J) Promote cooperative associations.

(g) Institute court proceedings to prevent unlawful combinations or
agreements in restraint of trade or for fixing prices.

(h) Put into effect state grades and state certification of agricultural
products.

In this act we find that the problems of standardization of
products and a state label or certificate for the same is very care-
fully considered.

FIELD AGENTS IN MARKETING 139

Texas is a state which has made a very serious effort at solving
its marketing problems. In 1915 a State Warehouse and Market
Department at the State capital was created, and an appropriation
of $66,000 was made for its administration. The work began under
two managers and fifteen lecturers. The Department is in official
cooperation with the State Agricultural Department, the State
Agricultural College, the farmers' union organizations, and the
boards of trade. The law aims to help the producer, rather than
the consumer. The principal activities are the promotion of co-
operative warehousing and marketing in farm products.

In addition to this Department the Agricultural and Mechan-
ical College maintains an Advisor in Rural Economics and four
assistants, who work on such problems as these : storing and mar-
keting sweet potatoes; farmers' clubs; organizing short time rural
credit unions; promoting the organization of egg circles, with
especial emphasis upon the need of infertile eggs for Texas. Other
cooperative activities are also fostered and promoted.

Washington. — ^A law was passed in this state in March, 1917,
creating the office of State Director of Farm Markets, the Director
to be appointed by the Director of the Agricultural Experiment
Station. The Director's duties include the following:

(a) To investigate and promote efficient distribution.

(b) A market news service (prices, supply, demand, freight rates, etc.).

(c) Organize cooperative concerns of producers and consumers.

(d) Examine under oath individuals, officers, and employers dealing in
farm products.

(e) Investigate the parcel post.

(/) Conduct employment bureau for farm laborers.

(g) Investigate transportation (methods, delays, charges).

(h) Recommend legislation.

Enough has been said to show the various methods of attack
on the marketing problem used by different States. Some States
go so far as to do actual marketing. Others furnish state aid only
as a means of promoting self help among the farmers. The States
which are developing self help are obviously dealing more funda-
mentally with the problem, and consequently with better prospects
of ultimate success.

Field Agents in Marketing. — Supported in part by the state
and in part by the federal Government, there is now coming to be
in each State a marketing official known as the Field Agent in
Marketing. His work is done in official cooperation between the
Bureau of Markets and the State University or State Agricultural
College. The chief work of such an agent is to secure Information.

140 MARKETING AND THE MIDDLEMAN

To a lesser extent he cooperates with producers in organizing
cooperative associations and in promoting rural finance. The
Field Agent in Marketing looks on the furnishing of reliable infor-
mation as the first step in solving the marketing problem. The
producers, it is supposed, when equipped with full and accurate
information can organize their own marketing agencies and take
care of themselves, freely using, of course, the advice and coopera-
tion of the Field Agent.

National Association of Marketing Officials. — The state mar-
keting officials and the various Field Agents in Marketing organ-
ized an Association which held its first two annual meetings in
connection with the National Conference on Marketing and Farm
Credit at Chicago in 1915 and 1916. This Association aimed to
bring together in one group representatives of all shades of opinion
and all varieties of practice in marketing matters. However, it
failed to function. In 1920 a new organization, the National
Association of State Marketing Officials, was formed at a Con-
ference in New York City. The aim is similar to that of the
old association.

Bureau of Markets. — The federal government in 1914 estab-
Hshed in the Department of Agriculture the Office of Markets and
Rural Organization. Since the creation of this office its scope and
activities have been rapidly enlarged. It is now a Bureau. Pri-
marily its aim is to investigate and present its facts to the public.
But it has now gone much beyond that stage. It aims to help
make history as well as merely to write history. It fosters coopera-
tion, based on correct business practice. It formulates and installs
correct accounting systems. It establishes standard and uniform
grades for cotton and grains. It furnishes telegraphic market
information on perishable products. The Bureau of Markets, as
previously mentioned, is in cooperation with the market depart-
ment of most of the States with such departments, and with the
Field Agents in Marketing.

Parcel Post Marketing. — The parcel post was looked on by
some voters as a promising method of introducing ''direct market-
ing" and the elimination of the ''middleman." The system has
been tried very thoroughly in the United States, but it has had
very little success in getting farm products direct from the farmer
to the city consumer. The physical difficulties have been over-
come. Containers have been devised, costing very little, which will
safely carry eggs or other highly perishable commodities a thousand
miles with a negligible per cent of damage (Figs. 21 and 22).

PARCEL POST MARKETING

141

But the marketing difficulties have not been overcome. If there
is a saving in price, who shall get it? The farmer has felt that
the margin belongs to him and should be added to his price.
The city consumer wants the product cheaper when dealing direct
^vith the producer. Only a small portion of farm products are
suited to marketing by parcel post. The farmer, to succeed in
parcel post marketing, must meet several standard market require-
ments: the supply must be fairly constant in both quantity and
quality, in order to meet consumer's orders; there must be some

^^!iik\'i^ :iii

If tnV ^^^

IIP iJ'si ......

to

H^I^B^B ^-^^'^'^-^.^^ '^i

'^^KLl'fW^K wl^ 1

^m ^^^^m.

iW'iw ^VP

1 Mmmm^

mmm ^

'mm*

lu

mMim ■

Fig. 21. — Shipping eggs by parcel post. (U. S. D. A.)

standard grade or brand by which both producer and consumer
can designate the article; packing must be good in appearance
and correct in preserving the goods properly; the question of price
and the question of time and manner of payment must be mutually
understood. The two big problems remain — How find the con-
sumer? and How fix the price? Farmers who have tried parcel
post marketing complain that the city consumers ''want the stuff
for nothing." The city consumer complains that the produce was
of an inferior grade. Until standard grades and packs have been
established, which will require cooperative associations among
farmers, there is little prospects for success in parcel post marketing
of farm products.

142 MARKETING AND THE MIDDLEMAN

The Cost of the Middleman. — A few years ago some writer put
into circulation the superstition that the middleman gets fifty
cents out of every dollar the consumer pays, and that the farmer,
in consequence, received but half the price paid by the ultimate
consumer. And in more recent times the middleman's 'HoU" is
commonly given as sixty-five cents on the dollar. No earnest
seeker after the truth will be satisfied with such sweeping assertions
as these. Since the ''toll" of the middleman varies greatly from
one product to another, depending on the various factors involved,

Fia. 22.^-Shipping perishable farm produce by parcel post. (U. S. D. A.;

it is necessary — and it is also the honest way — to inquire separately
into some of the commoner articles of consumption coming from
the farm. Some of the common articles considered below are
bread, meat, butter, eggs, potatoes and tobacco. Careful studies
have been made in all these fields by federal and State govern-
ment investigators.

Wheat and Flour. — We may trace wheat into export, till it
reaches the hands of the Liverpool buyers, or we may trace it in
domestic trade till it passes as flour from the retailer to the house-
holder. Taking the Kansas wheat crop of 1914, we find that the
Kansas farmer got seventy-five cents out of the dollar paid by the
Liverpool buyer. The various margins between the Kansas wheat
grower and the Liverpool buyer were as follows:

J

MEAT 143

Kansas Wheat 1914 ^

Cents per
bushel

Price received by Kansas Farmer 87.0

Margin taken by local elevator 3.0

Freight to seaboard 15.0

Inspection weighing .25

Gross profits of grain merchant 1.25

Export elevator, loading into boat,' etc 1.25

Ocean freight 6.0

Insurance on water .75

Exporter's expenses 1.0

Exporter's profits 1.25

Price delivered in Liverpool 116.75

Here the biggest margin taken by any dealer is the three cents
taken by the local elevator.

If we trace the wheat through the mill, and as flour, into the
hands of the housewife, the margins are as follows:

Tiw 1906 Wheat Crop — Producer to Consumer ^

Cents per
bushel

Price received by Kansas farmer 64.0

Local elevator 3.0

Transportation 8.4

Inspection, weighing, interest on draft .25

Commission 1.0

Miller 10.0

Wholesaler 5.0

Retailer 20.0

Price to householder of flour contained

in one bushel of wheat 111.65

In this case, transportation and milling are expensive services
which change the place or form of the wheat. The largest margin
for ''handling" the product is the retailer's margin. This is typical
of all commodities, and this retailer's margin increases as the
commodity becomes more perishable.

Meat. — Different investigations have been made by various
market experts into the gross margins in the meat industry. One
careful investigation gives us these margins:

Cattle Hogs

Farmer received 60.5 per cent 60.2 per cent

Freight, yardage, feed, etc 2.4 " 2.1 "

Packer's gross returns 11.3 " 15.4 '*

Retailer's gross returns 25.8 " 22.3

100 100

1 Prices of wheat to Producers in Kansas, etc. 63 Cong. 3 Sess. House
Doc. No. 1271.

- Bulletin of the United States Bureau of Labor Statistics, No. 130,
"Wheat and Flour Prices from Farmer to Consumer."

144

MARKETING AND THE MIDDLEMAN

But individual shipments vary so much that it is rarely correct
to speak in specific terms of the middleman's margin. For instance,
here are nine lots of cattle:

Nine Lots of Cattle. Division of the Consumer's Dollar

1

2

3

4

5

6

7

8

9

Farmer . . .

79.29
1.46
8.44

10.81

85.67
1.51
4.35

8.47

54.69
4.38
7.64

33.29

79.49
9.95
8.68
1.88

78.88
1.92
3.92

15.28

81.64
2.57
1.86

13.93

67.97
2.60
6.53

22.90

67.18
4.97
6.02

21.83

77.78

Freight, yardage, feed. .
Packer

1.86
6.53

Retailer

13.83

100

100

100

100

100

100

100

100

100

Summary, Nine Lots

Farmer 66 to 75 per cent

Freight, yardage, etc 3 to 4 per cent

Packer 5 to 6 per cent

Retailer 15 to 30 per cent

Figures compiled on cattle handled through the South St. Paul
market showed these margins:

Farmer ' 58 per cent

Retailer 30 per cent

The remaining 12 per cent is divided among packer, transpor-
tation, yardage, feed, etc. While the retail butcher gets a gross
profit here of thirty per cent, yet he has but a small net profit,
owing to his heavy expenses and small volume of business.

Butter. — The United States Department of Labor issued a
series of bulletins on "Retail Prices and Cost of Living Series."
Bulletin No. 164 of this series is entitled ''Butter Prices from
Producer to Consumer." Among the important findings in this
bulletin are the margins as shown in the following table :
Butter— Mar (Tins, hy Per Cents, 1904, 1910, 1911

1904

1910

1911

June

December

June

December

June

December

62.5

9.7

3.0

.1

5.3

19.4

70.8
10.3

2.2
.1

4.7
11.9

74.5

5.9

2.1

.1

4.6

12.8

72.9

7.1

1.9

.1

4.4

13.6

70.0

7.3

2.4

.1

5.3

14.9

75.9

Creamery margin

Freight

6.7
1.7

Cartage

.1

Wholesale

4.3

Retail. .

11.3

Consumer's price

100.0

100.0

100.0

100.0

100.0

100.0

The producer is here getting from two-thirds to three-fourths
of the ultimate consumer's dollar. The retailer's margin is, of
course, the largest single margin by far. The wholesaler's
margin remains small and fairly constant, owing to his large
volume of business.

A Wisconsin investigation is in substantial agreement with
this one. The Wisconsin farmer receives two-thirds of the

1

J

POTATOES 145

money paid by the consumer for Wisconsin butter. Here are
the figures:

The Marketing of Wisconsin Butter.^ Who Gets the Money?

Farmer 67.7 per cent

Hauling 4.3

Creamery 6.7

Railway 2.3

Storage 0.5

Shrinkage . 0.7

Receiver — jobber — broker 5.0

Packaging 2.9

Retailer 9.9

Eggs. — Tracing a dozen eggs from an Iowa farmer to the con-
sumer in New York we have the following summary:
Eggs — From Iowa Farmer to New York Consum£r

Paid the Iowa farmer 60 per cent

Profit of country store 0

Shipper, gross profit 3

Freight 6

Wholesaler (receiver, jobber) 7

Loss from candling 8

Retailer 16

Price to consumer 100

The bulk of the farmer's eggs are consumed nearer home, and
hence bring to the farmer a larger margin. The loss from candling
is an unduly large margin. With proper organization of producers'
egg circles this margin could be entirely eliminated, and this
saving would doubtless go to the producer in part, and in part
to the consumer.

Potatoes. — One of our best discussions of marketing is that by
L. D. H. Weld.'' He estimates that the farmer receives fifty cents
of the consumer's dollar spent for potatoes. Here we have a
highly perishable product. Farmers in the northern States (where
most of the potatoes are grown) frequently store their own potatoes
in the fall, rather than sell them to the '^ middleman." A shrinkage
of from four to fifty per cent in such a case is common. Improved
storage facilities will overcome this risk to a certain extent. But
the ideal storage is difl^cult to secure, since this implies dry, well-
ventilated air, at a temperature remaining constant at about 33
degrees. An investigation into potato marketing conducted by the
University of Wisconsin gives us this table of middleman's charges:

Price to farmer (varies from year to year)

Local dealer's margin 5 to 10 cents

Sacks and car linings 3 to 5

Distributor, for finding a market 3 to 4

Freight, including firing 8 to 10

Wholesaler 5 to 10

Retailer 15 to 30

3 Bulletin No. 270, Agricultural Experiment Station, University of Wis-
consin, June, 1916.

" Weld, L. D. H., The Marketing of Farm Products.

10

146 MARKETING AND THE MIDDLEMAN

The average retailer's margin here (22)^ cents) is typical of
all retail margins, namely, the largest taken by any middleman.
Small volume of sales and not large profits account for it.

Tobacco. — The Kentucky Agricultural Experiment Station has
issued a report (Bulletin 202) on the Marketing of Burley Tobacco
in central Kentucky. This study shows, as in other commodities,
the largest handling charges are those of the retailer.

The distribution costs are divided into three main categories —
retailer's gross profits, jobber's gross profits, and the manufac-
turer's gross receipts. Here are the results of the interesting study:

Where the Money Goes — Price 67.08 Cents, One Pound, Average Brand, Plug-cut

Smoking Tobacco

I. Manufacturer's receipts:

Growers gross receipts (one-half is profit) 8.0

Preparing leaf for manufacture 5.8

Cost of manufacturing 12.8

Selling costs 2.5

Advertising costs 5.1

Freight 2.3

Internal revenue tax 8.0

Manufacturer's net profit 3.8

II. Jobber:

Operating expenses 3.6225

Net profit 1.7441

III. Retailer:

Operating expenses 10.7332

Net profit 2.6833

Total cost to consumer 67.08

Citrus Fruits. — Oranges, lemons, and grape-fruit are among the
very perishable commodities; are consumed thousands of miles
from the point of production, and are consumed also at seasons of
the year several months from the time of their being picked. The
President of the California Fruit Growers Exchange has given us
a careful statement of the various margins in this industry.
The Consumer's Dollar ^

(Thirty Citrus Fruit Markets: 5485 reports for the year 1914)

1. Grower 26.7 cents

2. Picking and hauling 2.4

3. Packing 7.4 '|

4. Freight and refrigeration 20.5

5. Jobber — cost to grower to sell to j obber . 1.5 "

6. Jobber 8.2 "

7. Retailer 33.3 "

100.0

California Peaches. — ^Six thousand peach growers in California
organized for collective marketing. According to their 1918
report, the producer received the following fractions of the con-
sumer's dollar:

1916 crop 77 cents

1917 80.3 "

5 Powell, G. Harold, Address delivered at the Eleventh Annual Meeting
Western Fruit Jobbers Association.

ing I

RISKS FROM PERISHABILITY

147

California Raisins. — The California Associated Raisin Com-
pany distributes its own product very widely. It was estimated
that the producer, on the 1917 crop, received 61.2 cents of the
consumer's dollar.

California Almonds. — The California Almond Growers dis-
distribute their crop in very distant markets. On the 1918 crop
it was estimated that the producer received 53 cents of the con-
sumer's dollar.

Risks in Price Fluctuation. — The middleman, dealing in perish-
able produce, is often spoken of in the press as a ''food speculator."
In a strict sense of the term, every owner of a perishable product
is a speculator, since he has thereby assumed the risk incident to
price fluctuation and incident to loss by decay.

Few producers realize the actual range of price fluctuation in
one season on the common forms of perishable farm products.
The following table, compiled in one northern city, is believed to
be typical for the whole United States.

Price Fluctuations (Unhedged Produ/^ts), Minneapolis Central Market ^ Season

of 1907

Name

Quantity

Low price

High price

Onions

doz. bunches

doz.

doz.

bu.

doz.

doz.

doz.

bu.

bu.

doz

doz.

doz.

doz.

doz. bunches

doz. bunches

bu.

bu.

bu.

$0.06
.15
.25
.50
.10
.35
.25
.50
.75
.07
.25
.35
.50
.25
.25
.60
.50
.50

$0.15

.34

Head lettuce

.75

Spinach . . .

l.'^o

.20

Asparagus

.80

Beets

.60

Peas

2.00

Beans

3.00
.20

Cucumbers

.75

Cabbage

.75

Cauliflower

2.00

Carrots

.60

.60

Potatoes

1.75

Tomatoes

5.00

Melons

2.00

(From an unpublished manuscript, The Growing and Marketing of Small Fruits and
Vegetables, by D. W. Frear.)

The smallest fluctuation in price for the season was 100 per cent; the largest, 900
per cent.

Risks from Perishability. — ^According to a careful study made
by A. B. Adams,^ perishable farm products show losses from decay
of thirty-five to forty per cent. Hence from 30 to 40 per cent of
the margin between farm prices and retail prices of products
passing through the middleman's hands is due according to this
study, to losses from decay. This margin goes to pay for goods

^ Adams, Arthur B., Marketing Perishable Farm Products.

148 MARKETING AND THE MIDDLEMAN

bought from farmers, but which never reach consumers. The loss,
of course, is added to the price of the goods as a protection to the
dealer. The middleman ''hedges" or insures himself against loss
by buying on a sufficiently wide margin to give him protection.
Otherwise he fails in business. Mr. Adams also emphasizes the
point that the number of middlemen concerned is not the ruhng
factor, but that there are four economic reasons for the present
big spread in price, namely: (1) The perishability of the goods;
(2) The great distance between the producer and consumer —
frequently a thousand miles or more; (3) These goods are produced
by small-scale units — the individual farm, and are consumed by
small scale units — the individual family; (4) The high expense of
caring for these perishable goods. Standard grading and standard
packing, whether done by the progressive individual farmer, or
by a farmer's cooperative association (like the California Fruit
Growers Exchange Local Orange Packing Houses) is the first step
towards reducing these spreads in prices. Further remedies sug-
gest themselves — such as (1) cold storage facilities for each com-
munity producing perishables for market ; (2) facilities for canning,
preserving, manufacturing or otherwise processing these goods
near the point of production, putting in the market only the high
grade produce.

Services of the Middleman. — The middleman's service as a
risk-taker has already been mentioned. By careful study and long
practice he becomes better able to forecast and hence discount the
economic risk. Time was, to be sure, when there were no middle-
men. Then, by barter and by the great annual fairs and markets,
producers and consumers enjoyed ''direct deaUng." But gradually
the producers and consumers, of their own free will, gave up these
forms of "direct dealing." The middleman came in, to bring goods
from distant points to the place where the consumer wanted them
and to collect and store goods, in such quantity and of such quality,
as to supply them to the consumer at the right time, of the right
amount, of the right kind.

In economic phraseology, the middleman produced "time"
and "place" utility, which are just as important as the production
of the raw material itself, and just as truly "productive." As one
writer so ably sums up the economics of the middleman system:
"One of the most noteworthy ideas that results from a study of
the present retaifing system with all its complexities, is that it is
the product of an evolution extending back over a great many
years, and that during all the intervening time there has gone on

PROBABLE SvOLUTlON 140

a steady, relentless elimination of all forms of distribution found
uneconomical." ^

Selling is a Service. — Farmers are slow to accept the fact that
selling, like producing, is a service. The following quotation from
a farmers' company illustrates the reality of the middleman's
service — a department store being the middleman in this case.

*'An effort was made, through advertising and personal soh ci-
tation, to sell direct to the consumer, but this was found more
expensive than working through large department stores or com-
panies owning a number of grocery stores. The Exchange had
sale days for boxed apples in several cities, at which time it offered
to deliver to any home in these cities at the flat rate of $2.25 per
box. It cost the Exchange a fraction over 36 cents a box to make
deliveries, thus leaving $1.89. Better prices resulted from an
arrangement made with some department stores, which paid the
exchange $2.00 per box and sold on certain days to consumers at
$2.25 per box, the retail price advertised by the Exchange. The
Exchange received 11 cents more per box in selling to large dealers
than in seUing direct to the consumer."^

Probable Solution. — The middleman problem is largely a
problem of the retailer, for here is where the large margins are
taken. Cooperative associations of producers can eliminate many
wastes involved in the first steps of marketing (getting a stand-
ardized, certificated, properly packaged product) into the hands
of the wholesale distributors. But the retailing feature is the
most serious part of the problem. Reformers have suggested
various solutions.

''Carry your own bundles and save eight per cent," says a
New York editor.

''I beheve it will always be necessary," replies a business man,
"to deliver goods to the purchaser. Women have come. up through
thousands of years from slavery to where they are to-day. They
are not going back. They can now pick up a telephone and have
a yeast cake delivered to them in ten minutes. Any scheme to
educate the consumer to save money at the expense of trouble
and inconvenience is bound to fail." ^

The criticism is often made, and probably justly made, that
we have entirely too many retail stores. Some careful investi-

^ Nystrom, Paul H., Economics of Retailing, p. 357.

^ Report of the Growers and Shippers Exchange, Rochester, N. Y., U. S.
Dept. of Agriculture, Report No. 98, 1913, p. 236.

9 Dudley B. Pahner in the Outlook, March 14, 1917, p. 460.

150 MARKETING AND THE MIDDLEMAN

gators, however, say that the burden of this does not fall on the
public, but on the retailer hhnself. In other words, many men
accumulate a little capital in other walks of life, go into retail
trade, and fail. One writer expresses it in this way:

**In conclusion it may be stated that, from the standpoint of
the entire public, there is nothing to indicate that the great num-
ber of retail stores adds anything to the burden of expense the
consumer must bear. The high failure-rate in the retail business
would seem to indicate that retail distribution is supported, in
part at least, not by the consumers who patronize the stores, but
by the great numbers who enter the business of retailing with
capital accumulated in other occupations, and then lose it in the
retailing venture. The losses of the dealers who fail are primarily
the losses of the dealers themselves. Only in the most general
way of speaking could one assert that the public must bear the
burden. Certainly, no extra burden is added to the prices charged
consumers because of the keenness of competition resulting from
too many stores." ^^

An Ideal Retailing System. — Nystrom pictures for us an
''ideal" retailing system. Such a system, says he, would supply
the people what they want, the way they want it, when they want
it, and at as low a price as possible. The profits should be fair,
and in accordance with the service rendered. And more than
this, the salesman must be able to render an expert service. Is he
a groceryman? Then he should be a specialist in food values, in
dietetics, and in the preparation of foods. The man in dry goods
should be a textile and style expert, able to lecture to women's
clubs on these subjects. The rug dealer should be able to educate
his customers in the intricate lore of the rug. The store room
and store equipment must be up to the highest possible standard
of cleanliness, sanitation, convenience, and artistic and archi-
tectural arrangement. Pure fpod laboratory tests (made in the
store's own laboratory or in one supplied by the municipality or
State) should protect the customer. Public regulation is now
setting standards for inspection of foods, drugs, stores, restaurants,
weights, scales, measures, etc. Untruthful advertising should
come under State control next, says Nystrom.

Retailers* Conference. — In Winnipeg conferences have been
held by wholesalers, retailers, and bankers, to determine what
methods, if any, could improve the credit conditions of merchandis-
ing, and what reforms, if any, could be effected in wholesaling and

^° Nystrom, Paul H., Economics of Retailing, p. 335.

MARKETING COSTS MONEY 151

retailing. The consensus was that the retailers, particularly in
the country towns, are needed by the farmers, and hence the mail-,
order houses of the city should not supplant them. The country
town, consisting largely of retailers, should prosper with the
farmers, and not at the expense of the farmer. For, of course,
the farmer knows that his land values are substantially raised
by the prosperity and growth of the nearby village. The retailers,
in the Winnipeg conference, blamed the wholesalers for high
prices, claiming that the wholesaler would not sell goods to them
at a low enough rate. The answer was that the retailers ought to
combine in cooperative groups, and purchase jointly in larger
volume, thus enabling the wholesalers to do business on smaller
margins. The Conference had one beneficial effect, namely, to
call public attention to the problem of the small town retailer.

Marketing Costs Money. — One important lesson which many
farmers have apparently not yet learned is that marketing costs
money, and is worth money. Indeed marketing in certain products
must always represent a large margin of the consumer's cost.
Where farmers have successfully organized in any part of the
United States and done their own marketing, one of the first lessons
they have learned is that the information service alone has cost
them a large amount of money. Thus the produce growers in
two eastern counties of Virginia (Eastern Shore of Virginia Produce
Exchange) spend as much as twenty-five thousand dollars a year
for telegrams and telephone service. The Orange farmers of
California (California Fruit Growers Exchange) spend as much as
seventy-five thousand dollars a year for telegraph and telephone
service. An individual buyer of potatoes in North Dakota spends
seven hundred dollars a month for wire service during the busy
season. If a farmer in the United States to-day is asked to name
one example of the highest possible efficiency in marketing, of
marketing conducted on the lowest margin of ''middleman's"
expense, he would probably name the Ford automobile. This is
admittedly an example of a business which has been, up to the
present writing at least, conducted with an idea of fair service to
the consumer. And yet the ''middleman's" margin, the profit
taken by the retailer, is fifteen per cent. The so-called "direct
marketing" is not encouraged in the distribution of this product.
Indeed, if the consumer orders his car direct from the central house
in Detroit, he pays his fifteen per cent commission j-ust the same.
And this method of doing business has had two results: It has
caused a great expansion in the volume of the business. This

152 MARKETING AND THE MIDDLEMAN

volume of business, in turn, has made possible improvements in
the product, a lowering of price to consumers, and an increase in
profits to the manufacturer.

Ford Motor Company. — A person connected with the adver-
tising department of the Ford Motor Company was asked to
express his opinion on the subject of marketing costs. This he
did in the following way:

"The fifteen per cent allowed to the agent for making the sale carries
with it the certainty of considerable gratuitous service, which is rendered the
owner of the car, not only at the time of the purchase but during the years that
follow. It is as low a point as is safe or consistent with good reliable business
judgment. For, out of this the agent must maintain his place of business up
to a certain standard in the way of equipment for making replacements and
repairs, for looking after the welfare, not only of the one owner, but of all the
owners within his territory, and all Ford owners who may drive through with
their cars that require attention and service. He must pay his overhead, he
must pay on the investment in his business, and he has to be a mighty aggressive
and energetic agent if he makes any considerable amount of money.

"It would seem to us there is a broad field for doing very valuable work
in enhghtening the farmer as to the necessity of business methods and business
expenses. The primitive way will not do. There would be no progress. The
reaping machine would never have come into existence — the farm tractor,
the gang plow, the automobile and all the advantages of modern civiHzation
and progress would never have been born — if it were not possible to develop a
saving of time and a making of money through their use by farmers. All
these advances that have come from the brains of active business men have
been for the benefit, for the economy, for the profit of the farmer. And he
should be the one to welcome them most eagerly rather than to be picayune
and expect any man to do business for his interests or the interests of anyone
else without a profit . . . The laborer is worthy of his hire, and nowhere
else more worthy than in being that connecting link which brings to the farmer
those larger possibihties for making money and clothing himself with comforts
and luxuries. One trouble with the farmer is that he does not place any value
upon time. He will drive milk two miles to a milk depot, and he will never
estimate the cost of driving it from his house to the depot and back again. It
might take him two hours with a team of horses whose labors are worth $4.00
per day, and his own $2.00, but he counts it no cost."

The Farmer's Middleman. — Farmers favor ''direct marketing"
as an ideal system. There is one place where the farmer's theory
of direct marketing is put to the final test, and that is in the so-
called ''sales" or "auctions" held by farmers. At these "sales,"
where the farmer desires to dispose of his goods and chattels in
quick time and on good terms, he has the privilege of seUing
"direct" to the consumer. Yet I have never known a farmer to
do so. In practice he employs an expert middleman, known as an
auctioneer, to sell his goods. The farmer does this because he
saves time and money by it. The consumer, too, saves time by it,
and since he buys the goods at his own price, he cannot object to
paying for the services of this middleman.

d

QUESTIONS ON THE TEXT 153

The middleman will disappear when we dispense with his
services, and not till then.

Since ''direct marketing" is an ideal which can never be real-
ized in its entirety, the farmer's opportunity for improving his
marketing, permanently and economically, seems to lie in the
direction of owning or controlling the middleman, not in eliminat-
ing him. This, of course, signifies a high degree of organization
on the part of the farmers, coupled with standardization of product,
so that a group of farmers in one section can deal *' direct" (through
their proper representative agent, a "middleman") with an organ-
ized group (through its representative) in some other section, be
the group farmers or city consumers. Progress in this direction
is slowly being made. With the coming of the county agent in
every county, and with a fuller development of the present
"Country Life Betterment" movement, the farmers will be in a
strong position for marketing their products.

Collective Bargaining, — The words "collective bargaining"
have come into general use as signifying the dealings between
organized laborers and capitalists in adjusting wages and condi-
tions of employment. It is held to be legal for the laborers thus
to dispose of their labor collectively. Collective bargaining is just
arriving in agriculture. It is based on collective action, that is,
the organization of a group of farmers. The most conspicuous
examples thus far in agriculture in America are those of the organ-
ized dairymen in the New York and the Chicago districts, fixing
prices with distributors by means of the collective bargain. The
collective bargain has also been used by organized tenants in fixing
rents; by organized producers, both in buying supplies and in
selling farm products; the collective bargain has also been used
by farmers in fixing the wages of farm labor.

The "elimination of the middleman," so far as such a thing is
feasible and desirable, will come about increasingly through the
growth of collective bargaining in agriculture. This growth pre-
supposes an increase in real cooperation, that is, cooperation which
is for savings, not for profits.

QUESTIONS ON THE TEXT

1. Show the four underlying problems in marketing. When did the States

begin marketing activities? Account for this new activity.

2. Show in detail how the marketing problem was attacked by each of the

following States: Idaho, Cahfornia, Louisiana, Michigan, New York,
North Carolina, Ohio, Pennsylvania, Texas, Washington.

3. Going back to the California case, what principles of marketing were

finally accepted as correct?

154 MARKETING AND THE MIDDLEMAN

4. Distinguish between temporary makeshifts and fundamental reforms.

5. Explain in detail the functions of the so-called " Field Agents in Marketing."

6. What is the National Association of State Marketing Officials?

7. Explain at length the functions and methods of the United States Bureau

of Markets.

8. Show the success and the Umitations of Parcel Post marketing.

9. Cite facts showing the costs of the middleman, i.e., the so-called "middle-

man's toll," in the following: wheat and flour; meat; butter; eggs;
potatoes; tobacco; citrus fruits; California peaches, raisins, and almonds.

10. Show in detail the risks in price fluctuations, citing examples.

11. Show risks from perishabihty.

12. Show the economic functions of a middleman.

13. Cite the experience of the Growers and Shippers Exchange of Rochester,

N. Y., and show what principle it illustrates.

14. What is the probable solution of the "middleman problem"? Will the

consumer demand more or fewer services from the middleman, as time
goes on?

15. Cite Nystrom's views on retailing.

16. State briefly the outstanding facts on the Winnipeg Conference of whole-

salers, retailers, and bankers.

17. Cite the marketing costs involved in securing market information by

farmers' organizations, and justify this expenditure.

18. What marketing principles are illustrated by the distribution methods

of the Ford Motor Company?

19. Does the farmer's use of the auctioneer illustrate any principle in marketing?

20. When, if ever, will the middleman disappear?

21. What should be the future line of growth in market reform? Explain

the present and probable future field of the collective bargain.

22. Comment on the Mail Order House question ; Butter Marketing at Grand

Rapids; CaUfornia Almond Growers' Brokerage problem.

QUESTIONS SUGGESTED BY THE TEXT

1. To what extent should the State give aid to farmers in marketing their

products?

2. To what extent should combines among farmers be legahzed?

3. How should the selling price of farm products be determined and by whom?

4. Formulate an ideal system of storage, transportation, and credit for farm

products.

REFERENCES

1. Brown, Bliss S.: "Modern Fruit Marketing." New York, 1916.

2. FiLLEY, H. C: "From Cardoor to Consumer," Circular No. 5, Ne-
braska Agricultural Experiment Station, January 1, 1918.

3. FiTTS, Edward B.: "Marketing Hogs in Oregon." Extension Bulletin
No. 214, Oregon Agricultural College, August, 1917.

4. Weld, L. D. H.: "The Marketing of Farm Products." New York,
1916.

5. Holmes, George K.: "Systems of Marketing Farm Products and
Demand for Such Products at Trade Centers." Report No. 98, United States
Department of Agriculture. Washington, January, 1913. Contains accounts
of all principal cooperative associations in the United States in 1913.

6. Adams, A. B.: "Marketing Perishable Farm Products," Columbia
University studies, Vol. 72, No. 3, 1916. ■

7. Kerr, W. H., and Weld, L. D. H.: "Prices of Wheat to Producers
in Kansas," etc. 63 Cong. 3 Sess., House Doc. 1271, Washington, 1914.

8. Huebner, Grover: "Agricultural Commerce, "New York, 1915.

REFERENCES ^ 155

9. Benjamin, Earl W.: "Market Egg Problems," Bulletin 65, Depart-
ment of Agriculture, Albany, 1914, 368-385.

10. Myrick, Herbert: "How to Cooperate." New York, 1891.

11. NouRSE, Edwin Griswold: "The Chicago Produce Market," New
York, 1918.

12. PoE, Clarence: "How Farmers Cooperate and Double Profits,"
New York, 1915.

13. Nystrom, Paul H.: "The Economics of RetaiHng," 1915.

14. Bailey, L. H. (Editor) : "Cyclopedia of Agriculture," Vol. 4, 239-269.

15. American Economic Review, IX, No. 1, March, 1919. Papers and
Proceedings of 35th Annual Meeting. Effects of Government Control on
Marketing Methods and Costs: Discussions by Hibbard, Boyle and Smith,
pp. 47-61. Some purposes of price fixing and its results: G. F. Warren.
233-246.

16. "Minnesota Studies in Marketing Farm Produce," 1915, pp. 1-113.
Discussion of following subjects: livestock; potatoes; poultry; milk; city
market of Minneapohs; grain; food supply of the Iron Range.

17. "National Conference on Marketing and Farm Credits," Chicago,
1913; 1915; 1916.

18. "Industrial Commission Report," Vol. VI, 5-297; 337-454, 1900,
Vol. IX, xc-c, 1901; Vol. X, ccxciii, 1901.

19. Yearbook Department of Agriculture: 1899, "Dairy Development,"
381-403; 1900, "Influence of Rye on the Price of Wheat," 167-183; 1901,
"Wheat Ports of the Pacific Coast," 567-581; 1902, "Distribution and Magni-
tude of Poultry and Egg Industry," 295-309; 1904, "Consumers' Fancies,"
417-435; 1909, "Methods and Costs of Marketing," 161-173; 1910, "Effect of
Present Method of Handhng Eggs on the Industry and the Product," 461-477;

1911, "Handhng and Marketing of Eggs," 467-479; 1911, "Reduction of
Waste in Marketing," 165-176; 1912, Corbett, L. C: "A Successful Method
of Marketing Vegetable Products," 353-363; 1912, Pierce, H. C: "How the
Produce Dealer May Improve the Quahty of Poultry and Eggs," 345-353;

1912, Pennington, M. E.: "The Handhng of Dressed Poultry One Thousand
Miles from the Market," 285-293; 1915, Wilcox, E. V.: "How Hawaii Helps
the Farmers Market their Produce," 131-146; 1915, Clark, E. D.: "Shipping
Fish Three Thousand Miles," 155-158; 1915, Wolfe, Stanley L.: "Pointers
on Marketing Woodlot Products," 121-130; 1918, Folger, J. C: "The Com-
mercial Apple Industry of the United States," 367-379.

20. Butler, Ralph Starr: "Marketing Methods" (Vol. 5, Modern
Business, Alexander Hamilton Institute, New York, 1917), pp. 1-140; 206-
225; 322-335.

21. Swinney, John B.: "Merchandising" (Vol. 19, Modern Business,
Alexander Hamilton Institute, New York, 1917), pp. 298-348.

22. On Milk Marketing. — Files of official organs of organized milk pro-
ducers, as follows: (a) Dairymen's League News (Watertown, New York);
(6) Oregon League Dairyman (Portland, Oregon); (c) The Milk News (Chi-
cago) ; (d) Dairymen's Price Reporter (Youngstown, Ohio) ; (c) New England
Dairyman (Boston). Independent paper: The Milk Reporter (Suffolk, New
Jersey). Also following sources — Babcock, H. E. : " The Dairymen's League,"
Cornell Countryman, March, 1919; National Milk Producers Federation
(By-laws), "Marketing and Farm Credits Conference," Chicago, 1916, 430-
432; Cavert, W^. L.: "Milk Distribution in Minneapolis and St. Paul," yni.
of Minn. Studies in the Marketing of Farm Products, No. 4, Feb., 1915, 73-87;
HoRToN, H. E.: "Marketing Whole Milk, Marketing and Farm Credits
Conference," Chicago. 1916, 401-409; Bush, Gwendell: "New York Milk
Fight" (same volume), 409-418; Kirkpatrick, K. A.: "Marketing Milk in
the Twin Cities" (same volume), 418-421; Milk Producers Federation (same
volume), 421-425; Wheeler, Wilfred: "Marketing Milk in New England,

156 MARKETING AND THE MIDDLEMAN

Marketing and Farm Credits Conference," Chicago, 1915, 141-151; Kittle,
W. J.: "Distribution of Whole Milk in Chicago" (same volume), 152-158;
Chicago Milk Producers Association ; " Marketing and Farm Credits Confer-
ence,'^ Chicago, 1913, 128-131; Report of Fair Price Milk Committee of the
City of New York and the Commission on High Cost of Living," Legislative
Document No. 29, New York, 1920; "Primary Report of Joint Committee on
Dairy Products, Livestock and Poultry," 1917 (So-called Wicks Report,
Albany, N. Y.); "Development of the Cooperative Associations Controlling
Dairy Production in the United States from 1906 to 1916," Hoard's Dairy-
man, Nov. 3, 1916. (Same, reviewed in International Review of Agricultural
Economics, Feb., 1917, 37-39); Abbott, Stanley H.: "Experience of the
Boston Cooperative Milk Producers Company with the Sherman Anti-Trust
Act, Bulletin 35, Dept. of Ag., Albany, 1912, 1127-1133; "Report of Governors'
Tri-State Milk Commission to Governors of Pennsylvania, Maryland, Dela-
ware," 1917.

Also followmg publications of milk product companies: "The Powder
Magazine, Syracuse, N. Y., Published by Merrell-Soule Co. Also: "The Milk
Dealer," Milwaukee, Wisconsin, The National Journal for the city milk trade:
official organ of the International Milk Dealers Association, and the Minne-
sota Milk Dealers Association.

Also following miscellaneous — Warber, G. P.: "A Study of Prices and
Quahty of Creamery Butter," Bulletin 682, U. S. D. A., July, 1918; Potts,
Roy C, and Meyer, H. F.: "Marketing Creamery Butter," Bulletin 456,
U. S. D. A., 1917; Potts, Roy C: "Marketing Practices of Wisconsin and
Minnesota Creameries," Bulletin 690, U. S. D. A., 1918; Macklin, Theodore ;
"The Marketing of Kansas Butter," Bulletin 216, Kans. Ag. Ex. Sta., 1917;
Larkin, M. Lippit: "The Butter Market," Journal of Political Economy,
Marchj 1912, 267-274; "Butter Prices from Producer to Consumer," Bulletm
164, Bureau of Labor Statistics, Washington, 1914; Hibbard, B. H., and
Erdman, H. E.: "Marketing Wisconsin Milk," Bulletin 285, Wise. Ag. Exp.
Sta., 1917; Taylor, H. C, Schoenfeld, W. A., and Wehrwein, G. S.: "The
Marketing of Wisconsin Cheese," Bulletin 231, Wise. Ag. Exp. Sta., 1913;
"Investigation and Analysis of the Production, Transportation, Inspection,
and Distribution of Milk and Cream in New England," prepared by the Boston
Chamber of Commerce, Bulletin 22, Department of Ag. of Vermont, St.
Albans, July, 1915; "British National Milk Policy," Hoard's Dair3rman, Feb.
6, 1920, 126; "Cooperative Dairymen in Vancouver," Grain Grower's Guide,
Oct. 22, 1919, 8; Holman, Chas.: "Ohio Milk Producers Jailed," American
Cooperative Journal, Sept., 1919; "Detroit Milk Situation," Michigan Farmer,
Dec. 8, 1917; Hedrick, W. O., and Anderson, A. C: "The Detroit Commis-
sion Plan of City Milk Administration," Special Bulletin 99, Michigan Ag.
CoUege, 1919.

APPENDIX

The Mail Order House. — The mail order house is an agricultural problem
for two somewhat incongruous reasons. In the first place the big honest mail
Drder house renders the farmer a big service by bringing to his mailbox or to
his nearest freight depot, a standard set of goods at a fair cash price. It also,
however, by this same service, is a competitor of the nearby village merchants,
and this competition may sap the life of the country town. And the country
town is the one strong element in raising land values, bringing to the isolated
farmer the services of doctors, dentists, bankers, merchants, and others, and
adding in innumerable ways to the fullness of farm Hfe.

This is not the proper place to enter into a prolonged discussion of the
merits and demerits of a mail order house. There is one way, at least, to
meet the situation, fair to both sides. It is illustrated by the case of the house-
wife who made out her grocery order, amounting to $50.12, from the latest

APPENDIX 157

price list of a great mail order house. She took this list to the local grocer who
studied it carefully and then either dupHcated or improved upon every item
hsted thereon, and filled the order for $48.12 in cash. He met the mail order
problem successfully.

" Eliminating the Middleman." — (Address by W. B. Liverance, before the
20th Convention of National Creamery Buttermakers Association, Milwaukee,
1917.) Speaking of the recent federation of cooperative creameries near
Grand Rapids, Michigan, Mr. Liverance said:

"The one great idea in organizing our association was, by combining the
output of our creameries and by improving the quahty, to secure better
markets for our butter. We, at the outset, had many wild theories of distrib-
uting butter direct to the consumer, of perfecting a marketing system in many
of the large cities, of eliminating the middleman completely, etc. We were
in the class of many of the impractical theorists of to-day. We worked out
schemes of house-to-house disposal of butter, of distributing butter direct
from the creamery to the retailer, and many others of similar nature. It
took us a year or better to reahze that it takes money to market butter ..."

Cutting Out the Middlemen, or SeUing Through the Middlemen. — (The
experience of the Cahfornia Almond Growers Exchange, 1918 report, p. 12.)
"The Eastern broker received 23^ per cent for his services, which consist of
the following: SoUciting orders from customers; forwarding them to the
Exchange; telegraphing when necessary; and unloading and distributing our
cars on arrival. Two and one-haK per cent is a very reasonable brokerage
for the service rendered."

CHAPTER X

COOPERATION

"Cooperation'^ in agriculture is one of those vague things
which every writer, speaker, and politician usually endorses. The
word has come to be used very loosely. It needs defining. The
word is now used in a broad and in a narrow sense. It is well at
this point to inquire into both the broader and the narrower use
of the term.

In the Broader Sense. — Cooperation is the term often used to
designate the working together for mutual benefit of the farmers,
on the one hand, and the commercial clubs of the town, the
bankers, the railroads, the big industries, etc., on the other hand.
And, in the broader sense, this is true cooperation. This meaning
can easily be illustrated.

For instance, the Binghamton Chamber of Commerce (of
Binghamton, Broome County, New York) was among the first,
if not the very first, to organize what is now known as a Farm
Bureau. When organized and financed, the Bureau represented
the Chamber of Commerce, the Delaware, Lackawanna & Western
Railroad Company, and the United States Department of Agri-
culture. The city of Binghamton and the railroad company both
frankly recognized that their welfare depended fundamentally on
the agriculture of the community. The Chamber of Commerce
stated the case plainly to the farmers, and secured their endorse-
ment, on the grounds that they would either all prosper together
or all suffer together. A county agricultural agent — a genuine
community farm expert — was employed. The Farm Bureau
department of the Chamber of Commerce proved a success far
greater than its organizers had hoped. Since its beginning in
1911 this broad experiment in cooperation of town and country
has been an example for other towns to follow.

A second example of cooperation in this broader sense is that
of the bankers of the State of Alabama with the farmers of that
section. Alabama has produced one of the greatest agricultural
leaders of the day in the person of Mrs. G. H. Mathis (Fig. 23),
an actual farmer. She advised the bankers to take more interest
in the farmer and less interest from him, to encourage the land-
lords to establish friendly and helpful relations with their tenants
158

IN THE BROADER SENSE

159

to the end that the tenants, through better farm management,
might become land owners. The Alabama bankers employed
Mrs. Mathis to give up part of her time to teach better farming
to the farmers of the State, including the landlords and the tenants,
and also the boys and girls of the farms. And hence Mrs. Mathis,
by working with the bankers and farmers, with the landlords and
tenants, is securing the harmonious working together of these
different interests, and each interest is benefited by this coopera-
tion. The bankers in other states are very active both as State
Bankers Associations and as in-
dividual bankers, in cooperating
with the farmer. The "Banker-
Farmer" is the official organ of
this broad form of cooperation.^

The cooperation of railroads
with farmers takes many forms.
All important railroads now main-
tain agricultural departments
whose chief aims are to improve
agriculture in the territory tra-
versed by the road. New plants,
new methods of cultivation, bet-
ter seed selection, rotation plans,
better grades of livestock, bet-
ter marketing methods — all
these things and many more re-
ceive attention. The late James
J. Hill, when president of the
Great Northern Railway, improved the breed of beef cattle along
his lines in North Dakota by awarding very expensive pure-bred
sires free of cost to farmers meeting certain requirements. Thus,
railroads in general, with a purpose which they frankly confess to
be selfish, aim to improve the particular type of agriculture which is
peculiar to their section. The Missouri, Kansas, and Texas Rail-
way, for instance, like other roads in the fruit belt, is educating
the farmer to grade and pack his produce in a standard marketable
container. Special trains are sent by many roads, carrying exhibits
of poultry or livestock or pure seeds or other demonstration
material, accompanied by able lecturers and demonstrators, to carry
the gospel of scientific agriculture to the farmer. And in numerous
other ways railroads are cooperating with the farmers.

1 The "Banker-Farmer" is published at Champaign, lUinois.

Fig. 23.— Mrs. G. H. Mathis, of Alabama.

160 COOPERATION

The great industrial corporations likewise cooperate widely
with the agricultural industry. The International Harvester
Company, Deere and Company, the Universal Portland Cement
Company, and many other large concerns now conduct experi-
mental farms, maintain agricultural departments,, issue literature,
furnish speakers, and in many other ways cooperate with the
farmer in bettering his financial condition.

In the same broad sense of the term cooperation, the State and
federal governments cooperate with the farmer, through the Experi-
men+ Station, Agricultural Colleges, Departments of Agriculture,
the Federal Bureau of Markets, and numerous other agencies.

Cooperation; in Narrow Sense. — As used in a narrower sense,
cooperation means that form of business organization among
farmers whose primary aim is savings and net profits. To carry
out this aim our States have very generally enacted laws providing
for the incorporation of farmers' cooperative associations. These
cooperative corporations, while all aiming at economies and
elimination of wastes, rather than at profits, fall into two general
classes: those with capital stock and those without capital stock.
The majority of States provide only for the capital stock type of
organization. A few States provide for both forms. In either
event, the true cooperative corporation must meet with one test,
namely, its ''earnings" (more correctly its savings) must be dis-
tributed to those whose business produces these earnings, and in
some fair proportion to the business done. In other words, in
case the cooperative corporation has capital stock, only a fair
interest rate must be paid to stock in the form of dividends (usually
from 6 to 8 per cent), and the balance of the net earnings, if any,
to those patrons whose business produced the earnings. It has
been customary, in many quarters, to lay down three hard-and-
fast rules or "essentials" for pure cooperation, namely: (1) One
vote for one member regardless of the amount of stock held. This
is known as the one-man-one-vote rule. (2) Distribution of earn-
ings: dividends on capital stock limited to fair interest rate;
patronage dividends on basis of business done by individual.
This is known as the patronage dividend rule. (3) Limitations
on shareholding : limited to real farmers ; limited as to amount any
one person can hold, such as, for instance, $1000 per person. If
these rules are construed strictly, then the United States affords
but very few examples of successful cooperation. In almost every
conspicuous case of success one or more of these elements is lacking.
The real test is, who shares the benefits? If the benefits (whether

PURPOSE OF COOPERATION 161

in the form of stock dividends, patronage dividends, or other
form) accrue to those who own the capital stock, and not also to
those who furnish the business, then the concern is not coopera-
tive, and if these benefits do go to those who produce the
business, then the business is cooperative, whether the other
''essentials," so called, are adhered to or not. The three best
examples of large and successful cooperation in agriculture in
North America are the United Grain Growers of Winnipeg,
the California Fruit Growers Exchange of Los Angeles, and
the Eastern Shore of Virginia Produce Exchange of Onley,
Virginia. None of these adheres strictly to the three ''rules" of
cooperation named above.

A large number of farmers' corporations which call themselves
cooperative have none of the elements of cooperation about them,
and hence are not entitled to that name. And many corporations
which begin as true cooperatives permit all their stock to drift
into the hands of two or three individuals. Such an institution
is not likely to remain long as a truly cooperative organization,
whatever the name it may bear.

Purpose of Cooperation. — Cooperation, it must be emphasized,
is for savings, not for profits. "Capitalistic" corporations, so
called, are organized for profits, and for profits only. But coopera-
tive corporations are organized to perform a service for their mem-
bers, and this service usually takes the form of economic savings.
It is not therefore in accord with the spirit of true cooperation
to organize for the purpose of making profits from non-members.
Since we now have 30,000,000 persons on farms and 70,000,000
persons not living on farms, it is evident that the consumer must
be reckoned with in forming any cooperative "combine." Other-
wise the courts will hold such a combine to be contrary to public
policy. In brief, cooperation in agriculture aims to eliminate
wastes, introduce improvements, and hence realize savings in the
various processes of production, marketing, buying, insurance,
credit, etc. Increased profits have not been taken out of the con-
sumer. The consumer is, rather, a beneficiary. Yet savings have
accrued to the farmer. Mention has already been made in this
work of the California Orange Growers, and how, by organizing
the California Fruit Growers Exchange and advertising the "Sun-
kist" brand of citrus fruits, they have been enabled to furnish the
consumer a bigger, better, and cheaper orange, with increased
profits to themselves. But these profits have accrued through
savings effected and wastes eliminated.
11

162

COOPERATION

An Example of Cooperation. — An example of successful cooper-
ation is found among the farmers of Kentucky. The farmers of
Warren County, in the territory adjacent to Bowling Green, have
been able to bring to perfection a certain variety of strawberry
known as the Aroma. But the marketing of this highly perishable
fruit proved a task beyond the powers of the ordinary farmer,
and hence under wise leadership the growers associated them-
selves together, and in 1909 incorporated the Warren County
Strawberry Growers' Association, a cooperative corporation. This
section of the Blue Grass State now has the reputation of being

Fia. 24. — Wunt-n County, Kentucky iStittwljeriy Abttociutiun, jjickiiiK the Ixiiriea. (U.S. D. A.)

the largest strawberry growing and shipping point in the world.
The fruit is shipped in attractively labeled crates. For the 1917
crop ninety carloads of crate material was contracted for in
advance. The railroad cooperated by building additional loading
sheds and new trackage, and by running special strawberry trains
of ten cars or more, to the northern markets, on regular passenger
train time. The marketing of the berries is done by the Growers'
Association, in charge of an efficient manager (Figs. 24 and 25).

The important link in the chain is the Inspection Service. All
of the fruit put out by the association is inspected before loading,
and is put up in three distinct grades. The association has adopted
a very stringent code of rules on the grading of the fruit. By thus
standardizing their product and truthfully labeling it they are
able to sell this vast cjuantity of perishable stuff by wire on the

THIS KENTUCKY EXAMPLE OF COOPERATION

163

f.o.b. basis. It may be added also that money is freely spent in
April and the early part of May in advertising widely these Ken-
tucky strawberries. Dealers are informed by advertisements in
the trade papers, and the market demand is properly cultivated by
the time the heavy car-lot movement of strawberries begins.

This Kentucky example of cooperation — carried out where the
farmers are rated as particularly individualistic — illustrates well
certain correct principles and practices in cooperation. First,
there is a specialized field where the need of cooperation is great.
A highly centralized organization is effected under wise leadership,

Fia. 25. — Grading and packing the berries for the northern market. (U. S. D. A.)

with no money worse than wasted in promoter's fees. (As coopera-
tion becomes more popular, more and more counterfeit and bogus
"cooperators'' will rush in and organize farmers for the twenty
per cent commission, more or less, which they can extract for their
*' services.") The product was standardized. That is, a certain
distinct variety and quality was developed and properly labeled.
This served as did the trademarks developed by some of our old,
reliable, honorable business firms. Cooperation in this form brings
savings to the producers through doing business on a large
scale, and at the same time gives the consumer part of the
])enefits in the form of an improved product at a lower price, as
happened in the case of the California oranges. In both cases
the wider distribution of a highly perishable product was the
underlying problem.

164

COOPERATION

Some Causes of Failure. — The strawberry growers and orange
growers have shown us some of the correct principles and practices
of cooperation. Other experiments have shown us the wrong
principles and practices. The death-rate of cooperative enter-
prises in America is entirely too high. First in the list of failures
come the cooperative stores. Most of these institutions have been
failures. Successes have been too few to point out the road to
success. The farmers' cooperative elevator, on the other hand,
seems to have run the gamut of failure, near failure, fair success
and success. The causes of failure in the farmers' elevators that

Fig. 26. — Country elevator owned by the United Grain Growers. This company operates

350 elevators like this.

have gone down may be reduced to four general weaknesses: (1)
Poor management, including lack of accounting and auditing; (2)
Competition; (3) Emigration of original stockholders; (4) Dis-
loyalty of stockholders. But these failures of the past have become
stepping stones to success for the present and future. The cooper-
ative packing house is now on trial in the United States. A con-
spicuous failure in this field occurred at La Crosse, Wisconsin.
But here promotion fees were too high for any corporation to
stand. Many bogus ''cooperative" enterprises have come to
disgrace and failure, thus casting a shadow on efforts at genuine
cooperation. Thus, the so-called Northwest Trading Company,
operating in the State of Washington chiefly, and masquerading
as a farmers' concern to ''eliminate the middlemen," fell into the

I

UNITED GRAIN GROWERS

165

hands of the federal courts, and its leaders were convicted of
criminal practices and imprisoned.

United Grain Growers. — The largest example of cooperation
among farmers in North America is that of the grain growers of
western Canada. The United Grain Growers, as their company is
called, has an annual turnover of well over a hundred million
dollars. This company, like all successful cooperatives, was the
child of necessity. Beginning in 1906 under farmer leadership,

Fig. 27. — Terminal elevator, 2,.3UU,U(MI bii>liels capacity. Operated l)y l ( :;

Growers at Fort William, on Lake Superior.

purely as a farmers' economic movement for the better and cheaper
handling of western grain, the company has now developed several
collateral lines of activity. The business of the Company, briefly
stated, is now as follows: (1) Grain commission department for
selling the grain; (2) Country elevator department which operated
343 country grain elevators (Fig. 26), 231 flour warehouses, and
181 coal sheds; (3) Livestock department, for selling livestock:
(4) Terminal elevator department, operating both owned and
leased terminal elevators and a hospital elevator '(Fig. 27) ; (5)
Cooperative supply department, for buying farm machinery and
other supplies (Figs. 28 and 29) ; (6) Export company, for hand-

166

COOPERATION

^ 9
.-a

^ Q

S-i _

i

T3 S

q 3

CO O

OS

o^

O QQ

2i w

1^

UNITED GRAIN GROWERS

167

ling the grain export business; (7) Public Press, Limited — a
printing company to print the official organ, ''The Grain Growers'
Guide," catalogs, educational and propaganda Uterature; (8)
Sawmills and timber lands in British Columbia; (9) Land depart-
ment, for selling farm land on a commission basis, offering
protection and service to both buyer and seller.

Fig. 29. — Winnipeg machinery showroom.s of the United Grain Growers.

In its form of organization this company is highly centralized,
and is therefore efficient. This centralization may be represented
in this form:

when

then

40 farmers.

6000 acres in grain.

$8000 of stock subscribed in the United Grain Growers.

United Grain Growers will erect a 30,000 bushel house (or
larger), equipped with cleaning machinery. Farmers
will own stock in the big central corporation — not in
a local company.

This company has now 35,000 shareholders, a paid-up capital
of $2,159,763.16, and a reserve fund of $1,600,000. Shares of stock
have a par value of $25, and a book value of $41.50. When first

168

COOPERATION

organized, under a Manitoba charter, shareholding was hmited
to 4 shares to one person. Under the present Dominion charter,
the hmit is 80 shares to one person.

The one-man-one-vote rule prevails. No proxy voting is
allowed. No patronage dividends have thus far been paid, surplus
earnings going into reserves and into developing collateral activi-
ties. Patronage dividends on purchases are now under considera-
tion. Patronage dividends on grain sold are forbidden by the
anti-rebate rule of the Winnipeg Grain Exchange, of which this

Company is a member.

The United Grain Growers is
an amalgamation of two central-
ized farmers' companies, the Grain
Growers Grain Company (organ-
ized in 1906 and operating chiefly
in Manitoba and Saskatchewan),
and the Alberta Farmers' Co-
operative Elevator Company
(organized in 1914, and operating
in Alberta). The amalgamation
was effected in 1917. A Board
of 12 directors, all farmers, man-
age this huge enterprise. The
same president, T. A. Crerar, has
been kept in power since 1901
(Fig. 30). The annual meeting of
stockholders is a delegate body,
the locals being represented by
duly chosen delegates. The
company pays the expenses of the delegates to insure democracy
in representation.

The reader will bear in mind that many farmers in the province
of Saskatchewan are members of the Saskatchewan' Cooperative
Elevator Company — a company competing with the United Grain
Growers — having a business very similar to that of the Winnipeg
company, and having seats in both the Winnipeg and Minne-
apolis grain exchanges. These two companies have given the
farmers a powerful voice in controlling the grain trade of the three
prairie provinces.

Success of Cooperation. — ^The friends of cooperation are satis-
fied that the movement is slowly winning success. In comparison
with Europe, this success, to be sure, is small. But Europe presents

Fig. 30.— President T. A. Crerar, United
Grain Growers, Ltd., Winnipeg.

IN SELLING

169

three very important differences in the environment of coopera-
tion: (1) In Europe farmers Uve by the graves of their ancestors,
while in the United States many neighbors come and go with each
passing year; (2) In Europe a cooperative community enjoys
unity of race, religion and language, whereas the average American
community has not unity of race, language, or religion; (3) Dire

Fig. 31. — Eastern Shore of Virginia Produce Exchange, Onley, Virginia.

necessity among the peasants of Europe have driven them into
cooperation, while in America waste and exploitation of natural
resources still prevail in most agricultural communities. It is
fair to state, however, that cooperation is a success in the following
six broad fields:

(1) Production. — In this field cooperation has registered con-
spicuous success in the cooperative creameries and cheese factories
in Wisconsin, Minnesota, and other sections. In livestock breed-
ing too, the success has been very gratifjdng.

(2) In Selling. — ^The marketing of citrus fruits and strawberries
has already been named. Another conspicuous success in this

170 COOPERATION

field is the Eastern Shore of Virginia Produce Exchange (Fig. 31).
Here the farmers in two small counties market through their
central organization as much as ten thousand carloads of produce
in a season, putting it on the market under their own inspection
and label. This enables them to make their sales largely on the
f.o.b. loading station basis, securing a wider distribution and
avoiding market gluts. Only the poor quality of produce is con-
signed, and that without the *'Red Star" label. One important
feature of the sales service is the liberal use made of the telegraph
and telephone wires in securing market information. Farmers'
cooperative organizations have also made successes in marketing
in many other fields, including the following: Egg circles, live-
stock shipping associations, potato warehouses, fruit and vegetable
organizations of various kinds, milk, and grain. The great success
of the farmers' cooperative elevator movement is discussed in the
chapter on the Grain Trade.

(3) In Buying. — Incidental to some other form of cooperation
we find buying developed successfully. Thus the Farmers' Union
of Maine sells potatoes and incidentally buys and distributes
fertilizer. The farmers' elevators sell grain, and quite generally
carry "side lines" purchased by the farmer, such as grain cleaners,
fertilizer, coal, twine, fencing and many other lines. Buying,
however, as a major operation, such as the cooperative store, has
not proved a success, but quite the contrary, up to the present.

(4) Insurance. — Farmers' mutual insurance companies, par-
ticularly hail insurance, fire insurance, and livestock insurance,
have spread widely over the country and have met with general
success.

(5) Telephone. — The farmers' telephone company is perhaps
the most widely known form of farmers' business undertaking.
Information is lacking, however, to say to what extent these cor-
porations are cooperative, and to what extent they are common
joint-stock or "capitalistic" corporations. But it is hkely that
they are not, in most cases, cooperative in the strict sense of the
term.

(6) Credit. — Cooperative credit has been indeed slow to take
root on this continent. Credit must be given to Mr. Alphonse
Desjardins of Quebec for establishing in that Canadian province
our first real cooperative credit in America, In his Caisse Populaire.
A few States in the Union have now undertaken to provide the
legal machinery for cooperative credit. It is hardly necessary to
remind the reader in passing that credit based on first mortgages

THE N. A. O. S.

171

on land — as is the case with our Federal Farm Loan Act — is land
credit and not cooperative credit. North Carolina is building up
a most promising program of success in the field of cooperative
credit, under the leadership of the State Market Director, Wm.
R. Camp (Fig. 32). The subject of credit is treated at length in
the next chapter.

Economic Significance of Cooperation. — While agricultural
cooperation in the United States is indeed small when compared
with Europe, yet it is growing greater day by day. But a very
small fraction of our total busi-
ness, measured in dollars and
cents, is carried on through co-
operative channels. But the
future is full of promise. The
states are one by one creating
State Market Bureaus, and these
Bureaus are under directors who
quite generally agree in promot-
ing sound cooperation, and put-
ting it in the hands of wise
leaders. And soon the three
thousand counties of the United
States mil each have a county
agent who will also be a pro-
moter of real cooperation in agri-
culture, and finally the United
States Department of Agriculture
has the Bureau of Markets which fiq. 32 —
through its chief, its field agents
in marketing, its various experts, and its publications, is becom-
ing a tremendous influence in favor of cooperation among farmers.
Hence the future of cooperation in agriculture seems bright
with promise.

The N. A. O. S. — The National Agricultural Organization
Society aspires to do as much for American Agriculture as Sir
Horace Plunkett's Irish Agricultural Organization Society did for
Ireland. The one real clearing-house of ideas, principles and prac-
tices in cooperative and other forms of agricultural organization
is found in the conferences on marketing and farm credits held
by this society. The published volumes of the proceedings of
these conferences contain the principal papers read, but not the
full report of debates, discussions, and round table talks. This

William R. Camp, ofthe success-
ful North Carolina Credit Union Movement.

172 COOPERATION

society works in harmony with the various voluntary and govern-
mental agencies which are seeking to promote true cooperation
in American agriculture. These meetings were interrupted by the
World War. The work of the N. A. O. S. was likewise suspended.
It remains to be proved whether such an institution will take
root on American soil.

Essentials in Cooperation. — Some of the chief factors in success-
ful cooperation are the following:

A manager who is honest, efficient, and well paid.

Ample working capital and sound financial reserves and strict
auditing.

A specialized field of operation.

A large volume of business.

Strong, centralized control.

Pooling arrangements (in most selling associations) whereby
an occasional loss is distributed.

A wider and better distribution of the produce sold.

The goal, always in mind, is to improve the quality of the
product marketed, to standardize the pack, advertise and main-
tain the label or brand, and to introduce economies and savings,
so that both consumers and producers are the beneficiaries.

Farmers organized in a cooperative association according to
the above principles are mobilized for their own protection. They
can conduct collective bargaining where they control the supply
of the product, and thus have a voice in price-making.

QUESTIONS ON THE TEXT

1. Give two definitions of cooperation.

2. Illustrate by several concrete examples the broader use of the term.

3. Distinguish between stock and non-stock corporations.

4. Give the test of a real cooperative corporation.

5. State the usual tests apphed to cooperative corporations. Give reasons

for not applving these tests strictly.

6. Show abuse of the name "cooperative."

7. What is the purpose of cooperation?

8. Show how pubhc pohcy is involved here.

9. Show how both producer and consumer may be beneficiaries of cooperation

among producers.

10. Describe the cooperative association in the strawberry district of Kentucky.

11. Show where cooperative corporations have failed, and why.

12. What is the status of cooperative packing houses?

13. What was the Northwest Trading Company?

14. Describe at length the United Grain Growers.

15. Speak of the extent of the success of cooperation. Compare with success

in Europe.

16. Comment on cooperation in these fields: production; selling; buying;

insurance; telephones; credit. What principles are illustrated by the
Eastern Shore of Virginia Produce Exchange?

REFERENCES 173

17. State the economic significance of cooperation and its future outlook.

18. What is the National Agricultural Organization Society?

19. State the essentials in successful cooperation.

QUESTIONS SUGGESTED BY THE TEXT

1. Give arguments for, and outlook for, consumers' cooperation in the

United States.

2. Secure the last annual report of some cooperative association, and analyze

its business. From this report answer the following questions: What
is the marketing cost per unit (bushel, box, dollar, etc.)? What is
spent for market news service? For advertising? How widely is the
product distributed?

REFERENCES

1. Annual Report, 1918, United Grain Growers, Winnipeg, Canada.
(Contains also Report of Committee appointed by Board of Directors to visit
the Farmers' organizations of the United States, with special reference to
cooperative trading).

2. Cooperative Societies in Finland, reported by Consul Thornwell
Haynes, Helsingfors, Daily Commerce Reports, Washington, July 19, 1919,
p. 393.

3. Jessness, O. B., and Kerr, W. H.: "Cooperative Purchasing and
Marketing Organizations Among Farmers in the United States." Bulletin
No. 547 United States Department of Agriculture, Washington, September,
1917. Contains selected hst of pubhcations on cooperative purchasing and
marketing.

4. Minnesota Farmers' Institute Annual, Cooperation Number, No. 26,
St. Paul, 1913.

5. See also printed reports of important cooperative associations, such
as California Fruit Growers' Exchange, Los Angeles; United Grain Growers,
Winnipeg. Consult also official papers issued by farmers' organizations.

6. Yearbook Department of Agriculture: 1910, Powell, G. H.: "Cooper-
ation in Handling and Marketing Fruit," 391-407; 1914, Bassett, C. E.,
MooMAW, C. W., Kerr, W. H.: "Cooperative Marketing and Financing
of Marketing Associations," 185-211; 1915, Bassett, C. E.: "Cooperative
Purchase of Farm SuppUes," 73-83; 1916, Macpherson, Hector; Kerr,
W. H.: "A Federated Cooperative Cheese Manufacturing and Marketing
Association," 145-159; 1917, Jessness and Bassett (Cooperative Marketing
—Where— When— How?), 385-395.

7. Adams, H. B. : "History of Cooperation in the United States," Johns
Hopkins University Studies, Vol. 6, 1888.

8. International Institute of Agriculture, Rome. International Review of
Agricultural Economics. Siberia. — "Agricultural Cooperation," April, 1919,
167-185; Rmsia.—" Eggs," Sept., 1917, 7-12; "Flax," July, 1917, 14-22;
June-July, 1919, 351-352; "Butter," January, 1918, 18-22. G^aHcm.—" For-
estry," Feb., 1918, 110; Ireland. — "Irish Agricultural Organization Society,"
March, 1918, 205-208; >Saxon?/.— "Twenty-fourth Year of cooperation," Jan-
uary, 1917, 1-6; Denmark.— "Abattoirs," May, 1916, 1-16; June, 1916, 1-19;
"Eggs," Dec, 1916, 11-30. Norway.— "Briei History of Agricultural Coop-
eration in Norway," Aug., 1916, 16-33; United States.—WEhD, L. D. H.:
"Cooperation in Minnesota," Feb., 1916, 12-28; March, 1916, 25-33.

9. Powell, G. Harold: "Cooperation in Agriculture," New York, 1914.

10. Coulter, John Lee: "Cooperation Among Farmers," New York,
1914.

11. "Special Report of New York Delegates on American Commission
for the Study of Agricultural Cooperation in Europe," Department of Ag.,
Albany, Bulletin 56, Feb., 1914.

CHAPTER XI

CREDIT

Debt. — "Many neighbors have sold out and quit farming,"
writes a northwestern farm woman, ''because they had to. We
wdll have to sell this fall, because we are so deep in debt — it will
nearly kill me if we have to leave the farm. I do so want to keep
my husband and children there. I don't see how I can part with
the horses. I hate the cities and am afraid of them, so I hope that
the lawmakers will believe that ours is a real need. I am 25 years
old and our children are aged 6, 4, and 2^ years. I don't belong
to the 'I Won't Works,' but would like a little pay."

This letter is one from a collection of many received from farm
women in response to an inquiry on ''How the U. S. Department
of Agriculture can better meet the needs of farm housewives?"

It illustrates in a concrete way the very disagreeable fact that
the farmer's credit problem is, in certain cases, a real one. The
letter suggests that our lawmakers "do something" to meet the
credit needs of the day.

New View of Credit. — The attitude of the public mind has
undergone a tremendous revolution on the subject of credit. About
two hundred years ago a French king said, "Credit supports
agriculture as the rope supports the hanged." In our own history
the New England idea of thrift and the teaching of Poor Richard's
Almanac were both to the effect that debt is a disgrace and must
be avoided like the plague. Hence a mortgage came to be looked
on as a disgrace, a sort of skeleton in the family closet. There
was some excuse for this attitude in the days of free land, of home-
spun clothing, of homemade tillage tools. Farming then was really
an investment of labor on free land. But now farming represents
the balanced investment of three factors of production — land,
labor, and capital. In short, agriculture is now on a capitalistic
basis. The land has a large cash value. The farm equipment has
a large cash value. Agriculture has come to be a business involving
the administration of capital. According to the 1910 census, the
average Iowa farm represented an investment in land and farm
buildings of $15,008, in farm machinery of $440, and in livestock
of $1811. In other words the Iowa farmer has a business invest-
ment of $17,259. The village merchant can no longer proudly
174

CAPITALISTIC AGRICULTURE 175

arrogate to himself the title of ''business man" and look down on
the farmer as a mere tiller of the soil.

Capitalistic Agriculture. — When agriculture in America became
a capitalistic business, there came also a new attitude towards
credit. The word ''credit" came into use in place of the old word
"debt." Debt was no longer considered a badge of dishonor, a
mark of non-prosperity, or even as something to be avoided. The
practice of the great public utility corporations, particularly the
railroads, of piling up big debts, at low rates of interest, in long
term bonds, invested in income yielding property, and with the
fixed business policy of never paying off these debts (but of re-
funding them) proved suggestive to agriculture. Why should a
railroad, for instance, keep out of debt, when it can borrow at
4 per cent and make a return of 8 per cent on this money? Evi-
dently, the more a railroad could increase its debt — provided
always the interest rate was low, the investment safe, and the
return large — the better off it would be financially. The instinct*
of the individual farmer, however, leads him to desire to own his
farm in fee simple and free from encumbrance. But for the sake
of securing the balanced investment of land, labor, and capital,
it has come to mean in many cases that the farmer must borrow.
The social significance of farm credit and a permanent agriculture
is apparently grasped by but few writers and speakers. The
country is under obligation to Dean Thomas Forsyth Hunt of
the University of California for clearly seeing this problem and
in clearly stating it to his country.^ Quoting from his remarks
on this subject we have the following excerpts:

"As long as the people in the country raise larger families than those in
the cities, and the cities continue to grow faster than the country, it follows
that in the cities every generation must be affected by the character of the
previous generation in the country.

" New York and Boston are rapidly becoming un-American cities for the
simple reason that they do not raise enough children to maintain, let alone
increase, their population. Almost exactly one-half of the people of Manhattan
are foreign-born. Less than 15 per cent have two American-born parents.
Los Angeles* has become the puritanic center of America; Boston is now the
second Dublin of the world. Hoboken does not dare to have a parade on the
Fourth of July. Unless our children occupy the country, our grandchildren
will not occupy the cities. It is the people who occupy the land who will
eventually inherit the earth ... If farms must be recapitalized at least three
times in a century; if young men are born into the world without capital to
finance them; if the permanence of society is dependent upon a rural popula-
tion, not merely because it creates wealth, but because it grows children, then
what are we going to do about it? . . . For years the savings of the people
have been used in developing railways, manufacturing plants, department

1 64 Cong. 1 Sess. Senate Doc. 239.

176 CREDIT

stores, public buildings and city streets. A large part of the development of
private corporations as well as the public improvements of cities, has been
due to the savings of the people, borrowed largely at 4 to 5 per cent. The
land-credit plan is intended to allow the savings of the people to be invested
in the land in order that a permanent agriculture may develop.

"Men in cities now conduct great enterprises, enjoy comfortable trans-
portation facilities, occupy luxurious offices, and eat in sumptuous restaurants
without having a dollar of their own money invested in these agencies except
as they may carry Ufe insurance or invest in stocks and bonds. The phenome-
nal development of the cities within recent years would have been impossible
were this not so. Farming is the one great industry remaining in which men
commonly invest their own money in order to engage in the business."

United States Studies Credit in Europe. — Rural credit became
an issue in American political life about the year 1912. In that
year President Taft addressed letters to the State Governors,
inviting them to a conference at the White House for the purpose
of discussing agricultural credit. In this letter, among other
things. President Taft said :

''For some months past, at my direction, the Department of State,
through its diplomatic officers in Europe, has been engaged in an investigation
of the agricultural credit system in operation in certain of the European
countries. Although the investigation is still under way, a prehminary report
has been submitted, together with the recommendations of Ambassador
Myron T. Herrick in connection with my proposal to adopt this system in
the United States.

"A study of these reports and of the recommendations of Ambassador
Herrick, which I am sending you, convinces me of the adaptability to American
conditions of the cooperative credit plan as set forth in the organization of
the Raiffeisen banks of Germany. The estabhshment and conduct of such
banks, however, are matters for State control. I suggest also the estabhsh-
ment of land mortgage banks . . .

"The need for the estabhshment of an adequate financial system as an
aid to the farmers of this country is now quite generally recognized.- The
governmental initiative, taken by the Department of State under instructions
issued by my direction to the diplomatic officers in Europe on March 18 last,
have been effectively supplemented by the American Bankers Association,
the Southern Commercial Congress, and by many other bodies by whom this
question has been agitated, and valuable work has been done in studying and
disseminating knowledge of those great instrumentahties which have been
created in foreign lands to extend to their agriculturists credit facilities equal
in benefits to those enjoyed by their industrial and commercial organizations.
The handicap placed upon the American farmer through the lack of such a
system, and the loss sustained by the whole citizenship of the nation because
of this failure to assist the farmers to the utmost development of our agricul-
tural resources, is readily apparent.

"The . . . farmers of the United States add each year to the national
wealth $8,400,000,000. They are doing this on a borrowed capital of
$6,040,000,000. On this sum they pay annual interest charges of $510,000,000.
Counting commissions and renewal charges, the interest rate paid by the
farmers of this country is averaged at 8]i per cent, as compared to a rate of
four and a half to three and a half per cent paid by the farmer, for instance,
of France or Germany.

"Again, the interest rate paid by the American farmer is considerably
higher than that paid by our industrial corporations, railroads or municipah-

BEGINNING OF COOPERATIVE CREDIT IN AMERICA 177

ties. Yet, I think, it will be admitted that the security offered by the farmer
on his farm lands is quite as sound as that offered by industrial corporations.
Why, then, will not the investor furnish the farmer with money at as advant-
ageous rates as he is willing to supply it to the industrial corporations? Obvi-
ously the advantages enjoyed by the industrial corporation lie in the financial
machinery at its command, which permits it to place its offer before the investor
in a more attractive and more readily negotiable form. The farmer lacks this
machinery, and, lacking it, he suffers unreasonably."

This quotation is given at length because it so clearly states
the credit problem of the United States and at the same time
suggests its solution — land mortgage credit and cooperative credit.
These principles announced by President Taft bore fruit in the
year 1916. This is the date of a new era in credit in the United
States on account of the Federal Farm Loan Act enacted then.

Long- and Short-Time Credit. — The farmer uses two kinds of
credit, long-time credit and short-time credit. The long-time
credit generally takes the form of a mortgage on real estate. The
short-time credit is commonest found in the form of a book account
at the village stores. Less frequently the farmer signs notes at
the bank. It is impossible to state the rate of interest charged on
short-time loans for the whole United States, so much do conditions
vary in different sections. In the newer sections, and in the cotton-
crop sections of the South, conditions are burdensome almost
beyond belief. Take Texas as an illustration. ''Texas debtor
farmers," says an official bulletin from the Agricultural and Me-
chanical College of that State, ''have been paying to banks 10
to 40 per cent interest per annum, or to credit merchants 10 to
60 per cent above cash prices. This credit system, either as cause
or effect, uniformly prevails with all-cotton farming, or all-wheat
farming or any other form of one-crop farming." There are parts
of the South, particularly the Delta, where the cotton crop Hen
system has produced a credit condition even worse than that
described in Texas. As the farming becomes more diversified,
especially where livestock is raised extensively, credit conditions
on short-time loans become better. In old and prosperous farming
sections the farmer is able to secure short-time loans from the
bank at the same rate as the town merchant. And in all sections
the more prosperous farmers get all the credit from local banks
that they are entitled to, and at regular banking rates.

Beginning of Cooperative Credit in America. — Alphonse Des-
jardins was the first to introduce cooperative credit on the Ameri-
can continent (Fig. 33). He began his cooperative people's bank
among the French Catholics in the province of Quebec in the year
1900. Thus he was favored at the outset with unity of race and
2

178

CREDIT

religion. At the small town of Levis he organized among laboring
men and farmers his first credit union, or ''La Caisse Populaire de
Levis" as it is called there. The success of this first experiment
caused the idea to spread throughout all French Canada, so that
in less than five years 154 similar cooperative banks had been
formed in other parishes. The total turnover in the first 16 years
was $3,519,123.84 with gross profits amounting to $107,719.05,
and a total working expense of $8,832. The working men and
farmers choose their own management, provide all the funds them-
selves, loan the money to them-
selves, and in most cases their
honor alone is the main security.
The Credit Union.— The suc-
cess with cooperative credit in
Quebec led first Massachusetts
and then other American States
to try to introduce this Canadian
system under the name of Credit
Union. But as usually happens,
the taking over of a foreign sys-
tem did not prove very successful.
Massachusetts set the example
(in 1909), being followed promptly
by eight other States, as follows:
Texas (1913), Wisconsin (1913),
New York (1914), Rhode Island
(1914), North CaroUna, Utah,
South Carolina, Oregon — all four
in 1915. As these lines are being
written (1920), Massachusetts has nearly 60 credit unions; New-
York, 40; North Carolina, 30; Rhode Island, 1; and the other
five States none. The credit unions in Massachusetts and New
York are almost wholly in cities, and hence have no significance
for agriculture. In North Carolina, however, the credit union
is largely rural, and hence constitutes agricultural cooperative
credit. For our purpose, then, we will analyze in detail the North
Carolina system.

North Carolina Method. — The first financial statement issued
by the Credit Unions of North Carolina appeared in March, 1916.
One year later a second statement was issued, making a comparison
of conditions at the two dates, and showing one year's growth.
The number of credit unions grew from 6 to 14; the membership

33. — Alphonse Desjardins, father
the People's Banks of Canada.

MYRON T. HERRICK'S CRITICISM 179

increased from 201 to 505; depositors from 29 to 146; payments
on shares from $1,132 25 to $4,327.53; deposits from $959.76 to
$3,763.40; cash in banks from $1,299.78 to $2,666.15; amount bor-
rowed from banks from $100.00 to $1,450.00; and total resources
from $2,264.89 to $11,448.31. This shows a growth in resources
of over 500 per cent in one year. The secret of the success of the
leading Credit Unions, says their Superintendent, is that they have
helped finance their members in the cooperative purchase of sup-
pHes. Emphasis should also be laid on their encouragement
of thrift.

The North Carolina Credit Union is a society with a dual
purpose, namely, to encourage savings and to utilize these savings
for productive agricultural purposes. Loans are made to members
only and for productive purposes only. Leadership in organizing
aU the early credit unions in this State came, as the law provided,
from the Division of Markets and Rural Organization of the State
Agricultural Experiment Station and Extension Service. This
explains their growth in rural communities. The funds of the
union, as seen from the financial statement (Appendix) come
from share capital, deposits, and loans from banks. The par
value of a share is usually $10, but may be higher, up to $25.
Boys and girls are permitted to pay for shares on the installment
plan at 25 cents a month, and adults at $2.50 semi-annually.
Deposits may be received from members and non-members.
Four per cent interest is paid on deposits. The rate charged bor-
rowers is 6 per cent. At the same time the rate charged by supply
stores for book credit averages 38.4 per cent. Most of the loans
made by the North Carolina credit unions have been for fertilizer.
The Superintendent of Credit Unions in that State expects to see
two very important results follow from a general introduction of
credit unions: (1) Farmers should buy supphes in large quantities
at wholesale prices; (2) If the farmer can get credit on the same
terms as the middleman, he can afford to store his products and
hold them off the market till a favorable time arrives for disposing
of them. One apparent tendency is for the Credit Union to borrow
more and more from the banks, thus acting as a mere middleman
in bujdng and selling credit.

Myron T. Herrick*s Criticism. — Very high hopes were enter-
tained by many thoughtful persons that at last the Credit Unions
had arrived to solve the problem of cooperative credit in American
agriculture. But our greatest critic in this field. Ex-ambassador
Myron T. Herrick, pronounced these various State laws, as soon

180 CREDIT

as they appeared, wrong in principle. He advocated the principle
of an association or voluntary union of persons, preserving the
equality and personal responsibility of members, on the one-man-
one- vote plan; with or without share capital; liability limited or
unlimited; shares payable in installments and withdrawable at
any time. He claims that such a plan would in the beginning
produce small results, but it would grow rapidly. The community
would finally finance itself. The three sources of loans would be
share capital, savings deposits, and occasionally borrowed funds.
This plan is very much like the Canadian system. In many
respects it resembles the North Carolina plan, particularly in that
it provides for receiving savings deposits from both members and
non-members. Deposits from non-members are forbidden in
most of the State laws. It is an interesting question for the student
investigator, why States like Wisconsin, with a model law on
credit unions, have no credit unions. Does it mean that the
present banking system furnishes the farmer all the credit he is
entitled to?

Land Credit — ^The Federal Farm Loan Act. — ^The distinction
should be borne in mind between long-time credit and short-time
credit, between land credit and cooperative credit. Both are
needed. Each supplements the other. One is needed for perma-
nent investment in the purchasing, equipment, and improvement
of farm land; the other is needed to finance the farm operations
from one harvest to another. One can be used only by the land
owner; the other can be used by the landless man or by the
insolvent farmer.

The Federal Farm Loan Act became a law July 17, 1916. It
is, in principle, self-help plus government aid in getting the system
into operation. But, once in operation, the government merely
supervises the system, but grants no State aid to it. A careful
examination of the main provisions of this epoch-marking Act
shows that the government merely ''primes the pump," but does
not furnish the money.

The Federal Farm Loan Act provides certain channels for the
farmer through which he obtains cheap money, on the long-time,
easy payment plan. It introduces the amortization principle into
agricultural finance in America. This law furnishes to the investor
on the money market a standard liquid security, in place of the
old farm mortgage, which is neither liquid nor standard, as the
old-time farm mortgage could not readily be turned into cash and
no two farm mortgages were exactly alike. Hence the general

LAND CREDIT— THE FEDERAL FARM LOAN ACT 181

investing public never familiarized themselves with them. This
new law offers to the investor a debenture known as a farm loan
bond — standard and liquid, and destined to become famihar to
every investor. Underlying the bond is the first mortgage, and
underlying the mortgage is farm land worth twice the amount of
the mortgage. Hence the farmer is put in the same financial
condition, as regards the money market, as the great industrial
corporations. Before the World War disturbed credits the farmer
was paying five per cent on his loans under this Act, and this was
the rate paid by the United States Steel Company on its bonds,
and this is the largest business corporation in the world. Fin-
ancing the World War embarrassed somewhat the country's early
administration of this Act, hence it became necessary to raise
the rate.

The machinery of this Act is very simple. To get the benefit
of cheap land credit the law provides that farmers must band
themselves together in corporations, at least ten farmers in the
group. The federal government located and established twelve
land banks, and advanced the original capital to each one, namely
$750,000. The government appointed temporary directors to
serve the system. The next move was for the farmer to make.
They incorporated their local loan associations. They applied
for loans, furnishing as security first mortgages on farm lands of
twice the value of the loans sought. These mortgages were then
deposited in the district land bank and safely placed in the vaults.
Against these five per cent mortgages the Land Bank sold 4)^ per
cent farm loan bonds, receiving a premium of one and one-eighth
for them. Customers for these bonds comprise banks, insurance
companies, savings banks, private parties, and any other investor
seeking a safe, liquid, tax-free four and one-half per cent security.
The District Land Bank thus had a profit of one-half per cent plus
any premium received — a big profit in all, considering the volume
of the business. These two provisions of the law are worthy of
note: (1) When the farmers in one district take out loans amount-
ing to two million dollars, they take control of the district Land
Bank. They choose six of the nine directors, and these six must
be actual borromng farmers. (2) When the farmers of the district
take out loans amounting to fifteen million dollars, the govern-
ment capital must all be paid back. At this writing loans greatly
in excess of this amount have already been applied for. Hence,
under this Act, the farmers are to own and operate the Land Banks.
The government, in short, is simply helping the farmer help himself.

182 CREDIT

The president appoints a board of four men, who, acting with
the Secretary of the Treasury, constitute the Federal Farm Loan
Board and exercise general supervision over the whole system.

This Act also provides that after it has been in operation one
year and it appears that a communitj^ does not have and is not
likely to have a local loan association, then the district land bank
may appoint as agent a local bank. The local bank will then
undertake to act as intermediary between the borrowing farmer
and the land bank, receiving a commission of one-half of one per
cent on the loan.

Joint Stock Land Banks. — This act also provides that private
individuals may incorporate land banks, similar in general out-
lines to the District Land Banks, and that these joint stock land
banks may loan to farmers on first mortgage security, obtaining
the necessary funds by selling on the money market farm loan
bonds, tax free. In short, the joint stock land banks secure and
administer funds, in substantially the same method as the District
Land Banks. In loaning funds, however, they deal direct with the
individual farmer in their territory. Already the number of these
joint stock land banks exceeds the number of District Land Banks.

Significance of Cheap Credit. — The Farm Loan Act has had
two marked effects, namely, it has greatly reduced the interest*
rate on farm mortgages in all newer sections of the United States ;
it has introduced the long-time, amortization plan of repayment./
The Act has been in operation too short a time to permit of exten-
sive criticism of it. Certain questions arise, however. The Act was
designed to help the needy farmer in particular. But who borrows
first — the prosperous, shrewd farmer, who sees a chance to enlarge
his holdings and buy out his unprosperous neighbor by means of a
loan under this Act? Or is it the struggling farmer who is not
classed as a good manager? Since a loan is made only on the secur-
ity of a first mortgage on land, a landless man cannot borrow. He
must first secure title to the land in order to give a first mortgage.

This Act makes the farm loan bonds tax free; it also declares
them to be ''instrumentalities of the government" — whatever that
may mean; it therefore confers special privileges on the borrowers.
From the social viewpoint the large and fundamental question
involved is this : Will not this law, by making borrowers a favored
class, in the end enable the already prosperous land owner to be
more prosperous and buy more land at the expense of the so-called
poor farmer? Poor men have poor ways, says the old proverb.
Probably no law can make them richer.

THE FEDERAL RESERVE SYSTEM AND AGRICULTURE 183

Again, ''cheap money means dear land," just as "dear money"
ha&' meant '' cheap land " in the West. The Act will therefore tend
to raise land values. If therefore the Act was designed to help the
landless man and the tenant get a farm with cheap money, and the
farm land becomes high in price because of the Act, it clearly
defeats its own end. But such is the paradox of cheap money.

As originally passed, the Act permitted one borrower to bor-
row but ten thousand dollars. With such a small sum, a prosperous
farmer could not, of course, buy out many weak neighbors. But
already the ''large farmers" are asking to have the loan Umit
changed to $25,000. This change would facilitate the concentra-
tion of land ownership in the hands of those who are prosperous
and successful as landowners. In fact one is tempted to ask the
brutal question : Is it possible or desirable to prevent, by legisla-
tion, the workings of the law of the survival of the fittest?

The Life Insurance Companies. — The four chief sources of loans
on farm mortgages, before the establishment of the Federal I^and
Banks, were life insurance companies, banks, mortgage companies,
and private lenders. The Farm Loan Act forced the insurance
companies to meet a new form of competition, namely, lower
interest rates and long-term, amortization-plan loans. The insur-
ance companies promptl}^ met this competition, and even, in some
cases, offered better terms than the Federal Land Banks could.
The insurance companies offered two distinct advantages: (1)
loans secured direct from the company without joining any asso-
ciation; (2) money loanable on second mortgages as well as first
mortgages. The public has the benefit of testing the two systems,
side by side.

The Federal Reserve System and Agricultiire. — The long
campaign for reforms in our commercial banking system finally
produced our Federal Reserve Bank Act. This act, with its later
amendments, provided for an elastic currency based on commercial
assets, and for the pooling and mobilizing of bank reserves. All
national banks must and all State banks may join the Federal
Reserve system. Under this act, for the first time, national banks
are permitted to loan money on farm mortgages. However, what
is doubtless far more important to agriculture is the provision
for short-time agricultural credit. Ordinary commercial borrowers
limit their loans to a period of three months. Whereas the farmer
is permitted to borrow for six months. Under this act there is
now developing that form of commercial paper known as the
Trade Acceptance.

184 CREDIT

Trade Acceptance. — The greatest reform in short time rural
credit in recent j^ears is that promised by the use of the trade
acceptance. It is the cheapest and best form of credit known and
is, it is hoped, destined to take the place of "open account" or
book credit — the most expensive form of credit known. It should
take the place of the promissory note where the term is not over
six months. The farmers' cooperative store or the individual
farmer, when buying fertihzer, feeds, seeds, agricultural machin-
ery, livestock, or other agricultural suppUes, may sign a trade
acceptance, running as long as six months if necessary. This
acceptance he will pay when due, at his bank, like a promissory
note. It is, however, far superior to the promissory note, when
the holder of it seeks to rediscount it or realize on it in paying his
own accounts, since on the face of it it shows that an actual trans-
action has taken place in productive material. A promissory note
fails to do this. In other words, here is a form of standard, Uquid
security which can be turned into money at the Reserve bank in
the large city with the maximum of safety and the minimum of
expense. Already the large farmers are using the trade accept-
ance rather than ask their local dealer to carry them. And when
trade acceptances are once used their success and popularity are
assured. Country bankers are urging their patrons to use this
credit instrument. For some psychological reason the trade accept-
ance is paid promptly at maturity, whereas a promissory note is,
in many sections, not so paid.

QUESTIONS ON THE TEXT

1. Quote the "northwestern farm woman" as to the economic conditions

of farmers.

2. Show the attitude of mind towards credit now, and formerly, in this

country.

3. Show the relation of capitalistic agriculture to credit: Size of the Iowa

farmer's investment.

4. What is the business corporation's attitude towards credit?

5. Cite Hunt's statement on the social significance of credit.

6. When did rural credit become a public question here?

7. Quote at length from President Taft. Summarize.

8. Distinguish clearly between land credit and cooperative credit.

9. Discuss our credit situation prior to 1916.

10. Explain the beginning of cooperative credit in America: Quebec; United

States (nine States with detailed account of the North CaroUna experi-
ment): Herri ck's criticism.

11. Explain at length the Federal Farm Loan Act.

12. Discuss the Joint Stock Land Bank.

13. What is the social significance of cheap credit? From the social stand-

point, point out the probabilities and possibilities of this act.

14. State four additional sources of mortgage loans, and discuss in detail

Life Insurance Companies.

REFERENCES 185

15. Explain briefly the Federal Reserve System, and in detail the Trade

acceptance,

16. On a map locate the 12 Federal Land Banks.

17. What is the average size of a loan?

18. Locate the Joint Stock Land Banks.

QUESTIONS SUGGESTED BY THE TEXT

1. Show how land laws in New Zealand, designed to help the poor, helped

the rich. Show whether it is probable or improbable that our Federal
Farm Loan Act will make the rich farmer richer and the poor farmer
poorer.

2. Examine the records of your local Farm Loan Association, and determine

the classes of borrowers, and the purposes for which they borrowed.
Show the individual benefits received. Show the social benefits (or
. injury, if any).

3. Show the possibihties and the hmitations of the North Carolina Credit

Union plan. Explain failure of credit union idea in 5 states.

4. Secure from your local banker samples of trade acceptances.

REFERENCES

1. "Agricultural Cooperation and Rural Credit in Europe, secured by
the American and United States Commissions, 1913," 63 Cong. 1 Sess. Sen.
Doc. 214, same part 2.

2. Cahill, J. R.: "Report to the Board of Agriculture and Fisheries of
an Enquiry into Agricultural Credit and Agricultural Cooperation in Germany,
with some notes on German Live-stock Insurance," London, 1913.

3. "Evolution of Credit and Banks in France." Report of National
Monetary Commission. 61 Cong. 2 Sess. Sen. Doc. 522.

4. "Federal Farm Loan Board, Washington. First Annual Report, 1918.
Annually thereafter." See also circulars issued irregularly by same Board.

5. "German Bank Inquiry, National Monetary Commission Report,"
61 Cong. 2 Sess. Sen. Doc. 407.

6. Herrick, Myron T.: "How to Finance the Farmer — Private Enter-
prise— not State aid," 64 Cong. 1 Sess. Sen. Doc. 396.

7. Banker and Farmer : Dealers in Pork and Beans. Outlook, New

York, May 2, 1917, p. 21.

8. AND Ingalls, R.: "Rural Credits — Land and Cooperative,"

New York, 1914.

9. "Miscellaneous Articles on German Banking. Report of National
Monetary Commission." 61 Cong. 2 Sess. Sen. Doc. 508.

10. MoPMAN, James B.: "The Principles of Rural Credit," New York,
1915.

11. Weir, E. A.: "Rural Credit in Western Canada." Grain Growers
Guide, Winnipeg, March 26, 1919, p. 25.

12. Wolff, Henry W.: "Cooperative Credit for the United States."
New York, 1917.

13. "People's Bank," London, 1910.

14. "Cooperation in Agriculture," London, 1914.

15. International Institute of Agriculture, Rome; International Review
of Agricultural Economics: Italy — "National Conference of Rural Banks —
Work of the Italian Federation," May, 1919. 241-250; Roumania — "Agricul-
tural credit," May, 1917, 49-63; Gmmn?/— " Landschaf t of Piosen, 1914 to
1916," Dec. 1917, 1-9. "Raiffeisen Federation of Heuwed in 1914-1915,"
Feb., 1917, 1-14; March, 1917, 1-11. Austria-Hungary — "Agricultural Credit
in Bosnia and Herzegovina," Feb., 1917, 55-67; Denmark — April, 1911, Jan.,
1913; Feb., 1914; Jan., 1916; Jan., 1917. i^i^ssm—" Popular Cooperative

186 CREDIT

credit," May, 1916, 31-46; June, 1916, 24-40; July, 1916, 14-24; "Popular
Bank of Moscow," Nov -Dec, 1918, 861-873. Uruguay— "Mortgaiges," July,
1918, 565-585; Jan., 1917; 65-70. United *Stofes—" Organization of Credit
Unions" (in 9 States, namely: Mass., N. Y., R. I., Tex., S. C, N. C, Wise,
Utah, Ore.). June-July, 1919, 356-358.

16. "Annual Reports, on Savings and Loan Associations, Land Bank of
the State of New York, and Credit Unions," Superintendent of Banks, Albany.

17. "Annual Reports, Inspector of Ohio Building and Loan Associations,"
Columbus.

18. Rosenthal, Henry S.: "Building, Loan and Savings Associations:
How to Organize and Successfully Conduct Them," Chicago, 1911, 3d edition.

19. "Annual Reports, Rural Credit Societies of Manitoba, Parhament
House," Winnipeg.

20. "Loans under Rural Credit Law of South Dakota, State Banking
Department, Pierre."

21. "Loans under Rural Credit Law of North Dakota, Monthly Report,
Bank of North Dakota, Bismarck."

APPENDIX

The Twelve Federal Land Banks. — Numbered by Districts. — 1. Springfield,
Mass. States served — Maine, Massachusetts, Vermont, New Hampshire,
Rhode Island, Connecticut, New Jersey, New York.

2. Baltimore, Md. States served — Pennsylvania, West Virginia, Mary-
land, Delaware, Virginia, District of Columbia.

3. Columbia, S. C. States served — North Carolina, South Carolina,
Georgia, Florida.

4. Louisville, Ky. States served — Indiana, Ohio, Kentucky, Tennessee.
6. New Orleans, La. States served — Louisiana, Mississippi, Alabama.

6. St. Louis, Mo. States served — IlUnois, Missouri, Arkansas.

7. St. Paul, Minn. States served — North Dakota, Minnesota, Wisconsin
Michigan.

8. Omaha, Neb. States served — Wyoming, Nebraska, South Dakota,
Iowa. ,

9. Wichita, Kansas. States served — New Mexico, Kansas, Colorado,
Oklahoma.

10. Ho iston Tex. State served — Texas.

11. Berkeley, Calif. States served — California, Nevada, Utah, Arizona.

12. Spokane, Wash. States served — Idaho, Washington, Montana,
Oregon.

Federal Land Banks. Loans Made up to February 1, 1919

Spokane $25,912,555 St. Louis $11,830,410

St. Paul 24,141,900 Louisville 10,864,000

Omaha 17,922,140 Berkeley 10,013,200

Houston 17,394,276 Columbia 8,321,090

Wichita 16,981,800 Baltimore 6,531,850

New Orleans 12,975,415 Springfield 6,225.295

Total loans, $168,213,931; number of borrowers, 71,204; average per loan $2,362.

APPENDIX

187

I

4-, S_ t^ C_ h^ S^

lOi»(^O3C0O)

MCOCO

. Cn H* i-« 05 W -^1 M

OOXJOO
COOOM

H- h- M N3 >-- N3 to N5 N) •*>• !*>■ *>• Oi en "v] H* CO Ol to t*^ CO OW 00 <J bi Cn

O50000I— ^^OH-cotOCOWOii—OiNS^COl— rf>.C005rf>.H-Cn0iM00O00
"^pipOO(:;iOOOO*k_(OjS3;<I4i>-'popp>-'Oit-'piOai0500005«000

oj io ►- bi b b -^ o <

00 '<

tOCno.
C5h3h3

>— h-i-' NO tc. OOOOiOih-rf>.tOWOO"

Orfi-i-'Ot^-O tvJO. U»OtON50005?Dh-'M!

Gobbobbbobib- kjI-bl-'H-bbbcnJ

COC^OiOOMOO- CnCnOM*>-OOC50>

b0 4>'>{^

oiopo
b>wb

OOOO

WMOi. CO 05

CnOO. 00<li-'

03pp, 00 pi P

icbb- bob

MOO- OOOO

00 'b H- 1-' 'hf^ b '^ 50 00 00 00

OC050CDIS30"^WCOi->iyi
PpMMOiOpiOiOOWp

b'tcvibibbbcnbobob

OtCrf».OOOOOi-COO

»-

coos

►-ICH-

COh-rf*.

5 o

b*Ki^b

i-'tOC!0000>*^05"<IMOiCn'^CD'^~JO;

Cn coVjto

OCDOtOh-'.

H- p -vl p <I .

k) ^ bi b CO •

COtOOOM-

00 cn rfx I— CO
^^co<^ooco

05lN3rf>.Cn^

rf>-^00 I

N)b*H-

MOO CO

bocobi

' lO M CO CO CO rf». *. tn I

,~,,^'~^lr'*^'^^^WCOCOCOC;irf».MVl<JOOi-'COhf>-COM>*>.00005H-050l
^?'5R!:;SiJ^^'*MOOO>0005CnOH-COQ>t>.^Klt-'CDOi05*'Oi^OOCO

►-pCopppoi*.p;<ipjs3Cnvi_COjt».ppis3pcDp^C;i">JMtOt;^cOCO
S2SP22^^'**^**^'''^bH-bibibbbbiaibiIf».H-bo^<ib<I--w>-'bo
OOC;iOOCnrf».rf»-i0«00C»OO«0C005OOt3i— rf»-coc;iOOocooocooi

CHAPTER XII

TRANSPORTATION

Transportation, like credit, is now one of the vital forces
in agriculture. It is part of the very life of the agricultural indus-
try. The two, transportation and agriculture, must develop
together, with equal steps, prospering together, suffering together.
The State itself would not develop in a healthy and well-balanced
manner without a concomitant development of a well-rounded
transportation system. One speaker has called the road the
foundation of the State.

We have a six-fold transportation system at the present time,
not counting the airship and the submarine. Our system, in brief,
includes transportation by ocean, rail, lake, river, canal, and wagon
road. And of these six, the one showing the highest degree of
development and progress in the United States is the railroad.

Railroads. — In the United States, as in England — the two
countries where the railroad was first and is now best developed —
the railroad began as a private institution, and so remained up to
the time of the World War. In some foreign lands, however, the
railroad is owned and operated by the government. In the
United States, when railroads were first built, the accepted eco-
nomic theory was to the effect that competition would be adequate
to govern both service and rates. It was discovered, however,
that the railroad is a natural monopoly and is therefore not gov-
erned by competition. This left to the government the alternative
of regulation or ownership. Hence, in the course of fifty or sixty
years, the government adopted the policy of regulation both of
rates and services.

Evils. — Like any other great institution, the railroads change
their business standards and practices with the changes in society
about them. In the past the most crying evils of the roads were
their rebates to favored shippers, their discriminations in freight
rates (between persons, between localities, and between commodi-
ties), and their corrupt participation in party politics. These
evils were finally eliminated or scotched, due to legislation, to the
administration of the Interstate Commerce Commission, and to
the changing sense of business honor among the railway magnates
themselves. At the present time, however, there seems to be a
188

EVILS 189

swelling chorus of discontent against the railroads. Part of this
public discontent, as of all popular dissatisfaction, is due to the
ambidextrous efforts of the ubiquitous demagog. A part is based
on real grievances in connection with the service and the rates.
Railroad rates, it may be safely assumed, will never give popular
satisfaction, no matter whether they are made higher or lower,
whether they are made under government or private ownership.
The chief grievances at the present time, so far as service is con-
cerned," have to do with two things, namely, the speed of freight
trains and the supply of cars. The serious losses in the transpor-
tation of poorly packaged freight has already been mentioned.

These two subjects have had repeated airings before commit-
tees of Congress and before State Railroad Commissions. One
illustration will serve to show the concrete situation. At a hearing
before the United States Senate Committee on Interstate Com-
merce in 1908, on the subject of Prompt Furnishing of Transpor-
tation Facilities, the largest live-stock growers in the United States
were present. Among these was Murdo Mackenzie, one of the
greatest stockmen of North and South America. Some of his
testimony ran as follows:

"I will first touch on the shortage of cars and my own experience in this
direction. A year ago last fall I ordered cars from the Fort Worth and Denver
Railroad for shipment to Kansas City, either over the Rock Island system or
the Santa Fe. I gave the railroad from two to three weeks' notice to supply
the cars, and after that time had expired, and I had my cattle gathered, they
kept me from day to day waiting for cars until two months had expired . . .
On the 15th of September, 1907, I ordered cars for shipment to Kansas City
and St. Joe, and on the 5th and 6th of October to ship from the same points
in the Pan Handle. I proceeded to gather our cattle, and after I had them
on the trail for 30 miles, I was only then informed by the railroad that I could
not get the cars. I was compelled to turn the cattle back and turn them loose
again. This was on the 18th of October. I was informed by the superintendent
of the Fort Worth and Denver that there was no hope for my getting the cars
to ship over the Rock Island or Santa Fe before the middle of December . . .
I came down to Chicago from home; I saw the Rock Island people and the
Santa Fe people. I put my case before them and asked them if they could
not, even on personal grounds, help me out. They remarked that they could
not do it; that they had more business on their own systems, a part of which
runs through Texas, than they could supply cars for; that they were not going
to supply cars to connecting roads. Now here I was, between the devil and
the deep sea, located on the Fort Worth and Denver road, that is presumably
a road engaged in interstate commerce. They publish schedules for carrying
our cattle. They refused to supply me with cars, because they did not want
to let their cars go off their own system, fearing, as they stated, that if they
did so they would not get their cars back. The Rock Island would not supply
cars to connecting roads because they had more than enough to do with their
cars on their own system. Now, what is a man going to do who is in this
kind of a business? We have to ship our cattle. We cannot walk them, we
cannot put them on the trail, as we used to in years gone past. We are com-

190 TRANSPORTATION

pelled to ship them over the roads. Are we to be compelled to wait until the
season is over, until our cattle are shrunk, so that we can not get the price
for them which they would otherwise bring? Or what are we going to do?"

Murdo Mackenzie now takes up the question of the speed of
trains. He speaks in part as follows:

"Now, I have said enough about the car supply. I want to show you
what speed- we get over the railroads. I had a shipment of cattle in June
coming from EstelHne, Texas, going up into the northwest. It took me 5^
days to get those cattle hauled 1000 miles. The first 172 miles took me 36
hours (about 5 miles an hour)."

Mr. Mackenzie then speaks of three other shipments of cattle,
which made the following speeds, respectively: 93^ miles per
hour; 7J^ miles per hour; 5^:^ miles per hour. He introduced as
evidence a letter from the Solicitor of the United States Depart-
ment of Agriculture containing further material on the average
speed of stock trains. In a group of 42 cases on one road, the
average speed was 93^ miles per hour. In a group of 24 cases on
another road the average speed maintained was 12.3 miles per
hour. Other cases ran as follows: third road (22 cases), average
speed 5.4 miles per hour; fourth road (28 cases), 10 miles; fifth
road (122 cases), average varying from 1.9 miles to 15.6 miles
per hour; sixth road (14 cases), 6.4 miles; seventh road (15 cases),
11 miles; eighth road (166 cases), 9.7 miles per hour. In seven or
eight hundred cases the average running time of stock trains was
9.4 miles per hour.

An investigation of the speed of freight trains carr3dng potatoes
in refrigeration cars from the region of the Red River of the North
to markets East and South showed that the average speed is
43i[2 miles per hom*.

Delays in freight shipments largely occur at sidings and junc-
tion points, where other trains must be met, and at the city termi-
nals, which are grossly inadequate to handle the business passing
through them. The remedy here would involve not merely the
coordination and reconstruction of city terminals, but the double
tracking of all important main lines. Improvements of this kind,
however, as well as the addition of new rolling stock involves
vast increases in capital expenditures on the part of the railroads.
In the face of this situation, it does not seem likely that railways
can make these increased outlays and at the same time lower
rates on agricultural products. What way is left, then, for the
American farmer to secure better rates and services?

Some light on this question comes to us from England, where
a similar system of private ownership prevails. The British

RAILROADS AND THE FARMER 191

farmers felt aggrieved to learn that the British railroads were
carrying large quantities of foreign eggs at lower rates than the
British farmer was paying for sending his own eggs to market.
This seemed Hke a bad case of discrimination. The individual
English farmer, with his comparatively small supply, forwarded
his eggs to market from day to day in small consignments. The
foreign eggs came in in large lots. One of the English railway com-
panies replied to the National Poultry Organization Society's
request for lower rates in this fashion:

"If you will only send us eggs in 4-ton lots, as against the
very much larger quantities we received from abroad, we will
give you a rate which will be 25 per cent lower than we get as our
share of the through rate charged to the foreigner." The offer
was declined, because the farmers were not yet ready to deliver
this volume of business. When these farmers are able to deliver
this amount of business with some certainty both as to the volume
and the regularity of delivery, they will be able to secure service
and rates on the most favorable terms possible. We have already
seen, in the case of the Warren County (Kentucky) Strawberry
Growers, that as soon as they could guarantee quantity and time
of shipment, adequate transportation service was forthcoming.

Railway Finance. — American railroads are capitalized at much
lower figures than railroads in foreign lands. Here is the situation :

American railroads are capitalized at $ 60,000 a mile

British railroads are capitalized at 275,000 a mile

French railroads are capitalized at 141,000 a mile

German railroads are capitalized at 112,000 a mile

On the other hand wages are higher in America than in foreign
lands.

Average pay of American railway employe (before the war) $668 per year

Average pay of British railway employe (before the war) . . 251 per year

Average pay of French railway employe (before the war) . . 260 per year

Average pay of German railway employe (before the war) . . 382 per year

Average pay of Austrian railway employe (before the war) . 260 per year

And the freight rates are much lower in America. Here are
the figures:

Average charge for hauling ton of freight (before the war) 100 miles:

United States $0.75

England 2.80

France 2.20

Germany 1.64

Austria 2.30

Railroads and the Farmer. — The railroads are devoting a great
deal of attention to the subject of agriculture. Their reason is
frankly a selfish one — to make more prosperity for the railroad.
The roads with a federal land grant were interested in selling this
land. These grants amounted to 115,500,000 acres. All roads

192 TRANSPORTATION

derive considerable freight traffic from agricultural products and
from products sold to the farmer. The five chief methods now
employed by the railroads in aiding agricultural progress are these:
(1) Securing new settlers; (2) Agricultural education; (3) Marketing
cooperation; (4) Supply of farm labor; (5) Forestry and land-
scape gardening.

(1) Securing New Settlers.— Many railroads now have an
official called ''immigration agent" whose duty it is to bring
settlers from the crowded sections of the United States to the
sparsely settled parts. A few decades ago settlers were brought
largely from foreign countries. Thus the Santa Fe solicited
settlers from Germany in the seventies. In Barton County,
Kansas, along this line, there were 2 persons of foreign birth in
1870; in 1880 there were 2,216 foreigners here. Similarly in Marion
County, Kansas. Here the Russian Mennonites were brought in.
In 1880 there were 2 in Marion County; in 1890 there were 3,116.
A later illustration can be given for North Dakota. The Great
Northern railroad made a systematic attempt to bring in American
farmers, opening its campaign in the State of Indiana, and making
Cando, North Dakota, the objective point of settlement. On
March 21, 1893, a party of 300 men, women and children, in a
special passenger train, left Walkerton, Indiana, for Cando,
North Dakota. The household goods of these settlers came along
in a special freight train of forty cars. It is estimated that the
movement from the central states rapidly increased in the following
years, reaching 1800 the first year, and, after some ten years,
averaging 20,000 a year.

(2) Agricultural Education. — In this line of endeavor the rail-
roads are now generally cooperating with the State and Federal
governments. For instance, instruction trains are a good example
of this form of cooperation. A ''Better Farming Special '* is sent
out by one road, including cars and coaches equipped so as to
take the best ideas of the Agricultural College to the farmers.
Certain cars are equipped with live stock, heavy horses, beef and
dairy cattle, poultry, swine, and sheep, while other cars contain
illustrative and demonstrative material relating to seed improve-
ment, identification of weeds, drainage, alfalfa, silage, insects,
dairying, poultry raising, bacteriology, etc. This is merely a
sample of the work being done by many of the railroads. With
these trains go lecturers and demonstrators. The country folk
come in many miles to attend the lecture or demonstration.
Some "Better Farming Specials" devote their whole attention

MARKETING SERVICE

193

to one topic, such as beef cattle. Railroads also employ agricul-
tural experts to visit the farms and instruct the farmers. Some
roads maintain demonstration farms, or maintain demonstration

Fig. 34. — Beans in hampers, loading not properly braced.

t iG. 35. — Cucumoers snouici not be loaded in a hamper.

plots on private farms. Prizes are given for farm products or for
live-stock production.

(3) Marketing Service. — One large railroad system employs
men experienced in produce marketing, and sends them among the
13

194 TRANSPORTATION

farmers and advises them as to how and where to sell produce.
Other roads help organize the farmers into cooperative associations
and give them instructions on packing and grading, showing the
need of the standardized pack. One of the greatest preventable
leaks in our marketing system is the loss in shipping foodstuffs in
frail and insecure containers or in containers not properly loaded.
The accompanying figures illustrate this loss (Figs. 34, 35, and 36).
(4) Supply of Farm Labor. — Some roads now cooperate with
the State departments of agriculture in supplying labor for jobs
and jobs for labor. The railroad works largely through its local

Fia. 36. — Potatoes in barrels loaded on bilge and no head liners used.

ticket agent. The local agent is in touch with the farmer, on the
one hand, and with the central office on the other. He receives
the farmer's application for hiring help; he also learns of places
on the farm for labor. The central office of the railroad collects
and classifies the applications and reports, and presents them in
quantities to the State officials.

(5) Forestry and Landscape Gardening. — One railroad has put
1,000,000 acres under systematic forestry management. Another
railroad has planted a large acreage to trees, including the follow-
ing trees: red oak, 2,067,529; locust, 1,915,235; Scotch pine,
371,711; European larch, 47,045; Norway spruce, 46,500; catalpa,
40,605; pin oak, 26,220; white pine, 14,372; black walnut, 10,885;
other species, 27,524; making a total of 4,617,626 trees. Railroads
also contribute money and services in the work of prevention of
forest fires. Landscape gardening is carried on about the railway

EXPRESS BUSINESS 195

stations of some roads, under the supervision of an expert in this
Hne. This encourages ornamental gardening in the villages and
cities along the road. Some roads maintain nurseries in the prairie
states, where young trees, fitted to the chmate, are sold at very
low prices to farmers. Farmers are encouraged to plant such
trees as will protect and beautify their farmstead.

It is to be earnestly hoped that the railroads will develop two
additional lines of cooperation with farmers in certain wide sections
of the country. (1) Crude material for road building, such as gravel,
is lacking in many sections and can only be shipped in at prohibit-
ive costs. (2) Farm labor cannot flow to the fields where needed
owing to heavy charges for passenger fare. These two situations
should be understood and adjusted by the railroad companies.

Express Business. — ^The express companies utilize all forms of
transportation. They have grown into their present position of
prominence and power by rendering a special kind of service. The
historical growth of these companies is interesting. The federal
government has published a special census report on this subject,
prepared by R. H. Snead,^ from which the following information
is gleaned.

The beginning of the express business goes back to 1839, when
one William F. Harnden, valise in hand, made four trips a week
between New York and Boston carrying valuables and small
packages for his customers. There was a demand on the part of
the public for such a service, consequently a number of small
companies were soon engaged in express business. The American
Express Company was formed in 1850; in 1854 there were formed
the United States and the Adams Express Companies. An express
company, says one writer, purchases the right of transportation
at wholesale and sells it at retail. In addition to transportation,
calling for packages, and delivery of packages, the express com-
panies now render among other services the following : issue money
orders and letters of credit; exchange foreign money; enter and
clear goods at custom houses.

"Ever on the alert to extend its business, long before the railroad reached
a new section of the country, an express company would have an estabUshed
service by means of stage or pack animals. Indeed, no more romantic or
interesting figures are to be found in the history of the West than the Pony
Express Riders, who carried letters and valuables across half a continent."

Railroad companies now furnish and haul the necessary cars
for the express business on the contract basis, the express company

^ Bureau of Census. Special Report Express Business in the United
States, 1907.

196 TRANSPORTATION

paying a per cent of its gross earnings. While there are now 34
express companies operating in the United States, only six of them
are large companies. The original investment in this business was
small. While" the six large concerns have assets of $85,613,809,
only $6,267,184 represents equipment and fixtures used in the
express business. The balance of the assets consists largely in the
investments purchased out of surplus earnings. These investments
are largely in railroads and in other express companies. The six
big companies have 90 per cent of the assets of the 34 companies.

Express rates are graduated according to weight of package
and distance carried. Since the enactment of the Federal Parcels
Post law the rates have been put on a competitive basis with the
post office.

Parcels Post. — Like the express business, the parcels post now
operates over transportation routes of all kinds. The Post Office
Department is making a campaign of publicity in order to popular-
ize and to increase the service now rendered by the parcels post.
Exhibits are held at the various State fairs. Thirty-five important
cities of the country were selected for a more thorough and inten-
sive campaign, the immediate aim of which was to foster direct
marketing between farmer and city housekeeper. The postmasters
prepare and circulate lists of producers and lists of consumers.

What service does the parcels post actually render? In one
sense it is very much like the express business, except that the
weight limit is imposed in the parcels post but not in the express
business. Both have a delivery service in cities of a size to justify
it. Both transport highly perishable commodities and the cost
is very much the same, both using a zone system. The growth
of the parcels post has been encouraging, although not up to the
high expectations of some of its enthusiastic friends. Containers,
strong, light, and cheap, have been developed by private commer-
cial concerns, thus overcoming one of the initial weaknesses of
the system. Fresh eggs may now be shipped a thousand miles by
parcels post with comparative safety. In short, the physical
difficulties of parcels post marketing have been overcome. There
remain only the business difficulties. But these have proved the
hardest to overcome. The first difficulty is the agreement on
price. The farmer's wife was selling butter at the country store
at 20 cents a pound, but wanted 50 cents a pound when sent by
parcels post to the city. Credit arrangements are also difficult
to make. The city housewife does not want to pay cash in advance
for goods she has not seen and about whose quantity, quality,

RIVER AND CANAL 197

and time of arrival she is uncertain. Neither does the farmer want
to forward goods to a stranger who may reject them or may fail
to pay for them. Parcels post marketing thus means entirely
new business habits on the part of the public who may use it.
This process will take time, much time.

Interurban Electric Lines. — Certain sections of the country,
such as that about IndianapoHs, for instance, suggest the proba-
bility of a great development of electric lines as freight and pas-
senger carriers from country to city. The initiative for such Knes
seems to come entirely from the city end. It would seem feasible
for farmers themselves to organize corporations and construct
their own lines in case their community is not already adequately
served. This form of transportation is yet in its early stages,
but is full of promise for the future.

Lake Transportation. — ^While there are numerous lakes in the
United States employed in transportation of passenger and goods,
yet these all dwarf into insignificance in comparison with the traffic
borne on the Great Lakes. There is no more important highway
of commerce in the world than the chain of northern lakes. One
aspect of this economic condition is the phenomenal growth of the
large cities situated on the shores of the Great Lakes. While
lumber, coal, and iron ore figure prominently in this lake traffic,
yet grain is one of the commodities of first importance.

A large share of our surplus grain is produced in the region
tributary to the Great Lakes. The transportation facilities of
this waterway have given better and cheaper service than is
possible by rail. A large freight vessel, loading in bulk from an
elevator in Duluth will load 300,000 bushels of wheat in three
hours. Some of the larger boats carry over 400,000 bushels.
Freight rates by water, like freight rates by rail, have tended
downward for the last forty years. The average rate on wheat
from Chicago to Buffalo by lake was, in 1901, one-fourth of what
it was in 1871. The all-rail rate on wheat, Chicago to New York,
was in 1901 only forty per cent of what it was in 1871.

In 1871 the rate on wheat per bushel by lake from Chicago to
Buffalo was 6.3 cents. In 1909 the average rate was 1.4 cents.
The water rate fluctuates from day to day, with the supply and
demand of vessels. The rail rate is about twice the average
lake rate.

River and Canal. — There is little to be said on this subject
at the present time. Once our inland boat service was an impres-
sive thing. Now these canals are almost as extinct as the stage

198 TRANSPORTATION

coach and the ox cart. The Erie Barge Canal is a disappointment.
The Ohio and Mississippi Rivers do float some commerce, but it is
mere dust in the balance compared to the traffic borne by the rail-
roads that parallel their banks. Steamboat traffic on the Missouri
River, once important, may now be pronounced dead. Aside from
a few especially favored cities, Hke Washington, St. Louis and New
Orleans, the ordinary American River city derives Uttle or no
transportation benefits from its river.

The river is a pubhc highway. Any person, even with small
capital, can enter the competition thereon. Yet the field remains
practically unoccupied, while the railroads continue to handle the
traffic. The pubHc are doubtless a little slow to take a serious
and hopeful interest in river improvement since for a long period
of years the worst ''Pork Barrel" legislation of the United States
Congress has centered about the appropriation for ''Rivers
and Harbors." Doubtless this mishandling of an important
matter has set back the cause of real river improvement a good
many years.

Good Roads. — The term "Good Roads" is now coming to be
applied to improved country highways. The implication is that
ordinary country roads are not good roads. In other words, we
are just now developing a road system which compares favorably
with the good roads of European countries. For many decades
the roads in rural America were left to the strictly local units of
government as one of their sacred "functions." In practice this
meant that roads were rarely constructed with scientific or per-
manent improvements, but were generally left in a "state of
nature." True, the owners of adjoining farms were permitted to
"work the roads" once a year in Heu of paying their so-called road
tax. This farcical performance is now happily extinct except in a
few backward and hidebound communities. With the coming of
the automobile to both city and country, the farmer and the city
dweller are both of the same opinion as to good roads, namely,
that State and national systems of highways are a necessity.
Hence to-day we have the various transcontinental highways,
such as the Lincoln Highway east and west, the Jefferson Highway
north and south, and many other great trunk highways; we have
also the federal office of good roads and a huge federal appropria-
tion to subsidize State highway systems; we have also in most of
the States a central commission or board of engineers in adminis-
trative charge of the construction and repair of public roads. Cen-
traUzed administration is bearing good fruit. Big transportation

RURAL MOTOR EXPRESS

199

costs, formerly thought of solely in connection with railroads,
are now seen to go with the local haul on the country roads (Fig.
37). An expert in transportation in the Department of Agriculture
published some statistics in 1906, comparing costs of hauling
cotton and wheat from farms to shipping point, hauling on the
railway, and the ocean haul. The average local haul of cotton —
farm to shipping point — was 11.8 miles, and cost 16 cents per 100
pounds for this haul; for wheat the average local haul was 9.4
miles, and the cost of this haul was 9 cents per 100 pounds (5.4
cents per bushel). The railway charge for hauling to seaboard
was 40 cents per 100 pounds of cotton and 20 cents per 100 pounds

Fia. 37. — Transportation by wagon road as seen in Russia.

of wheat. The ocean carry was, of course, far the cheapest. Thus
England took 3,000,000 bushels of wheat in 1905 by saihng vessel
from Puget Sound, down the west coast of America and around
Cape Horn, a voyage of 15,000 miles. The average charge for car-
rjdng wheat to England for the year, the hauls varying from 3000
to 15,000 miles, was 9 cents a bushel, or only one and two-thirds
times the cost of hauling nine miles over a country road.

Rural Motor Express. — That country roads are soon to be
important factors in transportation is now evidenced by the train
of huge motor trucks that carry freight between important urban
centers in the eastern part of the United States. The railroad is
destined to be used principally for the long haul. Motor vehicles
operating over graded and surfaced highways will be the feeders

200

TRANSPORTATION

for the railways. With a dense population the greater part of the
farm produce is consumed within the range of the short haul.

Fig. 38. — The motor truck at onion and celery farm of Hartville, Ohio, being loaded. Ship-
ments are carried to Pittsburgh, Pa.

.^'•*««Sf^;^,

Fig. 39. — Farmers at Harford County, Md., delivering milk to roadside platforms from
which it is taken to the city dairies by the farmers' cooperative trucks.

It will manifestly be economical for the motor vehicle to haul this
local produce for local consumption (Figs. 38 and 39).

OCEAN TRANSPORTATION 201

The value of good roads to the farmer is manifest in many-
ways. For instance, travelers along the famous pike in Indiana
known as the Michigan Road years ago noted the spirit of pride
farmers along this road took in the upkeep of their farmsteads.
The fences were woven wire, in contrast with the rail fences just
off the pike; the barns were painted, and usually had the farmer's
name or his farm name in big letters on the roof; the houses and
lawns showed that the esthetic sense of the farmer and farmer's
wife appreciated beauty. Farm life had become more dignified. The
social value of good roads in annihilating isolation is easy to com-
prehend, but difficult to measure. Many serious efforts have been
made to measure the economic value of good roads as a factor
in raising land values. The Federal Office of Good Roads and
Rural Engineering made surveys in eight counties in five States
for a period covering six years, 1910 to 1915 inclusive. The study
revealed the interesting fact that following the improvement in
the highways, the selling price of the adjoining land amounted to
from one to three times the cost of the improvements. These
studies were conducted in the following States: Virginia, New
York, Alabama, Mississippi, and Florida. In Franklin county.
New York, the figures seem to indicate that the change from earth,
sandy and loam roads to bituminous macadam was followed by
increases averaging $12.50 per acre, or about 30.7 per cent. The
economic value of good roads includes other factors than increased
land values, such as lessened wear and tear on vehicles, harness
and teams, increase in size of load hauled, and decrease in time
consumed in haufing.

Ocean Transportation. — At the opening of the World War in
1914 ocean transportation afforded a good example of the economic
theory of competition. In other fields of transportation govern-
ments had gradually come to set aside the competitive system as
a regulator of rates and services.

A Royal Commission in Great Britain appointed in 1909, and
the Committee on the Merchant Marine and Fisheries of the
United States House of Representatives, under House Resolution
587, passed in June, 1912, both investigated the workings of com-
petition in ocean shipping, and both reached the same conclusion.
Competition has destroyed competition. A summary of the facts
found by the United States investigators is as follows:

First — that the evils arising from former unrestricted competi-
tion in ocean carriage have driven the steamship companies to
form understandings, conferences, combinations, ''rings."

202 TRANSPORTATION

Second — that these combinations and rings have led to the
formation of great shipping trusts. These trusts control not
only the lines directly owned by them, but also control, to a great
extent, the traffic of the tramp ships, which gives them a power-
ful monopoly.

Third — that these monopolies give rise to and maintain exces-
sive and unjust rates, and by use of ''fighting ships" and by
rebates to large shippers, tend also to bring forth other and danger-
ous monopolies, monopolies in buying and monopolies in selUng.

Competition is spoken of in these words:

"Unrestricted competition, based on the survival of the fittest,
tends to restrict the development of the lines, and in the end must
result in monopoly . . . Competition in the steamship business
was regarded as the demoralization rather than the life of trade;
as the means of introducing uncertainty instead of certainty, and
inefficiency instead of efficiency." The steamship companies ad-
vanced this statement, on the same subject: ''Competition has
never established a reasonable rate nor maintained a stable rate
. . . Rate wars tend to the monopolization of trade by the larger
shippers. Unless the warring steamship factions come to some
agreement, the result is more or less of a monopoly on the part
of the most powerful carrier engaged in the conflict."

These rings gave stability to rates on high-priced freight. But
these rings did not cover heavy bulk traffic, such as grain, flour,
oil cake, cotton, and similar commodities. The "package traffic"
(the high-priced freight) constituted 22 per cent of the tonnage,
while the bulk traffic constituted 78 per cent. That is, 78 per cent
of the tonnage, unregulated by agreements, consisted mainly in
the staples of agriculture. On the staples, ocean freight rates
varied not merely from month to month, but from day to day and
from hour to hour. This introduced an element of risk, which in
turn necessarily reflected itself in the price of the commodity.
In other words, the foreign buyer or American exporter would be
forced to hedge his risk, so far as possible, by paying a lower price
for the commodity.

The situation is beyond the reach of any one nation. An
International Commerce Commission, strongly urged by Hon.
David Lubin, Delegate of the United States to the International
Institute of Agriculture at Rome, offers one feasible solution to
the problem.

The World War brought a new element into the situation,
when the United States entered the field of ocean transportation.

QUESTIONS SUGGESTED BY THE TEXT 203

But whether this activity on the part of the United States govern-
ment is to be permanent or temporary is, at the present writing,
in doubt.

The World War also caused the United States to take possession
of the railroads, and to operate them as a unit. The law provided
that this government control should cease within 21 months after
peace was declared. The government made the single dominating
principle of its operation of the road the winning of the war; con-
sequently service to private shippers was strenuously curtailed;
rates were greatly increased; costs of operation were enormously
increased by reason of wage increases. In short, the pubUc paid
more and got less. While the war was in progress the pubHc
cheerfully acquiesced in this condition on the ground that any
sacrifice was worth while so long as it contributed towards victory.
With the coming of peace, however, the public demand was irre-
sistible that the roads be returned to private ownership.

QUESTIONS ON THE TEXT

1. Show the fundamental importance of transportation.

2. Name the six elements in our transportation system.

3. What economic theory first prevailed concerning our railroads? Show

failure of this theory.

4. State the evils in connection with early railroad operations. What is

the present status?

5. What are the two main grievances now against railroads?

6. Summarize the testimony of Murdo Mackenzie.

7. Summarize conclusions as to speed of freight trains. Explain these delays.

State remedy.

8. Cite British experience.

9. Comment on railroad capitahzation and freight rates here and abroad.

10. Show relation of railroad to farmer in six important respects.

11. Name two additional activities needing attention.

12. Discuss at length the express business.

13. Show growth, success, and limitations of the Parcels Post.

14. Show status and prospects of the Interurban Electric service.

15. Comment at length on lake transportation.

16. Describe and account for status of river and canal transportation.

17. Describe in detail the Good Roads movement in this country. Compare

haulage costs on country roads, railroads, and ocean.

18. Show the Rural Motor Express situation.

19. Comment at length on value of good roads to the farmer.

20. Show how the theory of competition worked out in ocean transportation.

21 . What action, if any, should the government take as to ocean transportation?

22. Show what effects the World War had on American railway transportation.

QUESTIONS SUGGESTED BY THE TEXT

1. Prepare a chart showing the amount of federal aid to good roads allotted

to each State.

2. Would it not be as logical for a farmer to work out his school tax by teaching

in the local school house a few days, as to work out his road tax?

204 TRANSPORTATION

3. Prepare a chart showing main highways across the United States.

4. Prepare a chart showing main Rural Motor Express lines in your State.

(Consult National Automobile Chamber of Commerce, 7 East 42d Street,
New York City.)

5. What solution have you for the railroad problem in the United States?

REFERENCES

1. Andrews, Frank: ''Freight Costs and Market Values. Yearbook of
the Department of Agriculture," 1906.

2. : "Grain Movement in the Great Lakes Region." United States

Department of Agriculture, Bureau of Statistics, Bulletin 81, Washington,
Nov., 1910.

3. : "Railroads and Farming. Some Influences Affecting the

Progress of Agriculture," United States Department of Agriculture, Bureau
of Statistics, Bulletin 100; Washington, October, 1912.

4. — — — ■: "Inland Boat Service, Freight Rates on Farm Products and
Time of Transit on Inland Waterways in the United States," Bulletin 74,
United States Department of Agriculture, Washington, December, 1914.

5. "Comparison of Capital Values — Agriculture, Manufactures, and the
Railways." Bureau of Railway Economics, Bulletin 39, Washington, 1912.

6. Elliott, Howard: "Relation Between the Farmer and the Railroad."
Address at the Tri-State Grain and Stock Growers Association, Fargo, N. D.,
January 17, 1912. (Mr. Elhott was at that time president of the Northern
Pacific Railway.)

7. LuBiN, David: "Proposal for an International Conference on the
Regulation and Control of Ocean Carriage." International Institute of Agri-
culture, Rome, 1914.

8. : "Is not ocean carriage a public utility? If so should it not

be under pubhc control"? International Institute of Agriculture, Rome,
December, 1916, No. 35.

9. McPherson, Logan G.: "The Farmer, the Manufacturer and the
Railroad." North American Review, New York, November, 1907.

10. "Prompt Furnishing of Transportation FaciHties. Hearings Before
the Committee on Interstate Commerce, United States Senate," February
21 1908

11. "Railways and Agriculture," 1900-1910. Bulletin 45, Bureau of
Railway Economics, Washington, 1913.

12. Sne AD, Russell H. : "Express Business in the United States." Bureau
of the Census. Special Reports, Washington, 1907.

13. "Industrial Commission Report," Vol. 4, 5-109; Vol. 9, LXXXII,
XC, CCLXXXV.

14. Yearbook Department of Agriculture : 1899 — " Development of Trans-
portation in the U. S."; 1900 — "Influence of Transportation on Fruit Indus-
try," 561-580; 1905— "Handling of Fruit for Transportation," 349-363;
1906— "Freight Costs and Market Values," 371-387; 1908— "Cost and
Methods of Transporting Meat Animals," 227-245; 1917— "Federal Aid to
Highways," 127-139.

15. "Rural Motor Express." (See Automobile Chamber of Commerce of
the United States, New York City.)

CHAPTER XIII

INSURANCE

In the insurance of his dweUing and other farm buildings, the
farmer is in the same position as any other owner of buildings.
This risk is very commonly carried by a farmer's cooperative
insurance company, or a joint stock company, a large number of
which do business in each State and are subject to the laws and
supervision of that State.

But the growing of crops and of live stock place on the farmer
a risk peculiar to the agricultural industry. Insurance in
these fields has developed in three general forms, namely, the
joint-stock company (the ordinary corporation), the mutual
company (a cooperative enterprise), and, in recent years,
State insurance.

The joint stock companies have long occupied most of the field.
Yet discontent with this form of insurance is steadily growing
among the farmers. The chief criticism seems to be, not that
these companies have failed to pay their losses, not that they have
been unduly harsh in their methods of adjustment, but that they
have collected too large a toll from the farmer. These com-
panies reply that their charges have been fair considering the
service rendered and the coverage afforded, and that they have
collected no more 'HoU" in good years than was needed, on
business grounds, to build up a safe and adequate reserve against
the bad years.

Farmers' mutuals, coming into the field, commonly use the
assessment method of paying their losses. Where they have
tried a level premium plan, they have committed the error of
making it too low, and hence of having heavy unpaid losses in
bad years. Where the assessment plan has come into use, as it
has very widely, it often operates under two handicaps : the area
covered is too small, placing in consequence too much risk on
each member; the volume of business is small, making an over-
head expense too high. A mutual company operating over an
entire State, with risks well distributed, and having a large volume
of business, is able to carry insurance to the farmer at actual
cost, including, of course, a small overhead expense. But there
are no dividends to be declared.

205

206 INSURANCE

In recent years the demand for certain forms of State insurance,
particularly State hail insurance, has become very insistent. A
good example of this is the Saskatchewan hail insurance conducted
by the rural municipalities of that province.

Saskatchewan's Experience. — In the United States speakers
and writers in recent years paint glowing pictures of Saskatche-
wan's success with state hail insurance. The experience of this
province is therefore worthy of some attention. Saskatchewan,
justly famous for its farmers' cooperative grain elevators and for
other successful cooperative enterprises, is a prairie province,
only a small fraction of whose area is as yet under tillage. Out
of an area of 155,764,000 acres, only 2,900,000 acres are "in farms."
The area in grain is of course but a small fraction of the farm area.
Here a law was enacted in 1912 providing a system of insurance of
the standing crops of wheat, oats, barley, flax, rye, and speltz
against loss by hail. The law was revised in 1915, and again
revised in 1917. Let us first examine it before the 1917 changes
were introduced. The maximum amoimt of compensation allowed,
in case of total loss, was $5 an acre, and the minimum, 25 cents
an acre. A tax of four cents an acre on all lands (except such as
might l5e withdrawn) was levied to cover the losses. That is, a
farmer paid $6.40 to secure $800 protection on a quarter section,
i.e., 160 acres. The levy of the four cents an acre applied to all
lands except those formally withdrawn by Avritten notice prior
to June 1. One or more quarter sections could be so withdrawn
provided (a) they were fenced in and used by the owner for grazing
and hay purposes; (6) unpatented quarter sections on which the
settler has less than 25 acres under cultivation; (c) any fenced
quarter section having less than 25 acres under cultivation. Each
rural municipality enjoyed complete home rule as regards the
adoption or rejection of the scheme. A majority vote for the
scheme, at a referendum for that purpose, made it operative in
the municipality till a fiu-ther referendum should be had. The
moneys collected were paid into a common pool and administered
by a commission of three persons, two of whom represented the
municipalities, and one the government. Some statistics will
show the workings of the law during its first few years.

At the first elections after the Act, 115 rural municipalities
voted to come under it, representing 20,000,000 acres of land.
The first year's business showed losses and administration expenses
of $777,697.59, and a net revenue of $788,389.50, thus leaving a
surplus for reserve of $10,691.91.

NORTH DAKOTA STATE HAIL INSURANCE 207

The second year three municipahties withdrew and fourteen
new ones came in, making 126 municipahties under the Act.
This year the losses and expenses amounted to $543,665.62, and
the net revenues to 1896,365.26. After setting aside a tax adjust-
ment reserve fund, the surplus to reserve became $348,391.55.

The year 1915 found 127 municipahties under the Act, with
22,000,000 acres of land, of which 5,000,000 was in crops.

The year 1916 proved to be the inevitable ''bad year" that
comes to all hail insiu-ance companies. The strain was too severe
for the system to stand. The hail losses were ten per cent of the
crop, amounting to a loss of $3,600,000. The revenue was only
$1,500,000, or a httle over two million dollars short of paying
the losses.

The Saskatchewan legislature, accordingly, in 1917 made a
thorough revision of the Municipal Hail Insurance Act. As
revised, the Act provides for a system of management similar
to that of the Cooperative Elevator Company of that province.
Each municipality votes on the question of coming under the
scheme. Each municipality so voting appoints a delegate to
represent it at the annual general meeting of the organization.
At this general meeting the directors are chosen, the scheme
providing for nine in all, three to retire each year. This puts the
management completely into the hands of the municipalities.
The general meeting, in reality a legislative body on this one
economic matter, has power to make provision for a crop acre-
age assessment in addition to a flat rate if it so desires, but
such action on the part of the general meeting cannot become
operative in the current year, thus giving opportunity to any
dissatisfied municipality to withdraw from the scheme at the
intervening election.

Thus the principle of state hail insurance has not been
abandoned, or even discredited in the eyes of the Saskatchewan
farmers. Apparently they have committed themselves for good
to this principle.

North Dakota State Hail Insurance. — The State of North
Dakota may serve as a type of state experimentation with hail
insurance. In 1911 a law was passed providing for a State admin-
istered system of hail insurance, under the jurisdiction of the State
Commissioner of Agriculture and Labor. The insurance fund was
derived from a charge of 20 cents an acre on the insured crops.
Farmers were offered the opportunity in April or May, when the
local tax assessor came around to value their property, to buy hail

208

INSURANCE

insurance. The assessor was allowed 25 cents per quarter section
and 10 cents for each additional quarter to one owner for all such
insurance written by him. But this compensation proved too
small, and hence he made little effort to sell insurance. In 1913
the law was revised. The assessor was allowed a fee of one-half
cent per acre — a very substantial increase. The charge for insur-
ance was raised to 30 cents an acre. The maximum protection
allowed was $8.00 an acre. The assessor was required to collect
his fee and the entire cost of the insurance in cash from the farmer
at the time the application for insurance was written. This proved
a very serious handicap, since the farmer's habit is to pay his bills
in the fall, after the grain harvest. Consequently the number of
farmers taking out State hail insurance was small. In actual
operation this law worked as follows:

North Dakota State Hail

Insurance — 1911-1916. Maximum Protection, $8
an Acre

1911

1912

1913

1914

1915

1916

Number of policies
issued

1011

139

$26,104.64

$21,510.03
70
$3,345.08

12.9

2505
443

$64,840.37

$57,936.69
55
$4,882.02

7.5

773

91

$27,214.37

$24,890.78
88
$3,074.11

11.3

761

114

$27,771.72

$24,985.39
65
$2,876.70

10.4

580

95

$20,853.22

$18,701.34
75
$2,181.53

10.5

845

Number of losses. .

Premium receipts.

Losses paid:

Dollars

Per cent

Cost of operation. .

Per cent of operat-
ing expenses. .

257
$33,113.10

$30,161.26
38
$3,098.44

9.4

The operation of this law proved both inconvenient and costly
to the farmers. Hence the demand arose that state hail insurance
be made compulsory and a tax be levied on all agricultural land
to defray the cost. This demand involved an amendment to the
State Constitution. Such an amendment, following the devious
course provided by law, passed the 1915 legislature, the 1917
legislature, and went before the people, for their ratification, in
the regular election of 1918 and was then ratified.

Mutual Hail Insurance. — Cooperative hail insurance, or mutual
hail insurance as it is generally termed, is successfully conducted
in many parts of the country. The peculiar problems of this form
of insurance may best be seen by taking a concrete example.
For our study let us take the Alliance Hail Association of North
Dakota, which completed the twenty-eighth year of service in
1918. It is an example of a successful insurance company all of
whose officers and directors are practical farmers. It is incorpor-
ated under North Dakota laws and is subject to the strict super-

MUTUAL HAIL INSURANCE 209

vision of the State Insurance Department. It claims as its five
cardinal principles the following: fair treatment; best protection
at lowest cost; fair adjustment of losses; prompt payment; a
thorough annual audit. The nominal rate of premium is 6 per
cent of the risk. But the amount of the risk is strictly limited,
$100 being the minimum; the maximum on any one quarter section
is $800, $1600 on any one section, and $20,000 on any one town-
ship. Insurance in no case shall exceed $8.00 an acre. There is a
so-called ^'contingent Hability" of 6 per cent in addition to the
nominal 6 per cent premium. The amount of premium collected,
usually four or five per cent, depends of course on the losses for
the year. If 12 per cent should prove inadequate {i.e., ninety-six
cents an acre), the losses are to be paid pro rata and this to con-
stitute a full settlement of the insurance. No unpaid losses are
to constitute a liability in the next year's accounting. Applicants
for insurance in nearly all cases give their note due October 1.
Insurance is wTitten solely on the mutual plan, and only one
assessment can be made in any one year, and that only for the
current year's business.

Only four times in the history of this company were there
unpaid losses, these amounting to $64,428.91, or less than one-
fourth of one per cent of the risks carried. There is no ''table of
mortality" in the hail insurance business, and each company
must be its own actuary. The cost per $1000 of insurance varies
widely from year to year. Had this company met all its losses
during the first 19 years of its existence, the actual cost would
have been $46.82 per $1000. Hence a six per cent assessment,
if collected, would be more than ample. This company passed
through two crises in its history, but managed to survive both.
Only twice did the administrative expenses exceed the losses paid.
These occasions were when the business was at a low ebb and the
losses unusually light. The chief item of expense is the commission
paid to agents. And here is the paradox of the middleman again!
By experience this farmer's company has found out that the more
it pays to agents (to the ''middlemen"), the less it costs the farmer
for operating expenses. For exactly as more agents are employed
and the volume of business becomes greater, the less becomes the
portion of the total outlay going into operating expenses, and the
greater becomes the portion of outlay going into the payment of
losses. In short, the more the farmers pay these middlemen the
less the farmer's insurance costs him. Yet, according to the
theory of "direct marketing" there should be no costs at all for
14

210 INSURANCE

agents to sell insurance to the farmer, but a saving of these costs
of many tens of thousands of dollars a year. The farmers, in
theory, will come up without solicitation and apply to their own
mutual company for insurance — a two-cent letter as a reminder
being sufficient for the purpose. This theory was indeed even
tested by this Association. By taking their agents off the road,
the volume of business was contracted to near the zero point.
Few farmers took out insurance. But almost the same overhead
office expenses had to be borne by the few farmers as by the many
in the years of big business, and hence the cost of the insurance
was increased, not reduced, by this pseudo-economy.

One "economy" practised by this company is the payment of
low salaries, farmers disbelieving in the theory of high priced
officials. In 1896 salaries were cut from $2400 (for two officers)
to $2200. In 1903 the president was put on a no-salary basis.
Later, however, he was given a compensation of $1200 a year,
which covered his services as adjustor also. Stock companies,
at the same time, were paying from two to ten times as much for
the same class of men.

Collection of premiimis is slow. Farmers give their notes
without interest for the full six per cent premium, thus making
the insurance just as cheap on time as for cash. From 70 to 95
per cent of the premiums is the most that can be collected, and
much of this runs two and three years. This is perhaps one of the
weak features of a mutual company. Harsh measures of collection
would alienate the good-will of rural communities.

This company has a thorough and complete audit once a year.
For the delicate work of adjusting losses only the most competent
men are used. For several years this work was done by the presi-
dent himself, a large farmer and a man peculiarly well fitted for
the task.

Wide distribution of losses is secured by carrying insurance
in every county in the State. Agents are sent out who can speak
the various languages of the North Dakota farmers. The chief
nationalities now reached are the Germans, French, Russians,
Norwegians, Bohemians, Poles; also the Jewish farmers.

One lesson has been taught by this Association, and that is the
folly of making the assessment too low. The heavy loss is sure
to come, and it should be provided for. Under the present by-laws
(for there is no established policy yet in the matter) there is no
provision for a surplus or reserve fund, each year's receipts being
applied to the same year's expenditures only. The experience of

PRESENT TENDENCY 211

the years 1904-1908 would seem to show the wisdom of a different
course. In 1904 an '' expense fund" was provided for. This
reserve — for such it was — grew to $46,106.46 in 1906, after all
losses of that year had been paid. The 1906 losses were $38,121.24,
while the losses the next year were $312,085.72, or over eight
times as much. Consequently the reserve was wiped out, an 8
per cent assessment used up, and still an unpaid balance of losses
of over $30,000 was left over to the next year. The by-laws at
present do not permit a carryover of unpaid losses. A larger
assessment in good years and a lower assessment in bad years
would equalize the burden and promote the welfare of the Asso-
ciation. If the total volume of business could be greatly increased,
thus reducing the share of operating expenses — and if a level
premium or at least some nearer approach to a level premium of,
say, five per cent could be charged — it is likely that a big reserve
could be built up against the bad years. Future crises could then
be met. As it is, a mutual company is always walking on the
brink of dissolution.

Present Tendency. — ^The state of mind of the farmer to-day is
turning him, instinctively, to State administered, compulsory hail
insurance. He knows that his own mutual company is paying
to its ''middlemen" from 10 to 70 per cent of the total outlay for
hail insurance, but that without these middlemen he would either
have no insurance at all or much costlier insurance. Hence he is
wondering why the State cannot undertake this service. The
farmer's position has peculiar strength and force here, since the
State now has in working order complete machinery for levying
and collecting taxes and assessments of various kinds. With a
negligible increase in expense, it could collect a compulsory hail
insurance tax.

In actual practice, as this chapter shows, neither State hail
insurance nor mutual hail insiu*ance is at this stage of affairs a
complete success. But experience with State hail insurance makes
the farmer want more of it, not less of it.

Those desiring to trace in detail the vicissitudes of a mutual
hail insurance company through a period of a quarter of a
century can do so by studying the following table. The great
fluctuation in losses from year to year is a striking feature of
the table.

212

INSURANCE

A Farmers^ Mutual Hail Insurance Company. — The Alliance Hail Association

of North Dakota

Year

Number

of
policies

Amount of
insurance

Paid to
agents

Salaries

and clerk

hire

Total
adminis-
trative
expense

Losses paid
and unpaid

Acres 170,295

$ 31,578.49 paid

1891

.1812

$1,362,360
Acres 96,115

$ 3,503.22

$2,149.06

$ 8,419.27

7,383.22 unpaid
11,259.42 paid

1892

987

$ 768,922
Acres 110,853

2,105.99

2,674.66

7,142.92

0
9,778.43 paid

1893

999

$ 886,821
Acres 118,411

2,265.23

2,926.06

7,626.36

0
9,123.46 paid

1894

1140

$ 947,288
Acres 224,731

2,505.36

3,230.66

8,468.97

0
79,302.60 paid

1895

2141

$1,797,848
Acres 96,880

4,795.31

3,107.66

12,169.34

0
20,688.03 paid

1896

992

$ 775,040
Acres 56,253

i, 866.32

2,449.56

7,173.42

13,465.29 unpaid
6,955.10 paid

1897

725

$ 450,024
Acres 99,302

i, 323.65

2,215.75

5,624.29

0
29,907.83 paid

1898

1126

$ 792,416
Acres 144,830

2,675.36

2,265.56

. 7,587.26

0
51,465.68 paid

1899

1686

$1,198,640
Acres 13,738

4,586.79

2,387.75

16,914.69

36,112.69 unpaid
26,631.90 paid

1900

234

$ 109,904
Acres 43,659

434.43

2,266.66

3,615.56

0
10,338.50 paid

1901

624

$ 349,272
Acres 62,523

i, 34 7. is

i,700.06

4,591.3i

0
21,356.32 paid

1902

145

$ 500,184
Acres 46,299

3,013.48

2,141.50

7,234.90

7,467.71 unpaid
5,747.08 paid

1903

600

$ 370,392
Acres 178,317

2,129.32

i, 768. 66

6,594. is

0
17,675.59 paid

1904

1484

$ 933,755
Acres 263,488

8,087.79

2,641.96

14,611.74

0
34,257.57 paid

1905

2710

$1,828,631
Acres 382,911

16,587.73

2,389.25

23,959.55

0
38,121.24 paid

1906

4231

$3,063,289
Acres 496,669

27,415.65

3,031.55

36,778.09

0
312,085.72 paid

1907

5217

$3,973,349
Acres 394,299

35,834.69

3,982.60

49,637.40

0
101,519.68 paid

1908

4473

$3,154,394
Acres 659,651

28,231.43

4,270.75

41,389.02

0
244,546.32 paid

1909

8005

$5,277,208
Acres 539,951

47,281.92

5,541,36

63,166.12

0
141,779.57 paid

1910

4192

$2,932,924
Acres 917,595

22,415.78

5,672.75

37,417.82

0
250,118.62 paid

1911

6138

$4,793,979
Acres 473,756

32,599.72

6,636.66

51,619.38

0
127,112.72 paid

1912

3975

$2,626,115
Acres 279,795

26,661.61

6,361.65

35,977.66

0
40,138.66 paid

1913

2288

$1,565,532
Acres 470,835

19,809.23

6,383.25

33,836.69

0
89,843.85 paid

1914

3747

$2,615,513
Acres

23,054.49

7,604.83

46,083.55

0
157,807.05 paid

1915

4107

$3,327,061.62
Acres

27,732.73

7,572.98

45,653.69

0
211,719.30 paid

1916

3390

$2,890,794.10

31,242.75

8,304.89

49,818.26

0

QUESTIONS ON THE TEXT

1. Distinguish between agricultural insurance and general property insurance.

2. What grievance, if any, has the farmer against the joint stock insurance

companies? How is the farmer answered by the joint stock company?

3. What mistakes have farmers' mutuals commonly made?

4. Explain in detail the Saskatchewan experience with state hail insurance.

5. Show why such a low assessment is used in Saskatchewan.

6. Has the principle of state hail insurance been discredited in Saskatchewan?

7. Discuss in detail North Dakota's experience with state hail insurance.

REFERENCES 213

8. Point out the chief flaws in the early Dakota scheme. Why was the State

never able to pay the losses in full?

9, Explain at length the workings of the Alhance Hail Association. What

principles are illustrated by the experience of this company? What
about the use of "middlemen" in selling insurance?
10. What is the present tendency in hail insurance administration?

QUESTIONS SUGGESTED BY THE TEXT

1. Should state hail insurance of growing crops be assessed on all farm lands,

including pasture lands?

2. Is insurance a proper function of the State? If so, should it be voluntary

or compulsory?

3. Should mutual companies operate on the level premium plan or on the

assessment plan?

REFERENCES

1. For North Dakota experience with State Hail Insurance, consult
biennial reports of Commissioner of Agriculture and Labor, Bismarck, 1911
and following years.

2. Valgren, V. N.: "The Organization and Management of a Farmers'
Mutual Fire Insurance Company." Bulletin 530, United States Department
of Agriculture, Washington, May, 1917.

3. — ■ — — ■: "Prevailing Plans and Practices Among Farmers' Mutual
Fire Insurance Companies." Bulletin 786, U. S. Department of Agriculture,
1919.

4. Other publications of the U. S. Department of Agriculture: "Cotton
Warehouse Construction" (Dept. Bulletin 277); "Modern Methods of Pro-
tection Against Lightning" (Farmers' Bulletin 842); "Fire Prevention and
Fire Fighting on the Farm" (Farmers' Bulletin 904); "Farmers' Mutual Fire
Insurance" (Separate 697, Yearbook 1916).

CHAPTER XIV

COLD STORAGE

The series of inventions during the last one hundred and fifty
years giving us our modern system of mechanical refrigeration
and cold storage marks one of the great triumphs of civilization.
The preservation of food by canning was an important step.
But the present use of refrigeration in the saving of food is a
vastly more important advance. Perishable foodstuffs, fresh and
in good condition, may now be found on the tables of the poorest
of our people, foodstuffs hundreds or even thousands of miles
from the place of their production, and many weeks or months
after the time of their production. The seasonal nature of certain
farm products makes it advisable to store them in the time of
plenty that they may be consumed in the time of relative scarcity.
Thus half the fresh butter produced in the country goes to the
market during the four summer months. May, June, July, August.
The heavy producing season for eggs is the three-month period,
April, May, June, equalling the remaining nine months.

The seasonal production of foods and the consequent seasonal
ebb and flow of these goods in and out of cold storage is illustrated
by the case of butter and eggs. The graphs (Figs. 40 and 41) show
receipts and dehveries of butter and eggs in the Quincy (Massachu-
setts) Cold Storage and Warehouse Company's plant for two years.

The graphs clearly illustrate the chief function of cold storage,
namely, to equalize the distribution of seasonal products through-
out the year. In other words, cold storage acts like a reservoir,
receiving the surplus flow of goods when production exceeds
demand and a market glut is impending, and giving out these
same goods when production has fallen off and a market scarcity
is impending. The public is thus benefited by having a greater
variety of food during all seasons of the year. A second function
of cold storage, equally important, is the transportation, under
refrigeration, of perishable foods in good condition to the consumer.
Thus Imperial Valley cantaloupes reach the New England con-
sumer's table without harmful exposure to heat and without
deterioration of quality. In the same manner lemons from Italy,
oranges from California, pineapples from Hawaii, all reach the
distant consumer in a fresh condition. Similarly, mutton from
Australia and beef from Argentine are served in a wholesome con-
214

THE SEASONAL PRODUCTION OF FOODS

215

dition on the table in England. Obviously the producer benefits
by thus finding markets, and at the same time the consumer bene-

Apr Jun. Aug.
I9IO

Jan. Aug. Oct
1909
Fig. 40. — Cold storage. Cases of eggs received and delivered.

J 9//

fits by having a large volume of food reach the market without
waste or decomposition. The importance of this factor in time of

216

COLD STORAGE

great emergencies and national crises is well illustrated by our
experience in exporting fresh meat to our soldiers and to most
of our allies during the World War. Hundreds of carloads of
fresh meats were rushed from the packers to the seaboard. Owing
to freight congestion and shortage of ships, much of this meat had

Amg.
1909

/^//

Jd/0

Fig. 41. — Cold storage. Pounds of butter received and delivered.

to be held weeks and even months before going overseas. Conse-
quently it was placed in cold storage warehouses, much of it going
into the empty apple warehouses in the neighborhood of Buffalo
and Rochester, New York. Here it was kept at several degrees
below the freezing point till shipping space was available, and then
it was forwarded to its destination without waste and without dete-

EXTENT AND USE OF COLD STORAGE 217

rioration. Thus in the wartime mobilization of our industrial
resources an important place must be accorded to cold storage.

Extent and Use of Cold Storage. — It is very likely that the
United States leads the world in the number of cold storage ware-
houses (Figs. 42 and 43). There are approximately 1500 of such
warehouses in this country. There are three classes of cold storage
warehouses, namely: (1) public cold storage warehouses in which
food products are stored for hire, and the owner of the house is
not interested in the foods stored; (2) private cold storage ware-
houses, in which the owner of the house stores food products of
which he is the owner; (3) combined public and private ware-

-ss^a

Fig. 42. — Cold storage warehouse in Chicago.

houses, in which the owner stores both his own commodities and
also the commodities of others.

The chief products now subject to cold storage are the follow-
ing: apples, butter, cheese, eggs, frozen and cured meats and lards,
and fish (Figs. 44 and 45). The significance of cold storage is sug-
gested by the amount of meats in storage on June 1, 1919, namely,
1,348,000,000 pounds — a 20 days' supply for the whole country.
These meats were on their normal course from producer, through
the packing houses, to the consumers, in the following manner:

65 per cent: hams, bacon, etc. In process of curing (a

process requiring from 30 to 90 days).
10 per cent: frozen pork. To be cured later in the year.
6 per cent: lard.
19 per cent: frozen beef and lamb. In part owned by the

Government and intended for overseas shipment.

100

218

COLD STORAGE

It will be noted that the large volume of ''meats in storage"
represents in part unfinished goods in process of curing and in
part the normal working supply to assure a steady volume.

The cold storage business is grooving rapidly, not only in the
United States, but in many other countries. Indeed, so important

Fig. 43. — Packing-house products stored in a public cold storage warehouse in Chicago.

is the business to public welfare that various countries are now
promoting the building of cold storage warehouses. Thus a con-
sular agent of our government reported recently that the Swedish
State was building a refrigerating plant at Hallsberg, Sweden,
for the freezing of meat, fish, and other foods, having a capacity
of four thousand tons. The backward state of cold storage in
Russia during the World War was described by our consular gen-
eral at Moscow in these words :

INFLUENCE OF COLD STORAGE ON HEALTH 219

"Prior to the War, only the following towns were provided with slaughter-
house refrigeration plants : Tiflis, Astrakhan, Rostof-on-Don, Taganrog, Riga,
Tashkent, Minsk, Moscow, and Petrograd. Most of the big cities are still
unprovided with these facilities. The various municipal councils have become
conscious of this unsatisfactory state of affairs, and projects for building
improved slaughterhouses, provided with refrigerating plants, are now pre-
senting themselves everywhere.

"The great cities and meat-consuming centers were suppHed by trans-
porting hve cattle from the breeding districts in Siberia, the Northern Cau-
casus, and the Steppe district. Only during frosty weather were the cattle
killed and frozen by natural means at the place of production. The frozen
meat was then carried in trucks to the capitals and industrial districts in
Russia. This primitive way of preserving and transporting the meat is rather
dangerous, especially if a thaw sets in on the way. It often happens that
milUons of rubles' worth of meat is damaged owing to defective cold storage
en route and at the place of consumption.

"The war, as has been said, gave rise to endeavors to find a satisfactory
solution of the refrigeration question. The Government has decided to build
25 slaughterhouses with refrigerating plants in different districts of Russia,
and the building of 15 more is under consideration. During the war, the Gov-
ernment is to organize and run these estabUshments. After the war the move-
ment now started will necessitate the organization of several meat-trading
companies. The big Petrograd Goods Storing, Refrigerating Rooms, and
Elevator Company has already started to build large slaughterhouses with
refrigerating plants, in the town Biyisk of Siberia. This fact shows that people
have begun to realize that there is plenty of room for private enterprise in
the systematic meat trade." ^

The Canadian government several years ago enacted a law pro-
viding for subsidizing the building of public cold storage warehouses,
in the interest of both producers and consumers. The administra-
tion of the act was placed under the Minister of Agriculture.

From the public welfare standpoint, the two paramount
questions concerning cold storage are its effects on health and on
prices. A great deal of the press comment on cold storage propa-
gates the charge that goods preserved by the cold storage method
are not only inferior, but are dangerous to public health. Equally
common is the press comment that cold storage enables food
speculators to withdraw food from the market, hoard it, and force
prices up to artificially high levels. The laws of supply and
demand, it is charged, are thus set aside. Both these charges are
serious and demand attention.

Influence of Cold Storage on Health. — ^A few abuses have at
times arisen in the use of cold storage, as in the use of everything
else. But impartial investigations of the subject by eminent
chemists and hygienic experts have repeatedly brought in the
verdict that cold storage is an important and beneficial method

1 Summarized from a report made in December, 1916, by M. T. Zaro-
chentzeff, secretary of the Moscow Refrigerating Committee, and reported
in Daily Commerce Reports, Washington, June 18, 1918, p, 1064.

220

COLD STORAGE

Fig. 44. — Fresh pork in cold storage in Chicago.

Fig. 45. — Direct refrigeration system of a large cold storage warehouse in Chicago.

of food preservation. It seems to be , an established fact that
food entering into cold storage in good condition is normally
delivered from cold storage in the regular course of business in

EFFECT OF COLD STORAGE ON PRICES 221

good condition. Professor William T. Sedgwick, Massachusetts
Institute of Technology, testifying October 24, 1911, before the
hearings on cold storage, conducted by the Massachusetts Com-
mission to Investigate the Subject of Cold Storage of Food and
of Food Products kept in Cold Storage, spoke in part as follows:

"So far as I am aware, there is no evidence whatever that cold storage
is in any way prejudicial to the pubUc health. On the contrary, it is one of
the greatest aids to pubHc health, in that it makes food more abundant, and
thus enables people to keep up their strength and to avoid such diseases as
scurvy, from which the human race formerly suffered so intolerably. Various
allegations, of course, have been made touching the wholesomeness of cold
storage materials, such as that deterioration takes place during cold storage,
whereby people are poisoned or otherwise badly affected, but I have yet to
hear of a single instance of carefully investigated and well-authenticated food
poisoning due to the effects of cold storage, to deterioration during proper
cold storage. I have myself, hke everybody else, repeatedly consumed cold
storage materials, and while I am ready to admit that the flavor is sometimes
changed, and not always for the better, I do not know of any well-authenti-
cated, carefully investigated case of food poisoning, or other ill effects, due
distinctly to cold storage."

From the above testimony, and from that of other qualified
persons, the conclusion seems fair that cold storage has no ill
effects on public health.

Effect of Cold Storage on Prices. — It is charged that cold stor-
age lends itself to speculation in food products. The charge con-
tains an element of truth. Any person who buys food products
and holds them for sale at a rise in price is a speculator. This
form of speculation is both legitimate, and, as marketing is
now organized, necessary and inevitable. Back of the charge,
however, is the implication that there is too much illegitimate
speculation, meaning thereby price manipulation and cornering
of the market. Any intentional cornering of the market is to be
thoroughly condemned. But looking at the actual facts of the
case, there seem to be fewer cases of cornering the market under
our present cold storage system than there were before the days
of cold storage. A large per cent of our present cold storage is
what is known as public storage. This means that the food in
these warehouses does not belong to the owner of the warehouse
but to many competing dealers. For instance, consider the case
of the Quincy Market Cold Storage and Warehouse Company,
the largest in existence. Here the number of persons storing goods
was found to be over 3,000, when an inquiry was recently made by
the Massachusetts Cold Storage Commission. A combination in
such a case to control prices or corner the market would be difficult.

It is difficult to state definitely the effect of cold storage on

222 COLD STORAGE

the price level of food products. It is obvious that the first effect
is to make prices higher to both producer and consumer during
the three or four months of heaviest production, and to make the
prices lower to producer and consumer during the season of lightest
production. In other words, cold storage tends to equalize prices
during the year. However, there is a larger question involved,
and one not easy of statistical proof or disproof. That is, the effect
of higher prices on production. For it is evident that the producer
does find a larger market and better prices during the heavy
producing season when his surplus is disposed of for cold storage
purposes. The necessary effect seems to be that cold storage
increases production. And the total effect of this increase in
production is to lower the cost of living. The situation was
summed up by the Massachusetts Commission on the Cost of
Living, 1910, in these words (p. 179) :

"Before cold storage facilities were available, during the time of plenty,
prices were extremely low for the producer. Conversely, during the season
of scarcity prices rose rapidly and were extremely high to the consumer.
Many classes of perishable products were not procurable, even at the extreme
prices. The cold storage warehouse acts as a balance. It insures that a fair
supply of the products of plenty, produced in their seasons, shall be available
throughout the year. It materially lessens the extreme between the former
minimum and maximum selling prices, which is a decided advantage to both
producer and consumer."

Government Regulation. — Little attention was paid to the cold
storage question by legislative bodies prior to 1910. The period
of agitation concerning the high cost of Hving had succeeded by
that time in focussing public attention upon several real or imagin-
ary causes, and the cold storage was hit upon as one of these causes.
In 1911 five States passed cold storage legislation; these were
California, Delaware, Indiana, New Jersey, and New York.
Kansas alone, prior to this date, had any such legislation. These
State laws have to do with these subjects: (1) inspection of cold
storage warehouses; (2) marking or tagging of cold storage prod-
ucts; (3) limitation of the time of cold storage; (4) regulation of
the sale of cold storage goods. The public has now come to de-
mand, and the warehousemen to expect a certain amount of in-
spection in the interests of public health. Beyond this activity,
however, the wisdom of State regulation is open to serious ques-
tion. The situation was well summed up by a cold storage com-
pany of Worcester, Massachusetts, in reply to the Cold Storage
Commission of that State, in these words:

"The local board of health makes inspection of our plant, we think, about
twelve times a year. We do not think there is much need of legislation on

QUESTIONS ON THE TEXT 223

this cold storage question, as self-protection demands that goods shall not be
kept too long, and dealers are coming to reaUze more fully each year that it
does not pay to hold goods too long. If the local inspectors would inspect
the goods when they go into storage, it would do a great deal more good than
any new laws will do." ^

The federal government, through its Bureau of Markets, now
makes public twice a month the total holdings of food products
in cold storage warehouses in the United States. The aim is to
protect the public and the dealers by wholesome publicity. If
such a service could be made fairly complete as to actual volume
of goods in cold storage, and could be issued promptly it would
prove helpful. Extreme deliberation and slowness characterize
most governmental activities, and this one may or may not prove
an exception. However, wholesome publicity of this kind would
afford the dealers and the public alike, protection against undue
manipulations of the market.

Suggested Inprovements. — The need now is for more cold stor-
age, not less. The large centers of population are becoming sup-
pHed with cold storage facihties. The farmers may now well
consider the question of erecting their own cold storage near the
sources of supply. This would help them avoid market gluts in
the early marketing season — an annual occurrence under present
unorganized, primary marketing conditions. In some sections of
the country cooperative fruit packing houses are equipped with
refrigerating facilities. Cold storage at such primary points,
together with precooling of perishable foodstuffs before shipment,
would go a long way towards eliminating the leaks between pro-
ducer and consumer, leaks, it is interesting to note, that the pro-
ducer now charges up to that convenient scapegoat — the middleman.

QUESTIONS ON THE TEXT

1. Show the nature and importance of cold storage.

2. Show relation of cold storage to seasonal nature of food production.

3. Name the two chief functions of cold storage.

4. Show relation of cold storage to mobiHzation of our food resources ia

time of war.

5. Show extent and use of cold storage.

6. Classify cold storage warehouses.

7. Name the chief products entering cold storage.

8. Give amount of meat in cold storage June 1, 1919, and explain the large

volume.

9. Show the growth of cold storage in other lands: Sweden; Russia; Canada.

10. State the evidence and the conclusions as to the effect of cold storage on

health; effect on prices.

11. Define speculation, and distinguish different kinds.

12. Explain in detail the extent and value of government regulation of cold

storage. Is health inspection sufficient?

2 Report, Massachusetts Commission on Cold Storage, Boston, 1912.

224 COLD STORAGE

13. Show the activities of the United States Bureau of Markets in the matter

of cold storage.

14. Suggest improvements in our cold storage situation.

QUESTIONS SUGGESTED BY THE TEXT

1. What per cent of the apple crop goes into cold storage? Of the butter

production? Of farm egg production?

2. Prepare a chart showing total cold storage in your State, and classify

this storage as to whether public, private, or combined public and
private.

REFERENCES

1. Armour, J. OGDEN:*"The Packers, The Private Car Lines and the
People."

2. Holmes, George K.: "Cold Storage Business Features." Bulletins
93 and 101, Bureau of Statistics, United States Department of Agriculture.
Washington, 1913.

3. Bell, John O.: "Reports of Storage Holdings of Certain Food
Products," Bulletin 709, United States Department of Agriculture, Wash-
ington, 1918.

4. "Daily Commerce Reports," Washington, June 13, 1918; June 18, 1918.

5. "Reports of Massachusetts Commission on Cold Storage," Boston,
1912.

6. Cooper, Madison: "Use of Cold Storage," 61 Cong. 2 Sess. Sen. Doc.
486, pp. 4, 5.

7. Pennington, M. E.: "Changes Taking Place in Chickens in Cold
Storage." Yearbook of Agriculture, Washington, 1907, p. 206.

8. Lane, Clarence B.: "The Cold Storage of Cheese," Bulletin 83;
Bureau of Animal Industry, United States Department of Agriculture, Wash-
ington, 1906.

9. Gray, C. E.: "The Keeping of Butter Made Under Different Condi-
tions and Stored Under Different Temperatures," Bulletin 84, Bureau of
Animal Industry, United States Department of Agriculture, Washington, 1906.

10. "Report of Massachusetts Commission on the Cost of Living,"
Boston, 1910.

11. Groesbeck, B. and Urner, F. G. : "Economic Effects of Cold
Storage Upon the Average Price of Eggs." Joint Committee Cold Storage
Warehousemen and Affihated Industries, New York, 1916.

12. Jenkins, W. C: "The Truth About Cold Storage," National Maga-
zine, August, 1911.

13. "Report of Investigation Relative to Wages and Prices of Commodi-
ties, Senate Committee on Wages and Prices of Commodities," 61 Cong. 1910.

14. "Findings of the Joint Select Committee of the 78th General Assembly
of the State of Ohio, Appointed to Inquire into the Purchase, Storage, Sale
of and Traffic in Food Products, Commodities and Supplies." Columbus, 1910.

15. "Report of the Industrial Commission," Washington, 1898-1902,
Vol. 6, pp. 297-307.

16. "Report of London County Council on Ice and Cold Storage,"
London, 1904.

17. Proceedings of the National Poultry, Butter and Egg Association"
(Annual meetings).

18. "Proceedings of the American Warehousemen's Association" (Annual
meetings).

19. Franklin. I. C: "The Service of Cold Storage in the Conservation
of Foodstuffs." Yearbook Department of Agriculture, 1917, 363-371.

20. "Cold Storage in Canada," Labor Gazette (Canada), August, 1917;
also International Review of Agricultural Economics, Dec, 1917, 53-66.

CHAPTER XV

AGRICULTURAL PRICES AND VALORIZATION

There is lack of agreement among men of affairs and among
professional economists as to the factors which actually do determine
price, or the factors which should determine price. As to the factors
which should determine price there are, roughly speaking, two
schools of thinkers, those who incUne to the beUef that prices
should be artificially determined by some social authority, and those
who incline to the behef that prices should be left to the play of
economic forces of supply and demand. Price history, however,
is a more fruitful field to explore at this point than is price theory.

Do Agricultural Prices Fluctuate According to the Law of
Supply and Demand? — The demand side of the market is difficult
to trace, for the market reports now prove that the demand for
staple products is never constant. The supply side, however,
may be traced by tabulating the yields for a series of years. The
question then resolves itself into this : Do prices go up and down as
yields go down and up? Many tables of statistics have been pub-
lished on this subject, but the figures collected and published by
the federal government are doubtless most widely accepted.

The following diagram is a reproduction of one prepared by
the Bureau of Crop Estimates, and covers crop yields per acre
and crop prices for fifty years.^ This table shows strikingly that
prices tend to advance when yields decline, and to decline when
yields increase. Ten crops are combined, namely, wheat, corn,
oats, barley, rye, buckwheat, potatoes, hay, cotton, and tobacco.
Prices and yields of each crop are reduced to their percentage of
the fifty-year averages (Fig. 46.)

Are Agricultural Prices Higher in the Spring than in the Fall? —
In many popular discussions of the ''middleman" — particularly
in political campaign oratory — the middleman is pictured as
storing or ''hoarding" food supplies in the fall of the year, when
they are cheap, and selling them in the spring when prices are high.
Or, put in another way, the unhappy farmer must hurry his crop
to market as soon as harvested in the fall, in order to pay his
debts, and in this manner sells it at big sacrifice in price. Then,
the story runs, this same farmer often is forced to buy back part
of his supplies in the spring at a greatly enhanced price.

1 Monthly Crop Report, Washington, February, 1917, p. 16.
15 225

226

AGRICULTURAL PRICES AND VALORIZATION

One of those strange popular fallacies which persist through
the years is this one that the price of the important agricultural
products is lowest in the fall when the farmers sell the bulk of
the crop. An interesting study of this subject was made by an
economist, J. E. Pope, and published under the title, ''Can the
farmer realize higher prices for his crops by holding them?"^
After studying the variation in the monthly prices of important
agricultural products, the cost of storage, interest, shrinkage, loss
and damage, and other expenses of holding the crops, he concludes
that in the long run it will not pay the farmer to hold his crops.

IB

fSU /670 /87S /sgo fPffS /S9o fff9^ /9oo ^0^^' /9fo ^9/r

Fig. 46. — Trend of farm prices and yield per acre of crops combined. 100 represents the
average of 50 years, 1866-1915.

Further light is thrown on this question by an examination of
the price ranges on the Chicago market of wheat, corn and oats
for the past fifty years and more, taking into consideration the
months when lowest prices were reached and the months when
highest prices were reached. See charts in Appendix to this chapter.

Interpreting these charts, we find that in the case of wheat the
high price of the year was reached in the six months following
harvest in 24 years out of 51, and that the low price was reached
33 times in the six months following harvest. This indicates that a
farmer would do about as well by selling his wheat at or near
harvest time as by holding it for six months or over.

^Qiuirterly Journal of Economics, Vol. 30, pp. 805-831.

SOME PRICE THEORY ^27

In the case of corn during 52 years, the low price was reached
45 times in the six months following harvest, and the high price
was reached 19 times in the same six months.

In the case' of oats for 52 years, the low price was reached 37
times in the six months following harvest, and the high price was
reached 23 times in the same six months.

Some Price Theory. — ^The generally accepted principle or
theory of price is that supply and demand determine price. This
theory generally presupposes the free play of competition. There
can be no doubt that supply and demand are the basic factors in
determining price. These are the most powerful and most per-
manent factors. Supply, however, may be temporarily cornered,
or monopolized. Demand may be artificially stimulated. For
the consumers ' wants are based to a great extent on whims and
fancies rather than on any rational consideration. Custom and
bargaining power are two very significant factors in price making.
That supply and demand are the basic factors in price fixing,
however, is shown by our own economic history. Large yields
have meant lower prices, and short yields have meant higher prices.
Yet it is obvious that only within large limits do supply and
demand fix the price. It may be said that supply and demand fix
the upper and lower limit of price, and between these limits the
actual price is set by other factors. Or, to put it another way,
supply and demand stake out a prize ring, and within this ring
other factors such as custom and bargaining fight out the actual
price. Thus supply and demand may fix the price of the bean
crop to the Michigan farmer between four dollars and six dollars
a bushel. The actual price may be set at five dollars, especially
if the farmers have a strong enough organization to bargain for
themselves collectively. The power of the stronger bargainer to
influence price is well illustrated by the story of General Grant,
as told by himself, when he once bought a twenty-dollar colt for
twenty-five dollars.^

3 "There was a Mr. Ralston living within a few miles of the village, who
owned a colt which I very much wanted. My father had offered twenty dollars
for it, but Ralston wanted twenty-five. I was so anxious to have the colt, that
after the owner left I begged to be allowed to take him at the price demanded.
My father yielded, but said twenty dollars was all the horse was worth, and
told me to offer that price; if it was not accepted I was to offer twenty-two
dollars and a half, and if that would not get him, to give twenty-five dollars.
I at once mounted and went for the colt. When I got to Mr. Ralston 's house, I
said to him : ' Papa says I may offer you $20 for the colt, but if you won't take
that I am to offer you $22.50, and if you won't take that, to give $25.'. . ^ I kept
the horse till he was four years old, when he went blind, and I sold him for
$20."— Gran^, U. S., Personal Memoirs, 2 vols., New York, 1885, Vol. 1, p. 29.

228 AGRICULTURAL PRICES AND VALORIZATION

In the organized markets, such as the grain exchanges, and
cotton exchanges, the market price is set by a bargaining process,
where both sides — buyers and sellers — are fairly equal in strength
and in knowledge of the supply and demand factors. But as the
market becomes more decentralized, more local, and more unorgan-
ized, the factors of bargaining power and custom gain more import-
ance and the limits set by supply and demand spread farther
apart — the ring becomes larger.

A "Just Price." — lb is likely that the individual farmer's weak-
ness as a bargaining factor in price fixing has given rise to con-
siderable discontent and suspicion towards the market on the part
of the farmer. He feels that certain "middlemen" who merely
''handle" his product have grown wealthy. So the farmer comes
to picture to himself an economic system wherein ''big business"
has waxed fat, in sloth and ease, by exploiting the farmer and
keeping him toiling at his hard and strenuous tasks. Of course
this picture leaves out of view the many "middlemen" who have
failed in their enterprises and lost their capital, and also leaves
out that other consideration, namely, that the successful "middle-
men," surviving strong competition, do it by supplying a service.
Some destructive agitators tell the farmers to abolish "big busi-
ness." Some advisers tell them to organize, bargaining collec-
tively, and thus conduct big business themselves. It is interesting
to note in this connection that in western Canada where the farmers
have scored such a success along cooperative lines through their
United Grain Growers Company (see page 165) the consumers
are already applying to these farmers such appellations as "big
business" and "profiteers."^ It is no wonder, therefore, that in
the existing confusion concerning price making and price ethics,
more and more voices are being raised asking for governmental
interference in price fixing or actual price fixing by the govern-
ment. This demand for a "just price" is easy to comprehend.
But "letting the Government do it" is a solution which may not
be as easy and simple as many a person seems to think. Price
fixing by the government as a war measure, but not as an economic
measure, was thoroughly tested in the World War, by Germany,
Italy, France, England, United States, and other countries. The
policy was tried and adhered to, as part of the military strategy
of the warring country. As an economic measure it was admittedly
clumsy and wasteful, and did not result in "just prices" — prices

^ Debate in House of Commons, Ottawa ; See Grain Growers Guide,
Winnipeg, July 2, 1919.

JUST PRICE; FAIR PRICE; EQUILIBRIUM PRICE 229

fair to producer and consumer. Since "regulation begets regula-
tion," these price-fixing measures entailed the need of government
regulation of consumption and production. But as a war measure
they were borne cheerfully by all parties.

Price fixing affects first of all the demand side of the market,
not the supply side. Thus, fixing thepri-ce low increases consump-
tion (and decreases production, in the end); fixing prices high
lessens consumption (and increases production in the end). Thus
the Federal Food Administration in the United States, in 1917,
fixed the price of wheat at a low -figure, compared with its market
value, thus stimulating the consumption of wheat. This led to
the regulation of consumption also, and finally to an extensive
system of rationing. In other words, the control of demand led
to an attempt at control of supply, first of one product, then of
other products. Each added .regulation begot another regulation.
Regulation had extended only to the necessaries of life when the
war closed. Concerning the non-essential industries, Professor
Warren made this pertinent comment.

"The present policy of regulation of prices of necessities is working about
as follows: The cost of living is lower than it would be. This leaves more
money to spend for luxuries. The luxuries rise in price. The manufacturers
3f luxuries pay better wages. Labor is attracted from farms and other regu-
lated industries." ^

This is a good illustration of how the consimaer's clamor for
cheap food, when headed by a price fixing body, may actually
result in food scarcity by diminishing production.

Just Price; Fair Price; Equilibrium Price. — The terms "just
price" and ''fair price," have no clear-cut definition in the popular
mind. As viewed from the individual producer's viewpoint, a fair
price connotes a price rewarding him for all his costs of production.
But this cannot be the social viewpoint, since many commodities
produced do find a demand at a price much above cost of produc-
tion, and others do not find a demand strong enough to cover cost
of production. In other words, there is a class of marginal pro-
ducers, producing at cost, and there is a class of sub-marginal pro-
ducers putting the product on the market at less than cost. As
viewed by society, a just price is that price which will maintain the
industry or enterprise which society wants maintained. Does a big
city want a supply of fresh milk? Then it must pay the price which
will maintain the dairy industry — the dairy enterprises of the indi-

^ Reprint from the Proceedings of the American Farm Management
Association, December, 1917; The Food Supply, G. F. Warren, p. 18.

230 AGRICULTURAL PRICES AND VALORIZATION

vidual farmers who produce the supply needed. Obviously the
cost of production of milk varies from farm to farm, and on the
same farm from month to month and from year to year. The city
must pay, not only for the cheapest portion of milk produced, but
the whole supply, including the marginal milk, i.e., the milk pro-
duced at greatest expense. For instance, if fifty farmers can produce
milk at 10 cents a quart, and fifty farmers can produce milk at
8 cents a quart, the city must and will pay these one hundred
farmers ten cents a quart, if the supply of these 100 farmers is
consumed by the city. That is, the city will pay ten cents a quart
if it wants to keep up its customary supply of milk. A "fair
price" maintains the most expensive units of the supply; other-
wise this part of the supply is not forthcoming, and the pric^ will
rise with the fall in supply till the demanded supply is forthcoming.
One danger in price regulation by any commission is the ignoring
of the economic law of marginal production and marginal utility.
Any price control is likely to stimulate consumption and reduce
production. Price fixing on the ''average cost of production" is
a foredoomed failure, even if it be not a calamity. Thus average
cost of producing crops commonly ignore the factor of abandoned
acreage. In 1917, 31 per cent of the winter wheat acreage was
abandoned. In Nebraska, 75 per cent was abandoned.^ The
average cost of producing milk ignores that portion produced at
a loss. A Tompkins County, New York, survey contains this
statement: "Cows are the most profitable kind of live stock in
the county, but the average cow does not pay. A very large pro-
portion of the cows are being kept at a loss. The most profitable
farms are keeping cows that give 50 per cent more than the aver-
age cow." ^ Yet the city consumes the milk from the average
cow, and pays for it. And the price paid is the same as for milk
from cows above the average. In short, if milk from the "marginal
cow " is wanted, a fair price must pay for this marginal milk, and
so also for any other marginal product.

Price Fixing, in Practice. — In recent years, due to the develop-
ment of the cooperative movement among farmers and their con-
comitant advance in collective bargaining power, there have been
many cases of price fixing by representative groups of farmers
bargaining with representatives of the distributors, or with a com-

^ United States Department of Agriculture Monthly Crop Report, May,
1917, p. 38.

^ Bulletin 295. Cornell University, College of Agriculture, March 1911,
p. 564.

COLLECTIVE BARGAINING BY CALIFORNIA GROWERS 231

mission representing the consumer. Thus the Dairymen's League,
in the New York City territory, has for some years fixed the price
of Hquid milk by bargaining with the large distributors. The
Wisconsin Milk Commission of October 1917 fixed the price of
milk for the Chicago-Milwaukee district. In most efforts at
price fixing cost of production is assumed to be the correct basis
of price. But in practice it is found impossible to ignore the de-
mand side of the question.- Furthermore the cost of production
varies so much from farm to farm and from year to year on the
same farm that it is not a definite and clear-cut item. One of
the sanest discussions of this complex matter is that of Professor
H. C. Taylor of the University of Wisconsin, in his bulletin en-
titled "Price Fixing and the Cost of Farm Products." ^ In this
he develops the theory of joint costs for farm crops, showing that
certain crops have a joint cost — like gasoline and kerosene — and
that the selling price varies as the demand varies — just as the
price of gasohne in 1918 was nearly twice as high as that of kero-
sene although the two were produced at a common cost. Professor
Taylor's conclusions are that when Price Commissions attack the
problem of price fixing they ought to consider the demand side
along with the price side and thus endeavor to keep supply and
demand balanced, that is, they ought to aim at an "equilibrium
price." Ought not the farmer to ask for an "equilibrium price"
rather than a "just price"? Professor Taylor further concludes
that a Price Commission might function wisely as a mere medium
for collective bargaining. Illustrating the principle of collective
price fixing, and its relation to cost-of-production and to demand,
two examples from California may be cited.

Collective Price Fixing by California Walnut Growers.' Fixing the
"Offering Price." — "The prices of the various grades of walnuts produced
by the California growers must necessarily be based upon the law of supply
and demand. If prices are set so high as to prevent normal consumption a
carryover must necessarily result, which always tends to demoralize the market
and makes necessary a material price reduction. In order to move an entire
crop valued at from five to seven miUion doUars within a period of two months,
and to move it as fast as the goods are packed and ready for shipment and at
an absolutely uniform price, it is necessary that that price be a trifle under
what is absolutely justified by the laws of supply and demand, for if the whole-
sale purchaser cannot figure on a sUght advance in price as the season wears
on he will purchase only his minimum requirements and will not stock up
with several months' supply, but will purchase hghtly at first, forcing the
growers to store such goods as are not necessary for immediate consumption,

^Agricultural Experiment Station, University of Wisconsin, Madison,
Wisconsin. Bulletin 292, May, 1918.

^ Cahfornia Walnut Growers Association, General Report, April 30, 1918,
pp. 34, 35. f , t- , y

232 AGRICULTURAL PRICES AND VALORIZATION

and the wholesaler will buy later and usually at a lower figure. The method
now pursued in determinmg the proper prices is through advices received
from salaried agents that the Association maintains in France and Italy, the
principal countries producing walnuts which come into competition with the
California line. Advices are constantly received through these agents as to
the extent of the foreign crops, the quahty, prices being paid, whether the
harvest is early or late, etc. The Association's sales department then gathers
all possible information regarding the consumer's demand in America. Accurate
estunates of both domestic and foreign walnuts carried over in this country
are secured, the purchasing power of the nation considered, then a careful
and accurate estimate of the quantity and quality of the California crop is
made, and all of these matters laid before the board of directors about the
time the shipping campaign opens. The directors first examine and crack
samples of walnuts gathered from practically all districts, and determine the
average percentage of sound merchantable nuts that can be guaranteed to
the purchasers of Diamond Brand goods. They then consider all factors
that enter into the value of the product, and name prices at which the Asso-
ciation's various grades and brands of walnuts will be offered the trade. And
for reasons above stated, these prices must be shghtly below the fi^re justi-
fied by the actual supply and demand as long as the pohcy of sellmg at one
uniform price throughout the entire season is deemed advisable."

Collective Price Fixing by California Almond Growers.^" — "At an oppor-
tune time the Association's representatives are called together for the purpose
of considering prices.

"The latest information as to the foreign and domestic crops, as well as
general market conditions, is fully discussed.

" The result is a price that in the opinion of all will move the crop promptly.

"It must be fully understood that the price named by the Exchange is
the best estimate as to the value of the crop to be harvested. Later market,
financial and foreign conditions may materially raise or lower that value. The
Exchange maintains a salaried representative in Europe, who reports from time
to time on the European almond crop, and market conditions. Thus the
Exchange is well posted on world-wide conditions affecting our industry."

A very illuminating example of the force of demand in fixing
the price of wheat was given by the market in the early part of
the year 1917. In Canada and in the United States the farmers
were complaining that the spread in price between different
grades of wheat — one dollar and over — ^was too great and was
not justified by miUing values or any other economic conditions.
The companies dealing in wheat accordingly were blamed. Yet,
when the facts were once clearly stated, it was understood that
economic factors did account for this wide spread. The situation
was explained to the Manitoba Grain Growers Association at their
14th Annual Meeting by Robert Magill, former Chairman of the
Canadian Grain Commission, in the following succinct manner: ^^

" Russian supply is cut off. India, the Argentine, and Austraha are too far
away. Several trips could be made to America for one to the former countries.

1° Report for 1918, California Almond Growers Exchange.
" Magill, Robert, 14th Annual Meeting Manitoba Grain Growers, Bran-
don, January 10, 1917. Grain Growers Guide, Winnipeg, January 17, 1917.

VALORIZATION IN BRAZIL 233

"The Allies Wheat Commission in London do all the buying on this
continent, and have only one buyer on this side. Everything must pass
through his hands. The aUies want no wheat but that which will make the
most loaves, and the lack of tonnage makes it imperative that they take only
the higher grades.

"Thus no market is left for our grades below No. 4, and the spreads are
enormous between these and the higher. Even at that, many companies are
losing money."

Summary on Cost of Production and Price. — The present agra-
rian demand that price of farm products be fixed on the basis of
cost of production plus a reasonable profit is only in part sound;
it contains one element of weakness by overlooking the demand
side of the market. The manufacturer who knows his cost of
production aims to sell at a certain margin above this cost. How-
ever, if demand falls off he must seek to lower his cost of produc-
tion, stimulate the demand, or both. Inefficient manufacturers
are constantly failing and being weeded out ; and successful manu-
facturers do at times market a part of their production at less
than cost. The same principles hold out in agriculture. All
farmers ought to know their production costs so far as possible.
However, when consumers refuse to buy the product of the ineffi-
cient farmer at the cost-of-production-plus-a-profit basis, such a
farmer is in the same position as the inefficient manufacturer.
Cost of production, therefore, should be one fundamental factor
in price making, but not the sole factor. Otherwise an equi-
librium price is not established. And a surplus or a shortage
may result. The *'cost-of -production" price always fails when
a surplus is produced.

For governmental interference in price fixing in ordinary
times, and the results to the producer and consumer, we may
wisely turn to Brazil and the so-called Valorization of Coffee.

Valorization in Brazil. — Valorization is defined in our consular
reports as '' giving by law a fictitious or artificial value above or
apart from the normal or ordinary market value." The valoriza-
tion of coffee was a plan carried out by Sao Paulo, a State in Brazil,
to enhance the market price of coffee. The world's coffee consump-
tion is about 18,000,000 bags a year. Most of this coffee comes
from Brazil. The United States consumes 80 per cent of the Brazil
crop. An extra large crop in 1901 brought disaster to many
planters in Sao Paulo, the principal coffee growing State in Brazil.
In 1906, the date the valorization scheme was developed, another
big crop threatened to reduce prices below cost of production.
The yield was 20,000,000 bags in Sao Paulo — more ttian five-
sixths of the world's supply. Hence the plan was developed

234 AGRICULTURAL PRICES AND VALORIZATION

and carried out for having Sao Paulo enter the market, buy up
enough coffee to secure a partial corner of the market, and
thus enhance the price. At the same time an effort was made
to prevent over-production in the next few years by keeping
down any increase in acreage. A heavy tax was levied on new
acreage. In this manner, both the supply and demand factors
were to be regulated.

Past experience had taught that a big coffee crop was usually
followed by a series of short crops. Coffee is not a perishable
product, but, like wheat, may be carried over for several years.
Hence, a surplus bought by the State could be gradually worked
off in succeeding years without disturbing prices. Thus it came
about that Sao Paulo borrowed the funds^ entered the coffee
market as a buyer, and bought 10,000,000 bags, aiming by this
partial corner to maintain the domestic market price at a minimum
of 7.9 cents per pound. Before putting the scheme into operation,
the minimum price was set at 13.2 cents. Such a gigantic scheme
as this required many tens of millions of dollars to finance it.
How was this venture financed? How was this State coffee mar-
keted? What were the effects, beneficial and otherwise, of valor-
ization? These three questions need answering.

Sao Paulo experienced considerable difficulty in securing the
necessary funds to buy and hold the coffee. Temporary credits
were used at first. An arrangement was made with the Brazilian
Bank for Germany for the discount of £81,000. Next a loan of
£3,000,000 was made through J. Henry Schroeder, of London, and
the National City Bank of New York. A loan of £3,000,000 was
made by the federal government of Brazil, under contract with
N. M. Rothschild & Sons, through the agency of Eugene J. J.
HoUender, Jr. It soon became necessary for Sao Paulo to call
upon a syndicate of bankers to take charge of the transaction and
hold the coffee off the market. It was also necessary to have the
Republic of Brazil guarantee the loan. In this manner £15,000,000
was borrowed from the bankers. These powerful financiers de-
manded certain liberal terms for themselves, both in regard to
financing the plan and in the marketing of the coffee. This loan
was to run 10 years (to January 1, 1919), and to be used, "For the
completion of the measures necessary for the defense of coffee,
and for the conversion into a consolidated debt of the various
temporary operations undertaken with the same object in view."
It is interesting to note that in the preliminary arrangements con-
cerning the first £3,000,000 loan the National City Bank of New

VALORIZATION IN BRAZIL 235

York was represented by Mr. Herman Sielcken; also that when
the purchase of coffee began for the State of Sao Paulo, August
20, 1906, among the large firms through whom the purchases
were made was Grossman and Sielcken of New York City, a
partnership composed of George W. Grossman and Herman
Sielcken. The expenses of valorization came in for a great deal
of criticism. The bonds for the first £3,000,000 loan were to run
3, 4, 5, and 6 years, and bear five per cent interest, but yet they
were sold at 93. The discount amounts to $1,016,400. The bonds
were in fact paid off within three years, the interest thereon
amounting to about $2,178,000. In addition to this the bankers
received 1 per cent upon the face value of the bonds, and also
one per cent upon the interest paid, which amounted to about
$167,000, and they were also paid 1}4 per cent, or about $181,500
for stamps, taxes, and other expenses. Hence the total cost of
this loan of $14,520,000 was about $3,542,000, or more than
24 per cent.

The bonds for the £15,000,000 ($72,600,000) were to run 10
years at five per cent interest, and were sold at a discount of 15
per cent, which was a loss to the State of $10,890,000. According
to the report of the Sao Paulo minister of finance, dated September
10, 1910, these loans up to that date had already cost the State
in expenses and charges of various kinds, in difference of types of
various loans (discounts), freights, insurances, buying and selling
commissions, interest on advances, warehousing charges, collec-
tion and remittance fees, and other expenses in connection with
State-owned coffee $52,591,976 in gold. This meant a cost of
33^ cents a pound in administrative expenses for all the coffee
purchased by the Government. The Government could much
more cheaply have paid a direct bounty to the producers provided
that coffee sank below a reasonable price.

The marketing of the 10,000,000 bags of coffee withdrawn
from the market was left to a committee of the bankers. The
government of Sao Paulo obligated itself to offer for sale through
this committee at public auction or by sealed proposals, at the
price of the day, 500,000 bags in 1909; 600,000 bags in 1910; 700,000
bags in 1911; and 700,000 bags in each succeeding year. The
government conceded to the committee full and irrevocable power
to determine the times of sale, the minimum obligatory quantities
mentioned, the markets in which to sell, to make the sales in the
name of the government, and exercise control over the transac-
tions. The Committee was to be paid 1 per cent upon the net ^

236 AGRICULTURAL PRICES AND VALORIZATION

product of the sales. On September 30, 1909, this committee had
in its custody and stored in the following amounts and places:

New York 1,744,161 bags

Hamburg 1,766,203 "

Havre 1,583,902 "

Antwerp 1,080,410 "

London 197,790 "

Rotterdam 155,191 "

Bremen 108,907 "

Trieste 109,807 "

Marseilles. 96,781 "

6,843,152

To market this coffee without disturbing the market was a
problem for the Committee. Since several members of the Com-
mittee were personally interested in the coffee trade, the higher
the price of coffee the greater the profit realized by them there-
from. Minutes of the meetings of this Committee show that they
were greatly perturbed at times as to the marketing problem. At
their first meeting, January 5, 1909, it was determined that not
more than 500,000 bags should be sold during 1909, and that at
not less than 7.2 cents per pound. At the April 27, 1909, meeting
the Committee considered favorably a proposal of the government
that an additional export duty be imposed on coffee of 10 per cent,
payable in coffee, such coffee to be destroyed under the control
of the Committee. Whether such coffee should be burned or
dumped in the sea was debated. The government later decided
to withdraw this proposal. At the January 5, 1911, meeting of
the Committee it was determined that 1,200,000 bags should be
sold between the 1st and 30th of April, 1911, and that no more
should be sold during the year. The Committee made sales
during 1911 as follows: 300,000 bags at 12^ cents; 300,000 bags
at 12^ cents. On January 25, 1912, the Committee announced
that 400,000 bags had been sold that day in New York at 15 cents
a pound. When the World War broke out there were 3,000,000
bags in store in Europe. This was promptly seized by the beUiger- *
ents. This closed out the last of the valorized coffee.

The effects of valorization are viewed in different lights by
different persons. Some claim it was an economic and financial
success. The facts are a little difficult to unravel. One unforeseen
result was a suit in equity brought by the United States Govern-
ment against Herman Sielcken and the other members of the
bankers' Committee, praying that the valorization scheme with
its several '' conspiracies, contracts and agreements" be declared
violative of the American Anti-trust Act, and that any claims to
ownership of said coffee by any member of committee be declared

VALORIZATION IN BRAZIL 237

illegal and null and void; second, that defendant Herman Sielcken

be perpetually enjoined from further withholding from the market

the coffee held by him and stored in New York, and that he be

enjoined from selling the same on condition that the purchaser

will not resell same; third, that defendants be enjoined from parting

Avith the custody of said coffee except to deliver same to a receiver

of the court, to be sold by him; fourth, that a receiver be appointed

forthwith to take charge of said coffee. The brief, in this same

lawsuit, states:

"The immediate effect of valorization was to withdraw from the natural
course of commerce more than 10,000,000 bags of coffee, and thus to reduce
the available supply and to increase its market price . . . Shortly thereafter
the prices began to rise and continued to rise although in the season of 1909-
1910 the production exceeded the consumption by more than a nuUion bags,
with the result that whereas' when the scheme of valorization was adopted,
Rio No. 7 was selUng in New York at about 7]^ cents per pound. It is now
(1912) seUing at 14^ cents per pound, an increase in price of nearly 100 per
cent. Within the last year, conditions have become especially acute, because
the consumption has exceeded the production, and hence the deficiency had
to be drawn from the supply already on hand, whUe a very large part of that
supply was and is in the hands of said committee, who were careful to sell
therefrom only in such quantities and in such a way as not to reduce the mar-
ket price. As a matter of fact said committee are masters of the coffee market.
They have under their control such a quantity of coffee, that by placing the
same upon the market the price of coffee would be greatly reduced, while
withholding it from the market maintains a price which is abnormally high
. . . The real intent and purpose of the valorization scheme was through a
restraint of the commerce in coffee between Brazil and other countries, includ-
ing the United States, by monopoHzing the same to increase the price thereof
to the enrichment of those instigating the scheme. This fact is made manifest
by the amount of money reahzed by individuals therefrom and from the ex-
pense thereof directly to the State of Sao Paulo, but indirectly to the consumers
of coffee . . . These figures show that it was not for the welfare of the pro-
ducers that this valorization scheme was concocted and carried out ..."

The first aim of the scheme was to raise the price of coffee to
the producers. This was undoubtedly accomplished. However,
it is open to- debate whether the increase in price equaled the
increase in taxes required to finance the scheme and reward the
bankers. Under an agreement of August 6, 1906, the Sao Paulo
government obUgated itself to create a '' surtax '' of 3 francs,. sub-
ject to increase or reduction, upon each bag of coffee exported.
The law of August 25, 1908, provided that an additional tax of
20 per cent ad valorem should be collected on all coffee exported
in excess of 9,000,000 bags for the first, 9,500,000 bags the second
year, and 10,000,000 bags each year thereafter. The 3 franc surtax
above was changed to 5 francs. In September, 1908, the 20 per
cent tax, was made 29 per cent. That this system of taxing was
unduly burdensome to the coffee trade was recognized by the Sao

238 AGRICULTURAL PRICES AND VALORIZATION

Paulo minister of finance, as evidenced in a communication of his
to the BraziUan embassy in Washington under date of April 1,
1909, wherein he states:

"The taxes collected by the State were given in guaranty of the loan and
will be reduced, once the loan is redeemed. The tax of 20 per cent ad valorem
on the export beyond the amount marked by law (9,000,000, 9,500,000 and
10,000,000 bags for first, second and subsequent years respectively) was
created by exigencv of the bankers, but the Government is negotiating with
them to replace it by another more acceptable to the markets."

The artificial enhancement of price of coffee and the placing
of export duties on it stirred the American Congress. There was
even some idea of modifying the American policy of free trade
in coffee in retaliation. At this juncture the finance minister of
Sao Paulo officially disclaimed further interest in the valorization
operations. He said (April 1, 1909) :

"The Government of Sao Paulo is no longer engaged in any valorization
operations and has ceased entirely with its intervention in the market with the
signing of the 15,000,000 pounds sterling loan. All the coffee stock belonging to
the State has been dehvered to the committee of bankers authorized to sell it."

There is no doubt that the Brazilian planter, being denied the
privilege of increasing his acreage of coffee cultivated his crop more
intensively. The trees were given better attention. Not only
that, but the high prices stimulated planters in Java and elsewhere
to increase their output. In this manner valorization did lead to
over production. The Wall Street Journal of March 18, 1916,
comments as follows on the low price then prevailing:

"Coffee prices are low, inexphcably low, to even the best trained special-
ists in the world's leading markets. At about 7^ cents the market hangs at
the mercy of liberal supplies coming from producing sources . . . The price
depression is sufficiently explained by trade dislocation and by surplus pro-
duction, of which last year the world had 1,055,000 bags left over out of a
total supply of 19,612,000 bags . . . Last year's big crop of 19,612,000
included 13,816,000 bags from Brazil and 5,796,000 bags from all other sources,
including mild Central American and East Indian coffees. The non-Brazilian
coffees were 30 per cent above the average in yields, and therefore had some
perceptible effect in reducing the coffee prices. But Brazil's 65 per cent of
the world's production is still the dominating influence. Last year's supply
was the largest since the valorization plan helped to hold prices up. The
supply situation there, after several poor years intervening, is the main reason
for low-priced coffee."

It is quite generally held that the cure for low prices is low
prices; the cure for high prices is high prices. But in applying a
remedy to low prices in Sao Paulo, the government applied a
remedy certain in the end to increase the disease. A temporary
gain was secured which was a pseudo gain, for the later losses and
expenses more than offset the temporary gain. New competitors

PRICE AND VALUE 239

were created in producing coffee. Doubtless the temporary high
price for coffee caused many consumers to seek substitutes for
this drink, of which there are many on the market. The valoriza-
tion scheme led to a severe collision Avith the legal authorities of
the United States. Evidently the chief advantage of the scheme
accrued to the bankers who managed it. These bankers were
beyond the reach of our legal machinery. As Wm. T. Chantland,
Special Assistant to the United States Attorney General, says in
his detailed report on valorization:

"Of a violation of this law (United States Anti-trust Act) the members
of the so-called valorization Committee, who are among the best-posted coffee
men in the world, were and are guilty, but of them we can deal only with the
American member, Mr. Herman Sielcken, who is now, and has been since
before this investigation was begun, Hving out of the United States, to wit,
on his estates in Baden-Baden."

That a state may comer the market and raise prices ("valor-
ize") is a doctrine that has a certain glamor about it among
law-makers in the United States. As evidence of this, the cotton
situation in 1917 is an example. Texas seriously considered
valorizing its cotton crop — or attempting to do it. The Houston
Chronicle of February 8, 1917, contains this news item:

" The house committee on constitutional amendments met last night and
reported favorably the Clark resolution for a constitutional amendment
authorizing the Legislature to create a governmental agency with powers to
fix a minimum price for cotton each year. The resolution also provides an
additional State tax of 10 per cent to raise a fund which would enable the
State to buy cotton or lend money on the staple in order to maintain the mini-
mum price determined upon."

Price and Value. — Price is value expressed in terms of money.
Values fluctuate from two sets of causes, those affecting the supply
side and those affecting the demand side. UtiUtyss the power to
satisfy a want. Value does not depend on utility, but on utility-
plus-scarcit}^, or what is generally called marginal utility. Water
has high utility, is in fact indispensable to life. Yet in most places
drinking water is so plentiful as to be free — that is, has no value,
no price, no marginal utility. But just to that degree that the
want for water is unsatisfied, to that degree its value increases.
No principle of economics has wider acceptance than this marginal
utihty theory of value. This being true, it is obvious that value
does not depend on cost of production. But it is related to it.
Value does not depend on demand, but is related to it. The true
conception of value is that of the keystone of an arch, the keystone
being labeled value or rjiarginal utility, and one side of the arch
being labeled ''Supply" and the other side ''Demand."

240

AGRICULTURAL PRICES AND VALORIZATION

The figure (Fig. 47) correctly shows the relation of value to cost
of production. Price fixed on cost of production alone therefore
may work disaster by ignoring the demand side. When supply
and demand are permitted to work, unfettered by artificial influ-
ences, governmental or otherwise, then high prices are the cure
for high prices (by affecting both the supply and demand side);
and low prices are the cure for low prices (by affecting both the
supply and demand side).

Vq I u e.

margin a I

u + i lify

Supply

Co si- o-P
j>roduchon

Demand

Fia. 47. — Relation of value to cost of production and to demand. Value depends on mar-
ginal utility. Marginal utility depends on supply and demand. Supply depends on cost
of production. Demand depends on utility. Any change, therefore, in supply or demand
affects value. Any change in cost of production or utility affects supply and demand, and

hence value.

Conclusions. — ^The question of a fair price is coming more and
more to be a social question. Among our social forces to-day
are government, public opinion, economic organizations of pro-
ducers and consumers, the press, and so on. The metropolitan
press at present sheds more heat than light on the price question,
catering to the supposed wants of its readers. However, a few
big city dailies now maintain a market information service for the
honest purpose of educating the consumers in the problems of.
markets and prices. Here is a vast opportimity for service lefl^
untouched by most city papers, however. Public opinion, unless
fed on the truth, is a force for evil as much as it is a force for good)-
The government may do much, and in fact is doing much, to spread* '

COLLECTIVE BARGAINING AS PRICE FIXING 241

information about , markets, market practices and market prices.
It may do much in the way of efficient pubHcity on the important
steps in marketing, particu larly transportation, grading, standard-
ization of pack, storage, processing and labeUng, credit, and so on,
and still leave free play to individual initiative and industry.
But the heavy, paralyzing hand of bureaucracy should never be
permitted to displace the nice adjustment of economic forces seen
in the open market where keen buyers meet keen sellers face to
face and fix the market price under free play of supply and demand.
In the realm of organized labor the collective bargain has now
established its place, rather than government fixing of wages. It
is altogether probable and desirable that a legal method of collec-
tive bargaining be also worked out in agriculture in the immediate
future for those more specialized products when the plan promises
success. Such a collective bargain, were producers, distributers,
and consumers equally well organized and represented, would
prove a useful adjunct to the open market in establishing fair prices.
Its educative value would be great. Its economic value would be
small at first, but would doubtless increase with time. At any rate,
the growing demand by both consumer and producer for "price
fixing," and that "something be done" by "somebody" requires
that the situation be met. And the collective bargain method
would be vastly preferable to governmental price fixing. The farmer
would be given a voice in price making, thus salving a very sore
spot. In the language of our political formula, the "consent of
the governed " is basic; it is equally expedient in our economic life.

Collective Bargaining as Price Fixing. — The term collective
bargaining is used in agriculture with some vagueness of meaning.
In mining and in railroading, whence the term comes, the meaning
is clear — namely the fixing of the wage rate (and other conditions
of employment) by a sort of parliament or congress of representa-
times of labor and of capital. In agriculture the essence of the
term is price fixing. Therefore collective bargaining differs from
cooperative buying and selling. Cooperative selling means the
mere pooling of supplies and selling at the market price from day
to day. Collective bargaining means fixing the market price
usually for a definite period, such as one year or one month. And
price fixing also implies control of the supply by the producers
^^hose representatives are making the collective bargain.

The farmer desires collective bargaining, and is entitled to
:, because of the voice it gives him in fixing the price on his
wn products.
16

242 AGRICULTURAL PRICES AND VALORIZATION

The field now successfully covered by collective bargaining in
agriculture is that of whole milk for certain large metropolitan
districts, particularly New York, Pittsburg, Cleveland, Chicago,
Detroit, Minneapolis, St. Paul, and San Francisco. Here the
dairymen control the raw milk supply. Representatives of the
organized dairymen bargain with representatives of the organized
distributors, and a price is fiixed. If consumers ever organize, the
farmers may bargain collectively with organized consumers. At
present, the problem of protecting the consumer against a ''com-
bine" of farmer and distributor is being solved in different ways
in different cities. Evidently the consumer is entitled to a ''voice"
in price fixing on the produce he buys. In Detroit, Pittsburg, and
elsewhere, he "sits in" with the representatives who do the
price fixing.

The chief problem involved, however, is not by whom shall
the price be fixed, but at what point. The farmer asks for "cost
of production plus a profit," in other words, a guarantee of divi-
dends. But he is never able to sell all his product in this way for
a very long time, if he produces a surplus. As the supply increases
beyond the consumer's wants, the price must drop; conversely,
when the supply decreases below consumer's wants, prices rise.
Hence a sliding scale is the solution, representing both cost of
production and demand. In other words, collective bargaining
will work if and when it follows the law of supply and demand.

QUESTIONS ON THE TEXT

1. What factors determine price? What factors should determine price?

2. Do agricultural prices fluctuate according to the law of supply and demand?

3. Are agricultural prices higher in the spring than in the fall?

4. Show the limitations of the theory of supply and demand in price fixing.

5. Show the attitude of some farmers towards so-called "big business."

6. Show the farmer's demands for a "just price."

7. Discuss the theory of price fixing by the government, and show its

limitations.

8. Show relationship of "just price," "fair price," and "equilibrium price."

Define each term.

9. Define and illustrate marginal producer.

10. Show how price fixing is sometimes done by collective bargaining.

11. Quote the conclusions of H. C. Taylor on the use of price commissions in

price making.

12. Cite the experience of the California Walnut Growers in making an "Offer-

ing Price," and show what price factors are given most weight.

13. Cite experience of Cahfornia Almond Growers, and show what price factors

they take into consideration.

14. Give illustration from wheat market showing where demand may tempo-

rarily be the dominating factor in price making.

15. Show Umitations to the theory of basing farm prices on cost of production.

REFERENCES 243

16. Give in detail the experience of Brazil in valorizing cofiFee, and show what

principles of price making are here involved.

17. Define price, and distinguish from value. Define utiHty; marginal utiHty.

18. Show relation of price to cost of production; to utiHty; to demand; to

supply; to marginal utility.

19. Compare price fixing by governmental agencies and by collective bargain-

ing. Which is preferable?

20. What are the arguments advanced by Swift and Company against the

cost-of-production theory in fixing prices for cattle?

21. Show some of the difficulties met in price control during the war by

Germany.

QUESTIONS SUGGESTED BY THE TEXT

1. Give an account of a case of collective bargaining in agriculture in your

State.

2. What is the legal status of collective bargaining? Give an account of some

court proceedings wherein the legaHty of collective bargaining in agri-
culture has been called in question.

3. To what extent is it true that manufacturers fix the price at which their

goods are sold?

4. What is the truth of this complaint recently pubUshed in a farm paper:

"The farmer is the only person on earth having no voice in fixing the
price of his own products"?

5. To what extent do laborers name their own wages?

REFERENCES

1. Pope, J. E.: "Can the Farmer ReaUze Higher Prices for His Crops
by Holding Them?" Qtiarterly Journal of Economics, Vol. 30, pp. 805-831.

2. Yearbook of Agriculture, "Causes Affecting Farm Values," 1905, pp.
511-533; also, "Agricultural Production and Prices," 1897, pp. 577-607,
Washington, 1905 and 1897.

3. "Industrial Commission Report," Vol. 10, p. CCLXXXVII; also Vol.
19, pp. 134-146, Washington, 1898-1902.

4. "Monthly Crop Report," United States Department of Agriculture,
Washington, February, 1917, p. 16. Figures showing relation of supply and
demand in price changes.

5. "Digest of Report of British Board of Trade on Cost of Living in the
Principal Industrial Towns of the United States" : "Comparative Summary of
Reports of the British Board of Trade on Cost of Living in the Principal
Industrial Towns of England and Wales, Germany, France, Belgium, and the
United States," 63 Cong. 1 Sess. Sen. Doc. 38.

6. "Report of Cost of Living Commission," Wellington, New Zealand,
1912.

7. Warren, G. F.: "Some Purposes of Price Fixing and Its Results,"
American Economic Review, March, 1919, pp. 237-245.

8. Taylor, H. C. : " Price Fixing and the Cost of Farm Products," Bulletin
292, Agricultural Experiment Station, University of Wisconsin, May, 1918.
A practical and comprehensive treatment of the whole subject.

9. "Are Prices too High?" Editorial in Wallace's Farmer, May 25, 1917,
p. 836.

10. Bradford, Edward A.: "The Question of Price Regulation." The
Annalist, June 11, 1917, p. 787.

11. McBride, James N.: "New School of Agricultural Thought." The
Annalist, June 25, 1917, p. 848. An argument for price fixing^on agricultural
products by the farmer.

244 AGRICULTURAL PRICES AND VALORIZATION

12. "Monthly Review of the United States Bureau of Labor Statistics,"
Washington, May, 1917. Contains articles on government control of food
supplies in Germany and government control of food supplies in Italy.

13. Rogers, F. E.: "Wholesale Prices and Receipts of Apples in Boston
for 36 years," Cornell Extension Bulletin 28, April, 1918, Ithaca, N. Y.

14. Mitchell, Wesley C. : " History of Prices During the War — Inter-
national Price Comparisons," Price Bulletin No. 2, War Industries Board,
Washington, 1919.

15. "Some Unforeseen Results of Coffee Valorisation," Review of Reviews,
New York, January, 1914, p. 111.

16. "Truth About Coffee," Wall Street Journal, March 18, 1916.

17. Chantland, Wm. T.: "Valorization of Coffee — a Detailed Report of
the Transactions and Facts Relating to the Valorization of Coffee," 63 Cong.
1 Sess. Sen. Doc. 30.

18. Brief: "In the District Court of the United States for the Southern
District of New York. United States of America, Petitioner, versus Herman
Sielcken et al, Defendants," Washington, 1912.

19. Daily Consular and Trade Reports, Washington, as follows: Jan. 28,
1908; Oct. 1, 1908; Oct. 19, 1908; Aug. 13, 1909; Nov. 2, 1909; Feb. 16, 1911 ; Feb.
7, 1916; July 12, 1916; Supplement for Aug. 20, 1916. (Valorization of coffee.)

20. "Monthly Consular and Trade Report," March, 1907.

21. Warren, G. F.: "Why Prices are High; Causes of High Price Levels:
Probable Future Prices," Grain Growers' Guide (Winnipeg), Feb. 4, 1920.

22. Rogers, Thorold: "History of Agricultural Prices in England."

APPENDIX

From an advertisement of Swift and Company, published in the press of
the United States, August, 1918.

Why the Cost of Producing Cattle Does not Determine Their Selling Price.

To produce a steer for meat purposes Not only do the receipts of animals vary

requires, as you know, a period of from one from week to week but the consumer de-
to three years. mand for meat also fluctuates.

The prices the producer has to pay for „„ J^LtZ T.Vi^L^ Z'^ZlTf^^^^^""

feed, labor and other items during this ^Li.ilc u -fTK^^LtL'^ +!«!.. .T,f^

period, together with weather conditions. S^"* ' ^ i Jt^ ^r.==L^^2af "L kI *°^* t"

J . '• „,u„+ :a „^o+„ i„ .^^^^„ *i „+ hve stock into dressed meat and by-products

determme what it costs to produce the steer. ^^^ distribute them to the consumer under

But the price the producer receives for ^^^^''"^ "^ *'^'^ ^^^•
the steer depends on conditions existing at Market conditions and competition

the time it is sent to market. establish the prices the producer gets for

his cattle. When meat prices go up or

If the supply of cattle coming on the down, so do cattle prices,
market at this time is greater than the^c^^^ ^j^ j^^^ ,^ ^^^ ^^^^

^^^I^^^^^^tTi^^.^^Vr^J^• ^ for animals than he takes in from the sale of

of meat and live stock go down. ^^^^ ^^^ by-products.

On the other hand, if the number of Swift & Company will gladly cooperate

cattle coming to market is less than enough in the carrying out of any national policy

to supply the consumer demand for meat, that will tend to steady the prices of live

the prices of meat and live stock go up. stock and meat.

Government Control of Food Supplies in Germany During the Early
Years of the World War. — Shortly after the War was declared the German
Government appointed a commission of scientists to prepare a report upon
which to base defensive food measures. This Commission, commonly called
the Eltzbacher Commission, devoted several months to the study of the
production, distribution, and consumption of food.

APPENDIX 245

An account of the German experience, from which the following excerpts
are taken, is printed in the Monthly Review of the Bureau of Labor Statistics,
Washington, May, 1917.i'-

"The recommendations of the Eltzbacher Commission for the reduction of swine and
cattle were carried out during the first four months of 1915. Approximately one-third of the
swine and 10 per cent of the milch cows — supposedly about a million and a half — were killed.
About the time when the killing of the swine was under way, in March, an inventory of the
potato stocks led to the official statement that these were low. Since the potato in Germany
was one of the staple swine feeds, it was decided to kill rather more than the denominated
number of swine in order to meet the loss in potatoes. Two months later another potato
inventory was taken, revealing the fact that the previous inventory had been in error and
that the killing of the additional swine had been entirely unnecessary, since the potatoes
were available; and these potatoes were thrown upon the market at a huge loss in price and
to a large extent underwent decomposition.

" No oxen were killed, and the killing of calves was not in excess of the usual number;
the slaughter did not extend to sheep and goats, which, on the contrary, were conserved
with foresight. The presence of such huge amounts of meat upon the market unquestionably
resulted in increased consumption during the first six months of 1915. According to the
plan, by far the largest portion of the meats thus obtained was to be conserved for future
use, and should have represented a very large stock of conserved meat. The processes of
conservation were, however, carried out very inefficiently, with the result that a large
portion of this meat underwent decomposition and became a complete loss ...

" In the autumn of 1915, within six months after one-third of the swine and a million
and a quarter of milch cows had been killed, two meatless days (Tuesday and Friday) and
two fatless days (Monday and Thursday) were introduced by decree. Maximum prices
were decreed for retail sales, but without correlation and usually without result.

" Gradually^ the Unes became drawn between cities and industrial districts, on the
one hand, and the country districts, on the other. To protect themselves the country
districts prohibited export. The authorities attempted, in a half-hearted manner, to oppose
such regulations and to reestablish the flow of foodstuffs in the channels of trade by increas-
ing the maximum prices. A maximum price, once established, became, of course, the only
price. As opposed to the regulations of the cities and of the imperial authorities, the regula-
tions of the smaller districts were naturally more effective. Restrictive regulations spread
over the entire land, each community looking out for its own interests, and it was soon
apparent that the industrial cities were at a disadvantage.

Establishment of the "War Nutrition OflBce. — "Control over the food supply of the
Empire was, up to June, 1916, vested in the imperial department of the interior (Reichsamt
des Innern), of which von Delbriick was secretary. Dissatisfaction with the measures taken
by this department became general during the second year of the war.

"The worst mistake of the Delbriick regime was in trying to regulate the sale and
use of food without knowing how much food existed. The food-card system in particular
evoked the severest criticism, this criticism being caused not so much by the rationing of
food as by the long waiting in front of shops for the sale of foodstuffs. The food-cards, with
the exception of the bread cards, did not carry any guarantee, but merely gave the holder
the right to stand in line for hours and take the chances. When the supply for the day was
exhausted the remaining shoppers were turned away. Disturbances of the peace were
frequent, and it was felt as a grievous injustice that by this waiting in front of shops the
women were withheld from household duties for hours.

"When Delbriick resigned, a separate department called the war nutrition office was
created directly under the Chancellor. The president of this office was given absolute police
powers under martial law, with a standing committee of experts representing the producers,
transporters, middlemen, consumers, and the army. The new system was installed on
June 1, 1916, with Adolph von Batocki as president of the war nutrition office . . ."

Control of the Potato Crop. — "Late in January, 1916, scarcity of potatoes developed
in the cities. An inventory showed that only 18,000,000 tons remained, from which the
seed had still to be reserved, leaving only 11,000,000 tons to last for six months. Thereupon
potato cards were introduced, and the attempt was made to limit the feeding of potatoes
to live stock. When the authorities attempted to uncover and seize the stock of stored
potatoes unexpected losses bj' decomposition became apparent. Von Batocki, on assuming
office, June, 1916, promptly prohibited any feeding of potatoes to live stock. The potato
cards introduced earlier in the year were not guaranteed, and in the large cities the intake
for each person during the spring months was often as low as a quarter of a pound a day.
Then the crop of summer potatoes came upon the market with a rush, as the maximum
prices were high and scaled downward to increase the offerings. Early in August the cities
were flooded with potatoes in carload lots. The poor, however, because of the announce-
ment that prices were scaled to fall, bought only from hand to mouth. As a result thousands
of tons decomposed and were lost. Nevertheless, even at this time the potato card and the
prohibition of feeding to swine were not suspended. Two weeks later the cities were again
empty of potatoes. The growers had ceased to harvest potatoes when the prices fell; they

^2 United States Department of Labor, Monthly Review of the United States
Bureau of Labor Statistics, Vol. IV, No. 5, May, 1917, pp. 710, 711, 712, 716,
717, 718. ■

246

AGRICULTURAL PRICES AND VALORIZATION

were engaged in the harvesting of grain, and the urban populations had to wait for regular
rations of potatoes until the digging of potatoes could again be resumed ..."

Measures Relating to the Production and Sale of Vegetables and Fruit. — "The
retail prices for fruit reached unheard-of heights during the summer of 1916. The growers'
prices were high, in extenuation of which the high cost of fertilizers, cultivation, picking,
and packing was adduced. The maximum prices first set were low. Then the growers
refused to pick. The prices were raised, and thereupon green fruit was sent to the market.
The people were encouraged to put up fruit by sterilization by heat and with saccharine;
but the housewives were not inclined to experimentation. Thereupon the war nutrition
office confiscated the entire crop of early apples and plums, supplied the sugar, and had
them converted into jam."

Example of Agricultural Advertising to Create Demand and Increase
Constmiption. — (Printed in American Newspapers, fourth week in July, 1919.
Republished by the American Meat Packers' Association. Reprinted from
New York Tnbune, July, 23, 1919.)

" There is Now Plenty of Beef and Lamb for Everybody. — At the present price levels
these are the cheapest of the meat foods. It is now possible to advise the American people
that it is no longer necessary to conserve beef and lamb. Right now, there is plenty of these
meats for everybody and this will be the situation for many months to come. Here are
the reasons:

"1. Demobilization of our armies has gone ahead so rapidly that they now require
very little beef and lamb.

"2. England and the other European countries no longer look to us for their
beef supplies.

"3. When war was declared the American live stock raiser started to produce more
meat. The result has been a large increase in live stock production.

" Therefore, you may now buy beef and lamb — and buy freely.

American National Live stock Association.
National Wool Growers' Association.
Cattle Raisers' Association of Texas.
Corn Belt Meat Producers' Association of

Iowa.
Kansas Live stock Association.
Southern Cattlemen's Association.
Panhandle and Southwestern Stockmen's

Association.
Nebraska Stock Growers' Association.
Missouri Live stock Feeders' Association.

Illinois Live stock Association.
Indiana Cattle Feeders' Association.
West Virginia Live stock Association.
Wyoming Stock Growers' Association.
Montana Stock Growers' Association.
California Cattlemen's Association.
Colorado Live stock Association.
Idaho Cattle Growers' Association.
Arizona Cattle Growers' Association.
New Mexico Cattle Growers' Association,
Cattle Raisers' Association of Oregon."

Extreme Prices of Wheat, Com and Oats. — The following table is a
statement of the extreme prices in Chicago of Contract Wheat (spot) each
year for the period of fifty-two years, indicating the month in which such
prices were obtained.

Wheat

Year

Months the lowest prices were
reached

Range for the
entire year

Months the highest
prices were reached

1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
1885

August. . .
November
December.

April

August. . .
November
September
October. .
February .

July

August. . .
October. . .
January. .
August. . .
January. .
December.
October. .
December.
March. . . .

$1.55

imy:

.76K @
.73X @
.99H @

1.01 @
.89 @
.81 K @
.83 K @
.83 @

I.OIH @
.77 @
.815^ @
.86H @
.95 H @
mVs @
.90 @

@$2

@ 2

@ 1

@ 1

@ 1

@ 1

@ 1

1

1.

1

1

1.

1

1

1,

1

1

.73?^

85

20
.47
.31 M
.32
.61
.46
.28
.30K
.26K
.76M
.14
.33K
.32
A3H
.40
.13K
.96
.91H

May.

July.

August.

July.

Feb., April and Sept.

August.

July.

April.

August.

December.

May.

April.

December.

January.

October.

April and May.

June.

February.

April.

APPENDIX

Wheat — Continued

247

Months the lowest prices were
reached

October

August

April

June

February

July

October

July

July

January

August

April

October

December

January

July

October

March

January

August

August and Sept

January

July

August

November

April

Nov. and Dec

October

July

August

June

February

Jan., Feb., Mar., Apr., May

Range for the

Months the highest

entire year

prices were reached

.0.69 3^ @ $0.84K

January.

.66 Vs @

.94K

June.

.71 M @

2.00

September.
February.

.75M @

1.08^

.74K @

1.08X

August.

mH @

1.16

April.

.69K @

.91K

February.

. 54X @

.85

April.

.50^ @

.63K

April.
May.

ASVs®

.81K

.53 @

.94^

November.

.66^^ @

1.06

December.

.62 @

1.85

May.

.64 @

.79>^

May.

.61K @

.87K

June.

.63H @

.79M

December.

.67K @

.95

September.

.lO'A @

.93

September.

.81>< @

1.22

Sept., Oct. and Dec.
February.

1.24

69 3^ @

.94K

May.

.71 @

1.22

October.

.84 K @

1.11

May.

.99X @

1.60

June.

.89 K @

1.29K

July.

.83 >^ @

1.17

October.

.85 @

1.22

April and May.

.mH @

1.15^

January.

.77K @

1.33

September.
February.

.98 @

1.68

.98X @

2.02

October.

1.51K @

3.45

May.

2.08 @

2.42

December.

Corn

Months the lowest prices were
reached

Range for the

entire year

$0.56K @$1.12

.52 @

1.02 K

.44 @

.97 K

.45 @

.94 H

.39K @

.56 K

.29M @

.48 5^

.27 @

.54K

.49 @

.86

.45K @

.76K

.38^ @

.49

.37 5^ @

.58

.29 >g @

.43^

.29 5^ @

.49

31 M @

.43 K

.35K @

.76 H

.79>< @

.81 K

.46 @

.70

.34 K @

.87

.34 K @

.49

.331^ @

.45

.33 @

.51 H

.33^ @

.60

.29 K @

.60

.27K @

.54 K

.39 J^ @

.80

..37 M @

1.00

.34 H @

.44^

Months the highest
prices were reached

March

December.
January. .
December,
December,
October. . .

June

January. .
December,
February .

March

December
January. .

April

February .
December
October. . ,
December
January. .
October. . ,
February .
December
December
February .
December
January. .
December

October.

August.

August.

May.

March and May.

May.

December.

September,

May and July.

May.

April.

March.

October.

November.

October.

July.

January.

September.

April and May.

July.

December.

May.

November.

November.

November.

May.

May.

248 AGRICULTURAL PRICES AND VALORIZATION

Com — Continued

Year

1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
19181

Months the lowest prices were
reached

February

December

September

January and February.

January

December

January

Januarv

December

December

January

January and December
February and March. .

January

February

January

December

Jan., Feb., March

December

January

January

October

May

January

November

Range for the
entire year

$0.33^
.24 3^
.19K
.21H
.26
.30
.30K
.36
.43K
.41
A2H
.42
.39
.39K
.56M
.58K
.45K
.45K
.47 H
.46M
.60

MH

.69
.93K
1.30

$0.59K
.54 K
.30 5^
.32 H
.38

.38:^

.49 K

.66^

.88

.53

.58}^

.64 K

.54 K

.66M

.82

.77

.68

.76

.83

.78><

.86

.82K
1.11
2.36
1.85

Months the highest
prices were reached

August.

May.

April.

August.

December.

January.

November.

December.

July.

July and August.

November.

May.

June.

October.

May and Sept.

June.

January.

November.

August.

Aug. and Sept.

August.

August.

October.

August.

January.

1, No. 2 white sold at $2.03.

Oats

Year

Months the lowest prices were
reached

Range for the
entire year

Months the highest
prices were reached

1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900

August

October

October

September

August

October and November

April

August

December

July

August

October

January

August

February

September

September

December

September

October

March and April

September

October

February

October

January

July

January

December

September

February

August and September.

August

August

$0,

38 M
.41M
.35K
.32M
.27
.20 K'
.23K
.37X
.29K
.27
.22
.18
.19M
.22 K
.29M
.30M
.25
.23
.24 K
.22 7^
.23M
.23 J^
.17K
.19K
.26
.28
.21^8
.26
.16 H
.14K
.15 5^
.20K
.19X
.21

$0.90
.74
.71
.53K

.51M

.43K

.40^

.71

.64 K

.35

.45^"

.72K

.36K

.35

AlH

.62

.43 K

.34 K

mVz

.35

.31M

.38

.26^

.45

.56 K

.34^

.32><

.50

.31K

.20>i

.23 J^

.32

.28K

.26K

June.

May.

July.

May.

March and April.

June.

December.

July.

May.

September.

May.

July.

December.

January and May.

October.

July.

March.

April.

April.

January.

December.

May.

February.

November.

April.

August.

May.

June.

June.

Feb. and March.

December.

May.

February.

June.

APPENDIX

Oats — Continued

249

Year

1901
1902
1903
1904
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918

Months the lowest prices were
reached

January

November

March

October and December

September

March

January

August

August

October

March

November

March

August

October

June

August

October

Range for the
entire year

$0.23 K
.29 M
.31K
.28 K
.25
.28 Vs
.33K
.46
.36H
.29K
.28 K
.30M
.31^
.33 K
.35^

.51

$0A8J4
.71
.45
.46
.34 H
A2H
.56 K
.60 H
.62K
.49
AlVs
.58 M
.43 3^
.51 H
.60 H
.57
.85
.93

Months the highest
prices were reached

December.

July.

July.

February.

July.

June.

September.

July.

May.

February.

November.

April.

September.

September.

March.

November.

July.

February.

CHAPTER XVI
COST OF PRODUCTION AND FARM ACCOUNTING

In manufacturing, cost of production is one of the factors
claiming the consideration of the manager. In this field, certain
standardized units of costs have been worked out, and cost account-
ing systems fairly well developed. An era of ''scientific manage-
ment" has been introduced. But in the field of agriculture rare
indeed has been the farmer who kept any cost accounts or had any
definite idea of the cost of producing his crops. In the language
of political economy the farmer is the manager or organizer in
charge of the three factors of production — lanci, labor, and capital.
He seeks that particular organization of the three factors that will
give him the highest net return. Considering the possible com-
bination of land, labor, and capital that can be made by a farmer,
ranging all the way from an intensive agriculture to an extensive
agriculture, it is obvious that knowledge of cost of production is a
very vital factor in success. This is illustrated by the introduction
of the Babcock milk test some years ago, which made possible a
cost accounting against each dairy cow. The simple apparatus
enabled many a farmer to weed out of his herd cows wlidch were
not earning their board, although they were giving a large quantity
of milk. This is a hint, at least, that some system of cost accounting
is needed to apply to the various factors of production. It is per-
haps correct to say that there are now four factors of production
— land, labor, capital and management or organizing ability.

The Federal Department of Agriculture and the State Experi-
ment Stations have in recent years done a great deal in meeting
the need for information on the cost of 'producing crops, and in
devising workable schemes of cost accounting for farmers.

The most noteworthy study in costs of producing crops was
that undertaken jointly by the Federal Department of Agriculture
and the Agricultural Experiment Station of Minnesota. This
study began in 1902, the aim being to continue it over five cycles
to four years each.^ This continuous detailed study of actual

1 The Cost of Farm Products: Hays, W. M., and Parker, E. C, United
States Department of Agriculture, Bureau of Statistics, Bui. 48, and Minne-
sota Experiment Station, Bui. 97, 1906.

The Cost of Producing Minnesota Farm Products: Cooper, Thomas and
Parker, E. C, United States Department of Agriculture, Bureau of Statistics,
Bui. 73, and Minnesota Experiment Station, Bui. 117, 1910.

The Cost of Minnesota Dairy Products : Cooper, Thomas, United States
250

THE ACRE IS CONSIDERED THE BASIS 251

farms has incidentally afforded valuable information on systems
of farm management, types of farming and labor requirements.
Bulletin 117 of the Minnesota Experiment Station, in this series,
gave data on farm labor, horse labor, and depreciation of farm
machinery. This bulletin served a very useful purpose in defining
the problems involved in such cost investigations, and in estab-
lishing certain standardized units in cost analysis. In the same
series, bulletin 157 shows the actual labor requirements of farm
crops in terms of man- and horse-hours per acre and defined some
of the principles underlying the use of man labor on the farm.
Since the cost of man- and horse-labor bears a fairly constant rela-
tion to total cost of crop-production, man-hour and horse-hour
labor form units of cost which can safely be used in different places
and in different times, and yet remain comparable. These units
can easily be translated into dollars and cents.

Five Items. — In addition to the labor costs of crop production,
five items of expense are usually considered, namely: (1) cost of
seed, (2) cash cost of threshing, (3) interest and depreciation on
machinery and special cash operating expense, (4) land rental or
interest on investment in land, and (5) taxes. When rent is
omitted, labor constitutes more than half the cost of producing
farm crops. And, to quote Minnesota bulletin 157, ''Cheap labor
is not desired in the sense that low wages indicate an opportunity
to lower cost of production. Such labor is often very expensive.
The use of well paid labor on highly productive enterprises over
an extended period of time makes for a far more prosperous
industry than cheap labor."

The acre is considered the basis or standard unit, and not the
yield, in studying labor requirements. The yield may be easily
introduced and the acre-unit translated into a bushel-unit for
purposes of comparison. Man-hour means the labor of one man
for one hour. Horse-hoiu- means the labor of one horse for one
hour. Land rental is considered an item of cost because the value
of the farm if invested in ordinary securities would yield an income.
In some sections, such as North Dakota, this yield is reckoned at
6 per cent. In Wisconsin land rental, including taxes, is charged

Department of Agriculture, Bureau of Statistics, Bui. 88, and Minnesota
Experiment Station Bui. 124, 1911.

The Cost of Producing Minnesota Farm Products: Peck, F. W., Minne-
sota Experiment Station Bui. 145, 1915.

Labor Requirements of Crop Production: Cooper, Thomas, Peck, F. W.
and Boss, Andrew, Minnesota Experiment Station, Bui. 157, 1916.

The Cost of Producing Minnesota Field Crops, 1913-1917: Peck, F. W.,
Minnesota Experiment Station, Bui. 179, 1918.

252 COST OF PRODUCTION AND FARM ACCOUNTING

at 5 per cent. Some Experiment Stations give the item of rent to
correspond as nearly as possible to actual cash rent paid by tenants.
Cost of Growing Grains. — Wisconsin Experiment Station at
Madison carries on cost accounting work. Figures in that State
in the year 1917, based on a six-years study, give the following
data on cost of growing grains:

Crop

Number
of fields

Average

cost per

acre

Average
yield

Rental

Oats..
Barley
Rye. .
Wheat

13.35
13.38
11.22
12.10

35.7
22.2
16.2
17.0

4.70
3.98
8.94
8.48

Other Cost Accounting. — These costs are seen to run very close
to the Iowa costs, found in Appendix to this chapter.

Referring again to the Minnesota studies (1908 to 1912, bulle-
tin 145), we find the following summary of costs:

Average monthly cash wages paid farm laborers during the
8 crop season months, April to November,

Rice County $28.19

Lyon County 26.45

Norman County 28.86

During the 4 winter months, these counties ran as follows, respec-
tively, $17.85; $21.20; $17.27.

The average monthly cost of board per man, same years, same
counties, was $15.43; $14,17; $12.36.

Reduced to an hour basis, the average rate of wages per hour
for monthly man-labor, same years, same counties, was 14.9 cents;
13.9 cents; 13.5 cents.

The average annual cost of maintaining a horse, same years,
same counties, was respectively, $103.41; $99.67; $84.16. The
hours worked annually by a horse averaged 1038; 1106; 976; or,
on a daily basis, the average hours worked by a horse was, 3.46;
3.68; 3.25. This made the average cost of horse-labor per hour
10.1 cents, 9.01 cents, 8.63 cents, respectively.

The annual depreciation on farm machinery was estimated, and
likewise the ''annual value consumed" for farm machinery. Sta-
tistics were carefully gathered to determine the average deprecia-
tion. The inventory value of a machine was based on the following
considerations : Number of years used, manner cared for, amount
of work done, repairs during the year, present condition, and appar-
ent future usefulness; also possible auction or exchange value of
the machine. In order to charge properly machinery values con-

ITEMS OF COST FOR GRAIN CROPS

253

sumed in producing crops it was necessary to determine the acre
cost of each class of machinery and distribute it to the various
crops. The values consumed in farm machinery, according to
these studies, are made up of depreciation, labor, and cash repairs,
and interest on the average annual investment. The sum of these
items for each machine divided by the number of acres on which
the machine is used gives the value consumed per acre per year.
For the period 1908-1912 the average annual depreciation of
machinery amounted to 6.7 per cent as an average of all farms for
all machines. For some of the commonly used machines the annual
depreciation was as follows: grain binders, 6.5 per cent; grain
drills, 5.0; corn binders, 7.97; mowers, 6.8; gang plows, 6.4; manure
spreaders, 10.3; gas engines, 5.7. The annual values consumed
per acre for commonly used machines were as follows: grain
binders, 16.8 cents; grain drills, 7.2; corn binders, 60.4; wagons
19.5; mowers, 16.7; plows, 9.5.

The total cost per acre of producing field crops in three Minne-
sota counties, including seed, man- and horse-labor, twine, machin-
ery charge, general expense, and land rental, was as follows
(1908-1912):

Spring wheat, fall plowed 10.78

Oats, fall plowed 12.02

Barley, fall plowed 11.16

Corn, husked in field 14.52

Taking the average farm prices on December 1 for each of these
5 years, a comparison is easily made between the yields necessary
to cover cost of production and the yields actually obtained:

Average farm

prices, Dec. 1,

1908-1912

Yield necessary
to cover costs

Actual crop
yields

Wheat

89.8
35.0
58.6
47.8

12 bu.
34

17

Oats

.^s

Barley

19 1 22

Corn

30 , 41

Items of Cost for Grain Crops. — One of the most interesting
features of the Minnesota reports is the distribution of cost per
acre, showing the very high per cent absorbed by labor and rent.
The following tables are selected from the list:

Distribution of Cost Per Acre in Dollars and in Per Cents of Minnesota Crops,

1908-1912

Wheat:

Labor $7.92 .

Land rental 3.83 .

General expense 1.26 .

Machinery 1.10.

Seeds 41.

54.5 per cent
26.4

8.7
7.6
2.8

254 COST OF PRODUCTION AND FARM ACCOUNTING

Distrihution of Cost Per Acre in Dollars and in Per Cents of Minnesota Crops,
1908-1912— Continued
Oats:

Labor $7.39 49.8 per cent

Land rental 3.83 25.8

Machinery 1.29 8.7

General expense 1.04 7.0 "

Seeds 96 .. 6.5

Twine 33 2.2

Barley:

Land rental 3.83 50.9

Labor 1.64 22.0

Machinery 935 12.4

General expense 696 9.3

Seed 41 5.4

Cash threshing 64 5.9

Twine 185 1.7

Corn (husked from standing stalks):

Land rental 3.83 35.5 "

Labor 3.36 31.3

Seed 1.37 12.7

Machinery 74 6.9 "

General expense 658 6.0 "

Miscellaneous Factors. — ^The cost of* producing crops depends
on a number of factors, among which are weather conditions and
crop yields. A record showing costs of production should contain
tables giving annual precipitation and temperatures during the
crop season. Crop yields should also be presented in appropriate
tables. In considering farm wages, the cost of board should be
added to the wage. The item of "general expense" is used to
cover insurance, taxes, and labor and other expenses which are
not chargeable to any one crop or productive enterprise.

Losses in Soil Fertility. — Loss in soil fertility caused by crop
production is not a proper charge in cost-of-production data.
Where such a loss occurs, there is no proper basis for calculating
the loss. Some crops, such as clover and other legumes, restore
nitrogen to the soil. The soil cannot be compared with machinery,
horse-power or buildings which depreciate constantly, regardless
of management, while the soil may be kept up and even enriched
by proper management. It is a well-known fact that there are
many fields in use to-day in the Old World which have been in use
since a thousand years ago, and yet which have more fertility now
than they had then — at any rate their yield is many times greater
now.^ It is neither feasible nor desirable to consider loss of fertility

2 "We had long desired to stand face to face with Chinese and Japanese
farmers; to walk through their fields and to learn bv seeing some of their
methods, appliances and practices which centuries of stress and experience
have led these oldest farmers in the world to adopt. We desired to learn how
it is possible, after twenty and perhaps thirty or even forty centuries, for their
soils to be made to produce sufficiently for the maintenance of such dense
populations as are living now in those countries. We have now had this
opportunity, and almost every day we were instructed, surprised, amazed at

PROBLEMS IN COST ACCOUNTING 255

as a "cost^^ in crop production. Fertilizers applied to the soil
form an item of cost which is definite and properly chargeable
to costs.

Signs of Progress. — Now that the various Agricultural Experi-
ment Stations and their substations and their demonstration farms
are carrying out detailed and continuous investigations of costs
of producing farm crops there is ground for the belief that standard
units of cost for the various factors will be worked out. These
units will consist largely in man-labor hours and horse-labor hours.
The acre will be the basis for both 3delds and costs. In the end
the industrial term ''scientific management" will come to be
applied to farm management, in the sense that more efficient
systems of farm management are to be established, using better
machinery, better seed selection, better crop rotation, better soil
management, better organizations of the factors of land, labor
and capital. The increasing efficiency of human labor, working
under proper organization, is illustrated by the figures pubHshed
by the United States Department of Agriculture, according to
which, in the year 1855 it required 4 hours and 34 minutes of
human labor to produce one bushel of corn, while fifty years later
it required but 45 minutes. Studies in cost of production under
varying conditions will, it is hoped, point out the economic limita-
tions of both extensive cultivation and intensive cultivation.

Farm Accounting. — ^Among the Experiment Stations that have
worked out cost accounting systems for farms mention must be
made of two — Minnesota and Cornell. Various commercial sets
are now on the market. It is difficult, however, to interest the
older generation of farmers in farm bookkeeping, especially in
any system of bookkeeping which involves much time or labor.
The Experiment Stations are making a vigorous and partially
successful effort to install systems on progressive farms. The main
hope must lie with the younger farmers, particularly with those
who have had courses at the State Agricultural Colleges.

Problems in Cost Accounting. — ^As indicated in the chapter on
the Economic Conditions of the Farmer, there are many factors
in the farmer's ''labor income'' that need more scientific treat-
ment by trained accountants. If the farmer's income is to be
stated in dollars, it thereby becomes necessary to place money

the conditions and practices which confronted us whichever way we turned;
instructed in the ways and extent to which these nations for centuries have
been and are conserving and utilizing their natural resources; surprised at the
magnitude of the return they are getting from their fields . . ." — King, F. H.,
Farmers of Forty Centuries, p. 2, {Madison, Wisconsin, 1911).

256 COST OF PRODUCTION AND FARM ACCOUNTING

values on his total income, including house rent and vegetable
garden. The capital value of the investment is a problem of
fundamental importance, just as it is in the realm of public utilities
and in the public regulation of rates of these utilities, particularly
railroads. The " vicious circle " may repeat itself here : high rates
mean high earnings; high earnings mean high capitalization; high
capitalization justifies higher rates. Why not the same circle in
agriculture: high priced product means high priced land; higher
priced land means larger capitalization; higher capitaHzation
justifies higher costs of production and higher prices. Since "cost
of production" is destined to figure so prominently in public
discussions, the question of the value placed on the land is of
high importance. The "market value" is now used by various
farm management specialists. But market value of farm land
depends on the market value of the product of this land. It will
therefore be but going in a circle to use the market value of the
land to determine one important element in the "cost of produc-
tion." Yet in the " cost-of -production " figures thus far published
"rent" (called interest on the investment) forms a very important
fraction of the cost. Economic theory and accounting practice,
now wide apart in this matter, must be harmonized, and some
agreement or compromise reached.

Another practice in vogue among farm cost accountants, and
which runs counter to principles enunciated by the Federal Trade
Commission, is that of counting at market value farm products
used on the farm in further production. An example of this is
hay and corn fed to dairy cows to produce milk for the market.
It is highly probable, however, that the farm accountants are cor-
rect in taking the farm value of such products, rather than their
cost of production. Of course it usually happens that the farm
value is above the cost of production, although this is not always
the case. Price statistics show that the price of farm products
frequently falls below the cost of production. The farmer is
entitled to suffer his losses or enjoy his gains, as the case may be.
If the farmer can make more, in the case above, by selling his feed-
stuffs on the market than by selling the milk for the market, then
he will and ought to curtail his milk production and sell his raw
materials. The consumer bidding for fresh milk must compete
with the hay market and corn market bidding for raw corn and
hay. If the consumer cannot pay this competitive price, the milk
will not be produced, and the market for "culls" will see a few
more dairy cows culled from the herds and sent to the butcher.

QUESTIONS ON THE TEXT 257

In fact the New York stockyards form a fair index to the status
of the dairy industry in the States surrounding that city. Here
the number of milk cows destined for slaughter fluctuates as the
balance between feed-costs and milk-price fluctuates.

Why Study Cost of Production? — Knowledge of cost of produc-
tion in agriculture is important both from the individual and the
social viewpoint. Society at large is becoming more and more
interested in price fixing by commissions, by governmental regu-
lations, or by collective bargaining, as outlined in the preceding
chapter. And cost of production is one of the important factors
in this problem of price fixing. From the standpoint of the indi-
vidual farmer cost of production studies should show what par-
ticular farms or what enterprises on any farm are being operated
at a loss. The foUo^ving questions could be answered: "

How many marginal producers are there?

How many producers are lower than marginal producers, and
what amount do they produce?

How many producers are higher than marginal producers and
what amount do they produce?

The submarginal farmer, like the submarginal manufacturer,
knowing his cost of production, could lower the unit cost of his
product, improve his marketing methods, or promptly shift to
some other enterprise. As agriculture is now organized, many
submarginal farmers actually continue year after year to farm at a
loss, before definite and conscious insolvency drives them from the
unprosperous acres. Perhaps in no other business does anyone
or can anyone continue so long to labor at a net loss.
QUESTIONS ON THE TEXT

1. Compare manufacturing and agriculture as to the use made of cost

accounting.

2. Show that the farmer is an entrepreneur.

3. What principle does the Babcock test illustrate?

4. Show what is being done to-day in studying cost accounting in agriculture.

5. What cost units were used in the Minnesota studies? Define each.

6. Show the factors in cost of production in addition to labor costs.

7. Which factors are most important?

8. Is "cheap labor" desirable?

9. Give some cost figures for Iowa corn, barley, oats, wheat.

10. Give some Wisconsin cost figures for oats, barley, rye, wheat. How do

they compare with the Iowa figures?

11. Explain the Minnesota method of accounting for annual depreciation of

farm machinery and annual value consumed.

12. Compare cost of producing Minnesota field crops with same crops in Iowa

and Wisconsin.

13. Should loss of soil fertihty be included in costs of production? Reasons

for your answer.

14. What are the signs of progress in cost accounting in agriculture?

17

258 COST OF PRODUCTION AND FARM ACCOUNTING

15. State some unsettled problems in farm accounting.

16. Show danger of the so-called "vicious circle" in farm accounting.

17. What is the correct accounting practice for value of farm products used

on the farm for further production?

18. State the objects to be gained by knowledge of cost of production on farms.

19. Show why farmers may unconsciously continue for years to farm at a loss.

20. Compare hours of labor per acre (man-hours and horse-hours) required

in Minnesota to produce wheat and potatoes.

QUESTIONS SUGGESTED BY THE TEXT

1. What principle should govern in calculating the value of the land used in

crop production?

2. From the standpoint of poUtical economy, is "rent" an item in the cost

of production?

3. From the standpoint of the Single Taxer, the private appropriation of

ground rent is a special privilege which should be aboUshed. Briefly
state the main reasons for or against this theory.

REFERENCES

The Experiment Stations and the 48 Agricultural College's are constantly
studying the costs of producing farm crops. Results of these studies are
published from time to time in bulletins and distributed gratis to those re-
questing copies. These bulletins constitute the best sources of information
on this subject. Only a few of these can be listed here.

1. "Industrial Commission Report," Vol. 10, p. CCXII, Washington,
1898—1902

2. Hays, W. M., and Parker, E. C: "The Cost of Farm Products,"
Bulletin 48, Bureau of Statistics, IJnited States Department of Agriculture,
Washington; and Bulletin 97, Minnesota Experiment Station, St. Paul, 1906.
(This is a pioneer study in this field.)

3. Parker, E. C, and Cooper, Thomas: "The Cost of Producing Minne-
sota Farm Products," Bulletin 73, Bureau of Statistics, United States Depart-
ment of Agriculture; and Bulletin 117, Minnesota Experiment Station, St.
Paul, 1910.

4. Peck, F. W.: "The Cost of Producing Minnesota Farm Products,"
1908-1912. Bulletin 145, Minnesota Agricultural Experiment Station, St.
Paul, 1914.

5. Peck, F. W.: "The Cost of Producing Minnesota Field Crops," 1913-
1917. Bulletin 179, University of Minnesota Agricultural Experiment Station,
St. Paul, November, 1918.

6. Peck, F. W., and Boss, Andrew: "The Cost of Milk Production,"
Minnesota Agricultural Experiment Station, Bulletin 173, 1918.

7. Cooper, T. P., Peck, F. W., and Boss, Andrew, Bulletin 157, Minne-
sota Agricultural Experiment Station, St. Paul, 1916.

8. Cooper, Thomas: "The Cost of Minnesota Dairy Products." United
States Department of Agriculture, Bureau of Statistics, Bulletin 88, and
Minnesota Agricultural Experiment Station, Bulletin 124, 1911.

9. Boss, Andrew, Peck, F. W., and Cooper, T. P.: "Labor Require-
ments of Live Stock." Minnesota Agricultural Experiment Station, Bulletin
161, 1916.

10. Boss, Andrew, Benton, A. H., and Caveft, W. L : "A Farm Man-
agement Studj^ in Southeastern Minnesota." Bulletin 172, University of
Minnesota Agricultural Experiment Station, October, 1917.

11. Warren, G. F.: "Farm Management," New York, 1916.

12. Duncan, C. S.: "Mercantile and Agricultural Economics," Journal
of Political Economy, October, 1918, pp. 769-806.

13. Orwin, C. S.: "The Determination of Farming Costs," Oxford, Eng-
land. 1917.

APPENDIX 259

14. Thomson, Edward H. : "Farm Bookkeeping," Farmers Bulletin 511,
United States Department of Agriculture, Washington.

15. Bexell, J. A.: "The Business Side of Farming," Farm Records,
Oregon Agricultural College, Corvallis, 1909.

16. a!nderson, a. C, and Riddell, F. T. : "Studies in the Cost of Market
Milk Production," Bulletin 277, Michigan Agricultural College, December, 1916.

17. Ladd, C. E.: "Cost Accounts on Some New York Farms," Bulletin
377, Cornell University Agricultural Experiment Station, June, 1916.

18. Hennis, C. M., and Willard, Rex E.: "Farm Practices in Grain
Farming in North Dakota," Bulletin 757, U. S. Dept. of Agriculture, 1919.

19. "Cost of Produciag the 1918 Cotton Crop." By the Department of
Agriculture of Texas. Austin Texas, 1918.

20. Farm Account Book. Prepared by Ohio Bankers Association and the
Agricultural Extension Service of the Ohio State University, Columbus, Ohio.

21. "Report of the Governor's Tri-State MUk Commission" (Pennsyl-
vania, Maryland, Delaware). Bulletin 287, Department of Agriculture, Har-
risburg, Pennsylvania, 1917.

22. Ladd, C. E. : "A System of Farm Cost Accounting," Farmers' Bulletin
No. 572, U. S. Department of Agriculture, 1914; Reprinted 1915.

APPENDIX
Cost of Production of Com, Barley, Oats and Wheat. — ^As an example of
the work being done by the leading state experiment stations in determining
cost of producing farm crops, the following tables are given, taken from the
station at Amos, Iowa. The figures were compiled in 1917, using $2.00 as the
cost of man labor per day, and $1.50 as the cost of horse labor per day.

Cost of Producing Corn Per Acre (Iowa) 1917

Rent $5.44

Plowing (gang) 1.882

Discing before plowing .561

Discing after plowing .701

Harrowing .632

Planting 367

Harrowing after planting .152

Cultivating, first time .915

Cultivating, second time .798

Cultivating, third time 676

Cultivating, fourth time .551

Depreciation and interest:

wagon .072

rack 024

harrow .024

disc 035

corn planter .067

harness .052

cultivator .059

gang 069

Seed corn 427

Testing seed corn .058

Grading 014

Total (growing the crop) $13,576

Average yield — 54.64 bu. j

Cost of growing the crop per bu. — .248. ^

Harvesting the Crop {Per Bu.)

1 . By picking in field 10

2. Cutting and shocking by hand 027

Husking from shock 137

3. Cutting with binder 021

Shocking 010

Husking fiom shock 137

4. Cutting wilh binder 021

Stacking 006

.164

.168

.027

260 COST OF PRODUCTION AND FARM ACCOUNTING

Cost of Producing Barley Per Acre (Iowa), 1917

Rent $5.44

Discing before seeding 816

Harrowing before seeding ,134

Seeding with drill 578

Discing after drilling 336

Harrowing after drilling 372

Twine. . . : 300

Harvesting 598

Shocking 238

Depreciation and interest:

harrow 024

disc 035

binder 453

drill 234

fanning mill 054

wagon 072

rack 024

harness 052

Seed (2.13 bu@ .619 per bu.) 1.318

Cleaning seed 066

Threshing 646

Cost of extra help 610

Total cost per acre $12.40

Yield— 26.93 bu. Cost per bu.— .46.

Cost of Producing Oats Per Acre (Iowa), 1917

Rent $5.44

Breaking stalks 230

Discing before seeding 672

Harrowing before seeding ,100

Seeding with drill 578

Discing after seeding 538

Harrowing after seeding 309

Harvesting 598

Twine 370

Shocking 238

Depreciation and interest:

binder 453

drill 234

harrow 024

fanning mill 054

wagon 072

rack 024

disc 035

harness .052

Seed (2.95 bu. @ .388 per bu.) 1.145

Cleaning seed 091

Threshing 944

Cost of extra labor , 744

Total cost per acre $12,945

Yield — 42.89 bu. Cost per bu.— .302.

Cost of Producing Winter Wheat Per Acre (Iowa), 1917

Rent $5.44

Discing before plowing 145

Plowing with gang 1.882

Discing after plowing 382

Harrowing after plowing 583

Drilling 578

Harrowing in spring 202

Harvesting 598

Twine 300

Shocking 238

Depreciation and interest:

plow 069

harrow 024

disc 035

binder 453

drill 234

fanning mill 054

wagon 072

(Carried forward)

APPENDIX 26i

Depreciation and interest: — Continued.

rack $0,024

harness 052

Seed (1.58 bu. @ .938 per bu.) 1.482

Cleaning seed 049

Threshing ' 1.054

Extra help 886

Total cost per acre $14,836

Yield per acre — 25.09 bu.
Cost per bu. — .591.

Cost of Producing Spring Wheat Per Acre (Iowa), 1917

Rent $5.44

Plowing (gang) 245

Harrowing 141

Discing 886

Seeding 578

Discing after seeding ' 695

Harvesting 598

Twine 300

Shocking 238

Depreciation and interest:

glow 069
arrow 024

disc 035

binder 453

drill 234

fanfling mill. ... 054

wagon 072

rack 024

harness 052

Seed (1.68 bu. @ .942 per bu.) 1.415

Cleaning seed 052

Threshing 705

Cost of extra help 572

Total cost per acre $12,882

Yield per acre — 16.79 bu.
Cost per bu. — .767.

Average Annual Hours of Labor Per Acre in Producing Field Crops, 1902-1912

{Minnesota)

Man-hours Horse-hours

Wheat, shock threshed 12.3 29.9

Oats, shock threshed 13.5 28.9

Barley, shock threshed 12.8 29.9

Fall rye, shock threshed 10.3 27.2

Flax, stack threshed 13.7 33.8

Corn, husked 26.2 54.2

Fodder corn, cut, shocked, stacked 30.4 52.6

Ensilage 32.6 59.8

Potatoes 44.4 75.0

Hay, timothy and clover, first crop 12.3 13.0

Hay, timothy and clover, two cuttings 20.7 21.5

Hay, wild 12.2 16.9

Farm Accounting — a Backward Science. — An Example from England. —

'' The general absence amongst farmers of any system whatever of bookkeeping
is a deplorable fact. The Royal Commission on Agricultural Depression of
1897 clearly showed that this bad habit was very general. In one district of
about 50,000 acres, only one farmer could be found who kept accounts. Some
vears ago the agricultural correspondent of the Yorkshire Post inspected a
large number of farms in Yorkshire, and only in one case out of a hundred
farms visited were any accounts whatever kept. This is sad, and aU the more
so as the art of bookkeeping is an easily acquired one." — Jackson, T. C, The
Agricultural Holdings Acts, 1908-1914, ct^ Tenant-Right Valuation. London,
1917, p. 181.

CHAPTER XVII

SPECULATION

There are in the higher courts in the United States to-day one
thousand judges, more or less, whose duty it is to interpret the
Federal and State laws. That such a large body of specially trained
men is necessary to construe the meaning of carefully-framed
statutes illustrates very strikingly the looseness of meaning which
is likely to attach to even deliberately chosen words. Little won-
der is it, therefore, that many words current in the daily speech
of the people have such a looseness and vagueness of meaning that
they mean different things to different people, and to the same
people at different times. The word speculation is a word which
stands out conspicuously in this class' of populaf but indefinite
terms. This means that there is confused thinking on this import-
ant topic, where clear thinking is needed. There is vagueness
where there should be sharp distinctions. Before discussing what
speculation is, what its services are and its evils, it will be the
wisest course for us to differentiate sharply a few terms which
are frequently confused with speculation.

Some Misused Terms. — (1) Hoarding. — In times of stress,
particularly in war times or in times of great scarcity of any food
commodity, the word ''hoarding" is freely used in a depreciative
sense. It is true that in ordinary times, when the thrifty house-
wife stocks up her cellars in the autumn with an ample hoard of
apples, potatoes, cabbages, turnips, pickles, preserves, jellies,
jams, butters, canned fruits and vegetables, and so on, she is
considered as doing a highly praiseworthy thing. When a dealer,
however, buys from the farmer in the autumn apples and potatoes
and stores these in a suitable warehouse, for use later on, this
dealer is likely to be denounced as a speculator and guilty of
''hoarding." If apples and potatoes are harvested only in the
warmer months of the year, which is nature's provision, and if
these same products are to be eaten in part in the cold months of
the year, which is man's custom, manifestly these products must
be "hoarded" by somebody, who is performing thereby a pubUc
service. In the ancient sense of the word, hoarding implied
secrecy, but as the term is now applied to the dealers in agricul-
tural products it has no such connotation. Potatoes stored in a
262

CASH AND FUTURE TRADING 263

warehouse for the winter by a farmers' cooperative potato growers'
association or farmers' cooperative elevator company, is, in popular
speech, not hoarding; potatoes stored in an adjoining warehouse
owned by a dealer is, in popular speech, hoarding. Evidently the
term is used to connote a practice tainted with evil. Such a word,
used in such a manner, may shed much heat and but Httle hght
on the subject under discussion. The term does not correctly
define or describe. On the contrary, it is a subtle appeal to the
feelings, to prejudice. The ''hoarder" of potatoes in the fall of
1918 paid the growers one dollar a bushel, and sold these same pota-
toes (if they had not decayed in the winter) for seventy-five cents
a bushel in March following. Such a decline in price in the spring
happens with unpredictable regularity with all farm crops.
''Hoarding," therefore, is a word which should be no longer used
in the present heedless and unthinking manner.

(2) Cornering the Markets. — Under primitive market condi-
tions, particularly where means of transportation were lacking,
shrewd and bold dealers were wont to corner the market for short
periods. Many the laws, ancient and modern, against this anti-
social practice! Under twentieth century conditions this con-
demned practice is of sporadic occurrence, particularly in the
unorganized markets. On the organized grain exchanges, in con-
trast, where strict rules exist against this practice, it is now prac-
tically extinct. The last cornering of the wheat market occurred
during the World War, and was done quite unintentionally by the
Allies in buying certain grades of wheat in excess of the supply
of these grades. In other words, contracts for the best grades of
wheat were made, not to corner the market and affect price, but
to secure actual wheat in large and certain quantities. Cornering,
long under the social and legal ban, is still confused by many
writers and speakers with speculation. Speculation is going on
every day, and much of it unavoidably so, while cornering exists
in but rare and isolated cases. The two terms should not be used
as synonyms, although this slovenly habit of thinking and speaking
is all too common.

(3) Cash and Future Trading. — Again, the popular vocabulary
betrays an irresponsible looseness of thinking concerning that
phase of the grain trade having to do with cash as against future
trading in grain. The phrase "speculation in grain" is quite
generally applied to future trading. And, conversely, trading in
cash grain is quite generally regarded by the public as free from
"speculation." Many bills introduced in State legislatures indi-

264 SPECULATION

cate this state of mind. But it is obvious that it is just as specu-
lative to buy cash grain, expecting to hold it for a rise in price,
as it is to contract to buy grain in the future, expecting a rise in
price. Both transactions give title to grain. Both are based on
the behef that the market is too low. The following concrete case
illustrates a speculation in cash grain. The Superior (Nebraska)
Corn Products Company became a heavy dealer in corn in the
spring of 1917. From February on for some months the business
was reported as ''big." Corn was bought and sold in car lots.
Futures were not traded in. On August 18, 1917, occurred the
failure of this concern. The cause of this failure was speculation
in cash grain, long on corn when the market slumped. This slump
occurred on August 8, and continued to August 11, amounting in
all to fifty cents a bushel. On Wednesday, August 8, the buyers
of this company bought 75,000 bushels of corn by telephone at
the closing price of the day before, before the Grain Exchanges
had begim the day's trading and wired the new prices to the
country. The break began, as noted, and continued four days.
This drop in price foimd this company long 175,000 bushels of
cash corn. This meant the financial ruin of the company, and a
consequent wiping out of all its assets. The case is interesting as
showing that speculation is speculation, whether in cash or future
grain. It is also interesting in showing what may happen to a
grain business that does not hedge, i.e., protect its cash purchaser
by corresponding future sales, and thus avoid speculation by the
ordinary use of futures.

Two Social Classes. — There are now, and apparently always
have been, and always will be, two classes in society, the conserv-
atives and the liberals. That this is true in politics and religion
is a matter of common observation. It is equally true in our
economic life. Deposits in our savings banks, investments in
government bonds, and in other safe and low-interest rate securi-
ties show the existence of a numerous class of economic conserva-
tives. Many strong bond houses had, before the World War, a
large purchasing clientele seeking four and five per cent invest-
ments. Safety of principal rather than size of return is the desider-
atum with these investors. Other financial houses advertise
investments yielding ten or twelve per cent. These investments
attract a less conservative group or a group less sophisticated in
investment economics. Lastly there is the group of securities
with no past record of performance, but with a promised ''assured
future" of high yields, varying according to the imagination and

THESE DEFINITIONS , 265

restraint of the promoter. This class appeals to the speculators,
especially to those "economic illiterates" in our society. It is an
obvious fact that society does include the two classes, conserva-
tives and liberals, risk takers and risk avoiders. Each class plays
an important and necessary part in opening up and developing
the resources of the country. For even the much-haloed Pilgrim
Fathers were settled in America by a company of merchant
''Adventurers," as speculative risk takers were then termed.^

We have with us now, as society had in times past, a class
wilUng to take risks, ready and wilhng to speculate. It may be
stated as a correct principle that an American citizen, with intel-
ligence and means, has a right to speculate in town lots, in agri-
cultural lands, in grain, or in anything else, as long as his conduct
does not interfere mth the rights of others or damage society in
any way.

What does society want, then, in the field of speculation? To
abolish speculation? That is clearly impossible, as well as unde-
sirable. The answer must be, to retain the good in speculation
and curb the evil.

1. What is Speculation? — ^As stated earUer in this chapter the
popular understanding of this word is somewhat vague. The word
is commonly used in a depreciative sense, and not in the honorable
sense of the old word "adventurers." The definitions found in
Webster's dictionary are interesting to note. They nm as follows :

Speculate. — To purchase with the expectation of a contingent advance
in value, and a consequent sale at a profit; often, in a somewhat depreciative
sense, of unsound or hazardous transactions; as, to speculate in coffee, in
sugar, or in bank stock.

Speculation. — ^The act or practice of buying land, goods, shares, etc. , in
expectation of seUing at a higher price, or of selling with the expectation of
repurchasing at a lower price ; a trading on anticipated fluctuations in
price, as distinguished from trading in which the profit expected is the dif-
ference between the retail and wholesale prices, or the difference in price in
different markets.

Gamble. — To play or game for money or other stake. To play for a stake
or prize; to use cards, dice, billards, or other instruments, according to certain
rules, with a view to win money or other things waged upon the issue of
the contest.

These definitions are substantially in agreement with the
accredited economic usage of these terms. According to these
definitions, a retail merchant is not a speculator, since he buys
and sells with little or no regard to price fluctuations. His margin

^ See Appendix to this chapter for an excerpt from the original charter of
this company, showing its speculative commercial nature.

266 SPECULATION

is the difference between wholesale and retail prices. On the
other hand, the speculative buyer is one who expects the price
to rise, and is willing to back up his belief with his money. His
profit, if any, must come from a rise in price. Or conversely, the
speculative seller (short seller) is one who believes prices are going
to fall, and who sells for future delivery, expecting to buy at or
before delivery time at less than his sale price. These definitions
omit the original grower of farm products from the category of
speculator. This is an arbitrary rule. For the essence of specu-
lation is risk, and the grower is the first risk taker.

Webster's definition of gambling is also given, since these two
terms are commonly juggled together as though they were syn-
onyms. This confusion should not be tolerated. Professor Emery's
distinction between speculation and gambling is now quite widely
accepted. Speculation he makes the assumption of inevitable
economic risks. In other words, if the crop is produced, the price
is likely to change — is, in fact, certain to rise or fall, and hence
the owner for the time being is the risk taker. The risk may be
shifted to a speculator, who is the person who prefei-s to assume
the risk. Such risks may be shifted or distributed, but can never
be abolished. Gambling is, according to Emery, the assumption
of a ''chance" or ''risk, " which risk the gamblers themselves have
manufactured. It is artificial. Thus two men may sit down in a
back room and bet, for instance, one hundred dollars each on the
outcome of a horse race, or on a foot ball game, or on the election
of the President of the United States, or on the price of grain
next week, or on the state of tomorrow's weather. Obviously the
risk of winning or losing the hundred dollars was manufactured
by the wills of these gamblers themselves, and that without the
bet, the money would have remained safe in their pockets. But
the owner of a commodity is by his ownership the bearer of an
inevitable risk, whether he wills it or not. To the superficial
observer, trading in futures on the great Grain Exchanges is mere
betting on the price of grain. This was true of the late bucket
shops of the country, for in these places "orders" to buy and sell
grain were not executed on any market. These fake "orders"
were bets, and hence gambling transactions. The five or six
important grain exchanges, where future trading in grain is carried
on in the United States, do not come in this class, since every buy
or sell order is actually executed, and thus has its proportionate
influence on the market. Each order is payable in actual grain,
although most of them will not be so paid, just as the twenty

TWO KINDS OF SPECULATION 267

billion dollars of bank deposits, subject to check, and payable on
demand in gold will not be so paid (except in small part), and do
not need to be so paid to meet the needs of sound business. That
these demand deposits are actually six or seven times the whole
amount of gold in the country in no way reflects on the ethics
or soundness of American banking. Quite the contrary. It is an
evidence of a properly functioning banking system. It will be
necessary to defer until the chapter on the Grain Trade any further
explanations of the methods of settling the large volume of future
trading in grain by the delivery of a relatively small amount
of grain.

Two Kinds of Speculation. — In the field of Agriculture to-day
speculation is of two kinds, organized and unorganized. Organ-
ized speculation is that form of speculation conducted on the
organized exchanges of the country; it is under strict rules, which
are published and open and known to all interested ; it is conducted
openly before the public gaze; the volume of it, together with
actual prices involved, is made a matter of formal record and is
also very largely given to the public by means of the daily press
and the trade papers. Unorganized speculation, on the other hand,
is not conducted under any particular rules; it is not carried on
in the open light of full publicity; the volume and nature of it
are not a matter of record, and are not known.

Organized speculation is best illustrated by the trading in
grain and cotton on the organized exchanges. Unorganized
speculation is illustrated by trading in farm lands — particularly
the promotion of land sales by real estate agents, so-called. It
is also illustrated by the trading in the various forms of farm
produce not handled on the exchanges, such as fruits, vegetables,
poultry, etc. Since there are, in the case of these products, no
great organized exchanges, with severe membership qualifications
both ethical and financial, as is the case with grain exchanges,
it is exactly in these products that we find most frequent market
abuses. As an extreme illustration of this may be cited the poultry
market in New York City which for some years remained an open
scandal. Live chickens would be bought by a certain class of
dealers, kept without food for two or three days, and then be fed
heavily with sand, gravel, and cement. In this manner consumers
were buying daily thousands of pounds of sand, gravel, etc., at
fresh chicken prices. This abuse, great as it was, cannot be attri-
buted solely to the speculative nature of the business. Doubtless
there have been and now are a few farmers who follow similar

268 SPECULATION

practices, and the farmer, thus far has not been called a
''speculator."

The butter exchanges in the United States have thus far fallen
far short of complete success, owing to their small membership
and small volume of trade.

2. Speculation: Its Services. — ^At the very outset it must be
stated and emphasized that the code of ethics of the speculator,
organized and unorganized, is exactly as high as that of the pro-
ducers and consumers about him. This means that a very large
majority of the so-called speculative traders (commission mer-
chants, jobbers, ''middlemen" in general) are honorable and con-
structive members of society and of their community; that a
very small minority of them are "black sheep" — the traditional
rule for all flocks. And in the second place it must be stated and
emphasized that the large manufacturers of food products cannot
deal with widely scattered, unknown individual farmers, and can-
not do collective bargaining with unorganized farmers, and hence
the farmer's market at the present stage of economic evolution
must be with the men who stand between him and the miller,
the packer, the canner, the spinner, and so on. In other words,
the speculator makes the market for the farmer's products. The
chief service of the speculator is to create this continuous market.
This function is not appreciated till it is interrupted by war or
other calamity. This truth, recorded in the proverb, "You never
miss the water till the well runs dry," may be illustrated by the
case of the California Bean Growers. In December, 1918, the
California Market Director reported the following situation among
the farmers of that State, when the speculator was partially forced
out of the market:

"... It has been pointed out that had there been no bean growers' asso-
ciation in 1918, the results would have been most disastrous to the California
bean industry. The conditions facing the growers were in the nature of an
unprecedented combination of unfavorable circumstances.

"The small limit which the Federal Food Administration has placed on
the profits to be allowed to the speculative buyer, had completely destroyed
his speculative interest in the product. As a consequence, he was unwilling
to buy except from hand to mouth. This left the producer with no buyers
except for the merest handful of his product. Furthermore, the banks, with
abnormal demands made on them by the government, with large advances
made by them to barley and to other growers, with a weak and decUning bean
market staring them in the face, were in no frame of mind to look with favor
upon requests for financial accommodations coming from bean growers. On
top of it all, the bean grower found himself faced with demands upon him for
ready cash to meet his abnormal cost of production that stressed him to the limit.^

2 Third Annual Report, State Market Director of CaUfornia, 1918, pp.
68, 69.

A THIRD FUNCTION PERFORMED BY SPECULATORS 269

This quotation also illustrates the truth that to the extent
that producers are organized and able to conduct collective bar-
gaining, to that extent the need of speculative buyers is lessened
and to the same extent ''direct marketing" with manufacturers,
canners, exporters, wholesalers, etc., is made possible. Obviously,
however, the speculator by making a market is thereby performing
a service and deserves credit rather than condemnation for it.

A second fimctioii of the speculator may be called his financial
or banking function. In many lines of trade the speculator may
be called on to finance the movement of the crop from the prindary
point to the larger, central markets. He becomes, in a sense, the
banker for his shippers, commonly advancing them money before
the arrival of the goods, and in some cases, many weeks before the
goods are shipped.^ This financial relationship is one of import-
ance to the farmer himself, for he is anxious to receive his money
when his produce reaches the primary shipping point, although
this point may be separated in time and distance a long way and
a long time from the final consumer. Even where organization
is efficient and cooperative selHng well-nigh perfected among the
farmers, as in the case of the Eastern Shore of Virginia Produce
Exchange — 3,000 growers selling through one central office — the
banking or financial aspect of marketing is held to be of more
importance than the so-called ''direct marketing." This farmers'
company does not market direct to small dealers in small towns,
near large distributing centers, but markets through the large
regular dealers, who in turn re-sell to the smaller cities. Consider-
ing financial risks involved in dealing with a vast number of dis-
tant small dealers, the added expense of more bookkeeping and
more credit-rating investigations, it is cheapest in the long run
to deal with the large dealers as above noted. Since the large
dealers in this case make a practice of buying for cash f .o.b. ship-
ping station, they are performing a very real service of a financial
nature. Although produce is shipped into forty States and two
foreign countries, the grower gets his pay at the latest within ten
days of delivering his produce at the shipping station.

A third function performed by many speculative middlemen is
that of warehousing or storing. In a few cases at the present time
we have public warehouses, but even in that case the title to the

^ The most conspicuous and extreme case of this credit relationship is
that furnished by the old cotton "factor" of the South, who advanced part of
the money before the crop was planted. This was clearly an awkward and
expensive form of credit, fitted only to a primitive condition of agriculture.

270 SPECULATION

stored goods is private, and consequently the speculative risk
remains. Cooperative organizations of farmers frequently erect
warehouses, and thus provide storage without asking this service
of the speculator. There is an increasing number of farmers'
organizations that provide storage and pool the product over a
period of time, so that all price fluctuation — speculative risks —
are distributed among those using the organization. But the fact
remains that at the present time the bulk of our storage facilities
for food products is provided by speculators, and that these persons
are thereby performing a necessary social service. If the farmers
can perform this service through cooperative organizations in a
cheaper and better manner, and thus introduce savings, they are
at liberty to do so and ought to do so.

These three functions of the speculator in food products hold
true for both organized and unorganized speculation. Unques-
tionably the great bulk of speculation in the United States is
unorganized speculation; unquestionably also the bulk of the
pubHc attention and discussion of speculation centers around
organized speculation, the lesser of the two forms. This is due
to the concentration of organized speculation in a few great
exchanges, and to the superficial spectacularity of its methods.

Speculation on the Organized Exchanges. — Before considering
the services of speculation on the organized exchanges, it is well
to look at three common errors in the public mind on this question.
(1) Does speculation cause high prices? In the popular mind it
does. "Cornering the market" — a form of speculation now prac-
tically extinct on the organized exchanges — may cause a temporary
rise in price, but speculation as defined in this chapter does not
cause high prices. (2) Does speculation cause low prices? Oddly
enough, speakers who accuse speculation of causing high prices
when addressing city audiences, will, when addressing producers,
make the claim that speculation makes low prices. The super-
ficial theory here seems to be that Mr. A. by selling short one
hundred thousand bushels of wheat to Mr. B. (wheat that A. does
not at the moment own) thereby depresses the market by this
artificial supply. But Mr. B. can equally well say that by buying
this wheat he has thereby created a demand, strengthening the
market. Obviously the amount bought equals the amount sold.
Speculation on the organized exchanges does not cause low prices.
(3) Does speculation cause prices to fluctuate? Here is the most
persistent fallacy of all, the most widespread confusion of cause
and effect. The one and only reason why men speculate is because

PRICE FLUCTUATIONS

271

prices are sure to fluctuate. If all speculators were to cease activi-
ties entirely, or were to become an extinct species, price fluctua-
tions would continue. For instance, the price of United States
Government bonds fluctuates from day to day, and surely no
one believes speculators are trading in these low-interest, high
grade investment securities.^ If the least speculative commodity
in the world — a United States Government bond — fluctuates in
price daily, as it does, it is clearly evident that price fluctuation
IS not the result of speculation. Instead of causing price fluctua-
tions, speculation in the pit tends to check price fluctuations.
Speculation in the pit is a process of putting on brake, checking
a rapid rise in price (a ''bulge") and checking a rapid fall in
price (a ''break"). As evidence of this, it is a noteworthy fact
that barley, which is not subject to future trading (pit specula-
tion), fluctuates much more widely in price than does either wheat
or oats. Wheat and oats are both traded in the pit; both, hke
barley, are world-wide crops, grown and consumed very widely
for a variety of purposes.

Price Fluctuations. — Taking Chicago Board of Trade figures
for a period of 18 normal years, when we were not engaged in
any war, we find price fluctuations in these three grains (spot
prices) to fluctuate as follows, by per cents:

Cash Price Fluctiuitions, by Per Cents, for 18 Years, of Wheat, Barley, and Oats,
Chicago — Showing Widest Flnctuati(ms in Barley.

Year

Wheat

Barle

y Oats

1899

24.2 per cent
42.6

26.6 "
41.0

32.5 '•
50.3
59.2

42.9 "
71.8

31.4 "
61.2

44.7 ••
40.5

43.5 "
43.1 "
70.1
70.4 "

207.3

57.1 per
97.6

73.2 '

93.3 '
72.2

103.3 '
57.1
52.7

175.0
130.4
91.9 '
114.3
152.6 •
233.3

102.4 '
79.5
87.5 '

120.6

cent 46.7 per cent
' 25 0 "

1900

1901

' 107 5 "

1902.

' 103 4 "

1903

44 0 "

1904. .

' 62 9 "

1905

' 38 0 "

1906

' 48 0 "

1907

' 68 6 "

1908

' 31 5 "

1909.

' 72 2 "

1910 . . .

64 7 "

1911

' 65 8 "

1912

' 93 4 "

1913

' 37 1 "

1914

' 52 6 "

1915

68 2 "

1916. .

52.5

From the above table it will be observed that wheat only once
showed a variation in price in any one year of over 100 per cent.

* See Appendix to this chapter, showing fluctuations in prices of United
States Government bonds.

272 SPECULATION

namely, in the year 1916; that oats showed a similar variation
but twice, namely, in the years 1901 and 1902; but that barley
showed such a price variation eight times in eighteen years, namely,
in the years 1904, 1907, 1908, 1910, 1911, 1912, 1913, and 1916.^
Wide price fluctuations are thus seen to be, in part, prevented
by speculation. Instead of the wider swings of the market which
occur yearly in barley, oats and wheat show many small-price
fluctuations. In the sense that speculation prevents wide swings,
it stabiHzes prices. Since speculation is carried on in the open
market, it is, in a very true sense of the term, a great auction
market, where buyers and sellers (of grain for future delivery)
are making bids and offers, and hence this form of speculation is a
correct register of values — not a maker of values. Supply and
demand are here reflected, each instantly manifesting itself either
through the bids or the offers, and hence in the price. Prices
fluctuate according to this pressure of supply or demand. The
speculator is in the market and is governed by these forces — if
he survive long as a speculator. And his speculations, as stated
above, tend to put the brake on both bulges and slumps in the
price. The many small fluctuations in price in oats, wheat,
and corn (on the future market, i.e., in the pit) accompany
trading by many traders at small profits (or losses) on each
trade. Where there are no organized exchanges, a few big
traders absorb the profits or losses (bigger profits or bigger losses,
and bigger margins).

The services of speculation on the organized exchanges take
three principal forms: (1) It furnishes a wide market. The
speculators stand ready, any hour of any day, to take any trade
regardless of the size, without having the market upset by the
transaction. This was amply illustrated during the World War,
when the Government was forced to place order for large quanti-
ties of oats for future delivery. Some markets could not receive
an order for 300,000 bushels of oats, without having the price
forced up unduly thereby, whereas the Chicago pit, by reason of
its heavy speculative trade, was able to absorb orders for many
hundreds of thousands of bushels of grain without causing a bulge
in price. This could only happen in a wide market. And now
that our country is so large, such a wide market is a commercial
convenience of great value. (2) A constant market is afforded

^ For the complete price table on barley, see Appendix to this chapter.
As to grades of grain used in above tabulations: for wheat and oats, contract
grades are used; for barley, brewing barley.

SPECULATION AND THE PUBLIC INTEREST 273

by the speculators. For instance a large feeder in Texas wires
an order to his dealer in Kansas City for 200,000 bushels of oats,
December delivery. The order is accepted and placed in part
in the Kansas City market — a market too narrow to absorb
instantly such a big order — and in part in the Chicago pit. The
first seller is the speculator, ready to sell at any instant, at his
price. Later he buys back from a dealer who is interested in
handling the oats, and thus the speculator, after absorbing the
order, passes it on to others ready to take it. This practice keeps
the market constantly open for the actual commercial needs of the
country. (3) Wheat, oats, corn, and cotton are handled at a lower
margin of cost because they are hedged in the pit. The risk is
shifted to the speculator, whose choice is to bear the risk, with the
profit or loss going with it.

The actual mechanics of speculation must be discussed in the
chapter dealing with the grain trade (Chapter XXII).

3. Speculation: Its Evils. — The chief evil of speculation, par-
ticularly on the organized exchanges, is the participation therein
by the unfit. The financially unfit constitute the bulk of this
class of unfit persons. It is true that some speculative houses —
an increasing number — carefully scrutinize the record of each cus-
tomer and would-be customer, to determine his financial ability
to speculate and stand the probable losses. A few houses are
lax in this. Again, some persons are uiifit to speculate by reason
of the position of trust which they occupy, such as bank clerks,
or cashiers in banks. These should be rigidly excluded from open-
ing a speculative account with any member of any organized
exchange. No member, in turn, can afford to enter such an account
on his ledger.

The cornering of the market is sometimes mentioned as one
of the evils of speculation. But since this activity is strictly
forbidden by the rules of the organized exchanges, it cannot in
fairness be considered as a part of the activities of these exchanges.
It is an activity the importance of which, so far as it has any, is
practically confined to the unorganized markets.

4. Speculation and the Public Interest. — Under our present
system of producing crops in the summer time, of financing them,
of storing them, and of consuming them during twelve months of
the year, speculation is an inevitable economic necessity. There-
fore efforts aiming to reform or abolish speculations should be
directed towards the foundation of the system, namely, the system
of distributing, warehousing and financing those products in

18

274 ' SPECULATION

which most speculation occurs. Perishable crops, such as fruits
and vegetables, should be directed by the organized growers
themselves to those markets that are not already glutted. For
instance, consider the case of ripe peaches. Growers in New York,
Pennsylvania, Ohio, and Maryland ship to Pittsburgh, which is a
very important distributing point to the mining towns in that
region. The market reports show that Pittsburgh's consuming
capacity is about 15 carloads of peaches a day in the peach moving
season. But, as illustrating market glutting by shippers, mention
may be made of one week's record recently in that market. The
week's receipts ran from Monday to Friday inclusive on the nor-
mal basis. But on Saturday 78 cars arrived. Of course these
cars were bought — by speculators (who performed thereby an
important market function) — but the glut forced the price down,
not the speculators. The shipment of peaches to any particular
destination lies wholly in the hands of the shippers, and the growers,
if they are not suited with present methods, have the power in
their own hands to change things. They have the liberty and the
encouragement to organize and distribute their crop where specu-
lative risks will be greatly reduced. In reaUty, it is the grower
who is employing the speculator to market his fruits and vege-
tables for him, in cases like the above, and hence if criticism is
due, it is due in part to the grower himself.

The more non-perishable crops, such as grains and cottons,
must be stored for a period of months, and in some cases over into
the next crop season, before they enter into consumption. This
storage problem brings with it the credit problem, since the
grower in most cases must have his money when he parts with his
crop. In many cases the "middleman" is the banker for the
grower, functioning through some local elevator, merchant or
dealer. But in any event, the middleman commonly borrows
from the big money markets and gets the money to the point of
production — a banking function. Fireproof warehouses, under
private management, with low insurance costs, issuing negotiable
warehouse receipts, all under public supervision and regulation,
are coming into general use. Under the Federal Reserve Banking
system the use of trade acceptances is likewise growing rapidly
in favor. But the point to be emphasized here is that a solution
of the warehousing and the credit problems wall go far towards
solving the speculation problem. To spend time denouncing
speculation and speculators is about as futile and barren an
occupation as can well be imagined, unless it be followed with

QUESTIONS ON THE TEXT 275

constructive suggestions. The business world recognizes that
many risks cannot be ehminated but can be distributed, as is
evidenced by fire insurance, rent insurance, habihty insiu-ance,
and the many other forms of insurance. In agriculture, crop
insurance, hail insurance, live-stock insurance, and the other forms
of agricultural insurance go a long way towards distributing the
risks of production. In marketing, however, some risks and some
speculation seem difficult to distribute, and hence remain to be
shifted to the shoulders of the speculator.

To Sum Up. — Gambling, in the form of lotteries, has been long
since outlawed and abolished. Gambling in many milder forms
is falling into social disrepute. The social instinct is against it.
Unorganized speculation is now a matter of public clamor and
popular concern. It is a symptom, rather than a fundamental
condition. But ''the people hath spoken," and the ban of dis-
approval has been placed on some forms of unorgam'zed specula-
tion but not on others. Confusion exists. No sharp definitions
have been evolved. The farmers themselves, while generally/ con-
demning ''speculation in food products," unblushingly speculate
in the land itself. And the land question is more fundamental
and more serious than the food question. Less attention should
be paid to speculation, and more to proper distribution, storage,
and credit. As to organized speculation, it is working out its
own rules, under the glare of publicity. It is performing an eco-
nomic function which should be continued till a better and cheaper
substitute can be found. Then it will cease to be a "problem."

QUESTIONS ON THE TEXT

1. Cite evidence from common observation that important words are often

used with ambiguous meaning.

2. Discuss the usage and meaning of the following terms: hoarding; corner-

ing the market; cash and future trading and speculation.

3. Distinguish two social classes, from the economic standpoint.

4. To which class was the founding of the Plymouth Colony due? Cite

evidence from the Charter of this colony.

5. Formulate a principle covering the right to speculate.

6. What does society want in the field of speculation?

7. Define speculation. Compare the dictionary definition with the ordinary

economic usage.

8. Is the retail merchant a speculator?

9. Define short seller.

10. Is the farmer a speculator?

11. Define gambhng. Distinguish from speculation.

12. Compare the volume of future trades with the volume of bank deposits,

and show economic significance.

13. Distinguish two kinds of speculation. Illustrate each.

14. In which form do most frequent abuses occur?

276 SPECULATION

15. What role is played by butter exchanges?

16. Comment on the ethics of the speculator.

17. What are the ser\dces of speculation? Three functions.

18. Show, by the case of the Eastern Shore of Virginia Produce Exchange,

the significance of the banking function in distribution.

19. The bulk of speculation in the United States is of what kind?

20. Discuss three popular fallacies concerning speculation in the organized

exchanges.

21. Compare fluctuations in price of oats, wheat and barley, and explain

the differences.

22. In what sense is it true that future trading stabilizes prices?

23. Show the three chief services of speculation in the organized exchanges.

24. What are the evils of speculation?

25. What is being done now to reduce these evils?

26. Show what the pubUc interest requires in the matter of speculation.

27. Distinguish clearly between fundamental reforms and mere treatment

of symptoms.

28. Summarize the main points of the chapter, showing the problems which

underlie speculation.

QUESTIONS SUGGESTED BY THE TEXT

1. Should prices fluctuate, or should they be "stabihzed "? Reasons for your

beUef. If prices are stabihzed, at what point should they be stabilized?
And by what authority? Should the price be a "just price" or an
"equihbrium price"? Define "just price." Since the consumers in
the United States have a majority of two to one over the pro-
ducers, price fixing by governmental authority would likely be shaped
in whose interests?

2. Outhne a practicable system of production, warehousing, financing, and

distribution that would contain the minimum of speculation. Would
such a system work under the present limitations and imperfections of
human nature?

REFERENCES

1. Anderson, B. M., Jr.: "Grain Speculation and Food Control," Ths
Annalist, May 21, 1917, pp. 689-690. A discussion of the functions of specu-
lation, with particular reference to the grain market.

2. "German Law Against Exchange Speculation." In Consular Reports
(Washington) as follows: Vol. 52, No. 194, Nov., 1896. Vol. 62, No. 235,
April, 1900. Vol. 64, No. 243, Aug. 28, 1900.

3. "Good and Evil in Speculation." Industrial Commission Report
(Washington) as follows: Vol. 10, pp. xxxvii-lxiv, p. 188. Vol. 6, pp. 89-224.
Vol. 19, pp. 185-186.

4. Haney, Lewis H. (Editor): "Studies in Agricultural Economics."
Bulletin 298. University of Texas, Austin, October, 1913.

5. Hill, John, Jr.: "Gold Bricks of Speculation." Chicago, 1904.

6. Rowland, Harold J.: "Speculation and Gambling." The Independ-
ent, New York, October 2, 1913, pp. 15-18.

7. Pickell, J. Ralph: "The Problem of Food Distribution," Rosenbaum
Review, Chicago, April 14, 1917, pp. 1-3.

8. Pickell, J. Ralph: "Rural Speculation." Rosenbaum Review, Chicago,
January 27, 1917, pp. 1-2.

9. Price, Theodore H.: "Short SeUing and the Speculator," Commerce
and Finance, New York, November 20, 1918.

10. Price, Theodore H.: "On Licensing Speculators," Commerce and
Finance, New York, December 4, 1918.

APPENDIX 277

11. "Wall Street's Fair Price Law" — A Discussion of the Use and Ethics
of Manipulation, Conducted in a New and Very Open Spirit by Members of
the Stock Exchange — The Intent Determines the Quahty of the Act. The
Annalist, New York, April 19, 1915, p. 372.

12. "Why we Stopped Buying at our Elevators." (Editorial). The
Saskatchewan Cooperative Elevator News, Regina, June, 1917, pp. 7-9.

13. Emery, H. C: "Speculation on the Stock and Produce Exchanges
of the United States." Columbia University Studies, New York, 1896.

14. ; "Legislation Against Futures." Political Science Quarterly,

X, 62-86.

15. Stevens, Albert C: "Futures in the Wheat Market." Quarterly
Journal of Economics, II, 37-63.

16. "Speculation on the Stock Exchanges and Public Regulation of the
Exchanges, Papers and Discussions at the 27th Annual Meeting of the Ameri-
can Economic Association, Princeton, New Jersey, Dec, 1914." Papers by
Samuel C. Untermyer and H. C. Emery: Discussions by Albert W. Atwood,
Walter E. Lagerguist, A. R. Marsh, Joseph H. Underwood, Wm. C. Van
Antwerp, Wm. Z. Ripley. American Economic Review, Vol. V, 24-111. Same
in condensed form, in Market World and Chronicle (New York), January 16,
1915, 70-84.

17. Brace, Harrison H.: "The Value of Organized Speculation,"
Boston, 1913.

For additional references, see chapter on the Grain Trade.

APPENDIX
" The Charter of New England — ^1620." — As illustrating the interesting
fact that "adventurers" (speciilators) founded the New England Colony (the
Plymouth Colony) and sent the early settlers there, the following extended quo-
tation is given from the original King James Charter of 1620.

"James, by the Grace of God, King of England, Scotland, France, and Ireland, De-
fender of the Faith, etc., to all whom these Presents shall come. Greeting, . . . Whereas,
since that Time, upon the humble Petition of the said Adventurers of the said first CoUonye
{i.e., London Colony), We have been graciously pleased to make them one distinct and
entire Body by themselves, giving unto them their distinct Lymitts and Bounds . . . Now
forasmuch as We have been in like Manner humbly petitioned unto by our trusty and well
beloved Servant, Sir Fferdinando Gorges, Knight, Captain of our ffort and Island of Ply-
mouth of the said Second Collonye, and by divers other Persons of Quality, who now intend
to be their Associates, divers of which have been at great and extraordinary Charge, and
sustained many Losses in seeking and discovering a Place fitt and convenient to lay the
Foundation of a hopeful Plantation . . . We would likewise be graciously pleased to make
certaine Adventurers, intending to erect and establish flfishery. Trade, and Plantation within
the Territoryes, Precincts, and Lymitts of the said second Colony, and their Successors,
one several distinct and entire Body, and to grant unto them such Estate — Prvieliges —
there, as in these our Letters — Patent — expressed. Divers of our good Subjects . . .
have for these many Years past frequented those Coasts ... In Contemplacion and serious
Consideracion whereof. Wee have thought it fitt according to our Kingly Duty, soe much
as in Us lyeth, to second and follow God's sacred Will, rendering reverend Thanks to his
Divine Majestic for his gracious favour in laying open and revealing the same unto us before
any other Christian Prince or State, by which Meanes without offence, and as We trust to
his Glory Wee may with Boldness goe on to the settling of soe hopefull a Work, which tendeth
to the reducing and Conversion of such Savages as remaine wandering in IDesolacion and
Distress, to Civil Societie and Christian Religion, to the Inlargement of our own Dominions,
and the Advancement of the Fortunes of such of our good Subjects as shall willingly intresse
themselves in the said Imployment, to whom We cannot but give singular Commendations
for their soe worthy Intention and Enterprize."

The Hudson's Bay Company. — The oldest corporation in the World is the
Hudson's Bay Company. It was chartered in 1670 by King Charles II, under
the title "Governor and Company of Adventurers of England, Trading into
Hudson's Bay."

Thus the word "adventurer" was once used to denote a " speculator " in
the better sense of the modern term.

Speculators of the kind named in the two cases above are necessary in
society in order to have any social progress.

278

SPECULATION
Barley Price Ranges, 18 Years, Chicago.

Year

IjOW

High

Range

Per cent
of fluctu-
ation

1899

Cents
35
34
38
37
36
30
35
38
40
46
43
42
55
42
42
44
48
58

Cents

55

67

66

73

62

61

55

58
110
106

82K

90
139
140

85

79

90
128

Cents

20

33

28

36

26

31

20

20

70

60

39 K

48

84

98

43

35

42

70

57 1

1900

97 6

1901

73.2

1902

97 3

1903

72.2

1904

103 3

1905

57.1

1906

52.7

1907

175.0

1908

130.4

1909

91.9

1910

114.3

1911

152.6

1912

233.3

1913 . . . •

102 4

1914

79.5

1915 ■ • . •

' 87 5

1916

120.6

Fluctuations in Prices of United States Bonds. — "Since November, 1916,
the 2 per cent consols have declined in market from 993^-100 to 96^ in October,
1917; the 3s of 1918 from 100^-101 1^ to 99-100; the 4s of 1925 from 110-
llOM to 105-1053^." Vol. 1, p. 7^.— Annual Report of the Comptroller of the
Currency, Washington, Year ending October 31, 1917.

Monthly Range in Price in New York, Noifember, 1916 to October, 1917.

Date

1916

Coupon bonds

Registered
bonds

4'8 of 1925

2's of 1930

Panama
3'8 of 1961

110 -llOM

99K- 99K

102 -102

IIOK-IU

99K- 99K

102 -102

liOK-liOM

99K- 99 K

101 -102

109 -llOK

99 - 99K

99K-101

108 -109

99 -100;^

99K-101

106 -108

98 - 99

95 - 99K

105 -106

96 - 98

90 - 94

104 -105M

95 K- 98K

80 - 90

104K-105K

96 H- 98 K

80 - 80

104K-105M

96K- 96K

80 - 80

105H-105K

96K- 96K

80 - 80

105 -lOb'A

96K- 97K

80 - 80

November

December

1917

January

February

March

April

May

June

July

August

September

October

(Vol. 2, pp. 52, 53.)

CHAPTER XVIII

THE AGRICULTURAL PRESS

There are at present nearly five hundred agricultural papers
in the United States. While the bulk of these have an average
circulation of fewer than one hundred thousand copies, yet there
are about fifty papers with a circulation of over one hundred
thousand each. There are seven farm papers with an average
circulation each of over five hundred thousand. It is obvious,
therefore, that a majority of the farmers read at least one agri-
cultural paper, and many of them more than one paper.

The agricultural press is now a highly differentiated institution,
so that even the most highly speciaUzed farm interest has its
organ. For instance, not merely does the stock grower have his
paper, but there is a particular paper for a particular kind of stock,
such as Holstein cows or Percheron horses. Similarly, with the
gi'owers of field crops. Not only are there hay joiu*nals, but
journals dealing with alfalfa. However, the agricultural press,
considered from the broader standpoint, is made up not merely
of these specialized journals dealing with live stock, horticulture,
bee keeping, etc., but also and chiefly of that type of farm paper
which is written for the farmer's entire household.

Point of View. — The best type of farm paper to-day looks on
the farmer first as a citizen. Such a paper is nonpartisan and
nonsectarian. Yet, in a very real sense, such a paper is much
concerned with the broader political and reUgious questions of the
day. The farmer is regarded first of all as interested and concerned
wdth the civil, social, economic, political, educational and moral
forces about him — the general questions of good citizenship. And
in the second place the farmer is looked upon as interested and
concerned about good farming. A careful examination of a num-
ber of our largest and best farm papers shows that their editorial
point of view towards farming is, first, a good man, and second,
a good farmer.^

Best Type of Farm Paper. — The best type of farm paper is of
course that one which best serves the real and permanent interests
of its readers. It performs a real service, not merely to the farming
''class" but also to the State and nation. It has a deep responsi-

^ See Appendix to this chapter for different viewpoint

279

280 THE AGRICULTURAL PRESS

bility, and is meeting that responsibility, in making better and
more prosperous farmers and better and more intelligent citizens.
The paper that caters in a narrow sense to the mere economic
needs of the farming class is not the best type of farm paper. It
is a mere trade paper. Likewise does that type of farm paper fail
of high success which attempts to take part, in a partisan way,
with the momentary and passing issues of politics. The best type
of farm paper — and there are now several farm papers in this
class — is performing service for its readers. It is published in the
heart of the section which it serves. It has an editorial staff large
enough and able enough to keep in contact with the farmer and
the farm home. Its leading articles fit local conditions. The
individual farmer is reached and helped. The farm community
receives more help than the individual farmer. The social side
of rural community life is properly evaluated and treated. The
significance is recognized of the slogan "Better farming, better
business, better Uving." This type of paper is truly a household
paper, since it contains departments and articles of interest to
each member of the farm household. A maximum number of
articles appear fresh in this paper and a minimum number are
clipped from other sources. It maintains a clear, wholesome moral
tone. The farmer prefers this tone in a paper.^ The advertising
pages of this type of paper are a good index to the service it is
rendering its readers. No patent medicine advertising is carried.
No financial advertising is carried. In fact, so far are the interests
of the subscribers protected that now the papers of this type are
adopting the policy of guaranteeing their own advertising. In
short, these papers are rendering service and protection of a
high order to their patrons. They are rural institutions of
first importance.

Worst Type of Farm Paper. — ^There are a few farm papers
scattered over the country that apparently have not taken deep
root in the soil. Their editorial staff is not rural minded. Their
contents are collected mostly by the scissors. They prostitute
their advertising pages, teaching the farmer to spend his money
for "cancer cures," "rheumatism cures,'' and other fake remedies,
as well as for brass jewelry, gimcracks, gewgaws, frauds, shoddies
and other bogus merchandise. These papers are parasitic in their

2 Agricultural communities were the first to vote for prohibition — of the
liquor traffic — ^the cities the last. Farmers look upon the cities as being some-
what cynical on moral and religious questions. In these matters the farmers
are fundamentally conservative.

OTHER TYPES OF FARM PAPERS

281

nature, taking from the farm community, and leaving nothing
or less than nothing in return.

Other Types of Farm Papers. — Very few farm papers attempt
to be national in scope. Yet what may be termed the national
type is exemplified by the Farm Journal of Philadelphia. Pub-
Hshed in a great eastern city, this paper now circulates in every
State, and particularly in the West and far West. Its editorial
staff has been able to sense those questions and poHcies which are
primarily interesting to the farmer as a good citizen ; the questions
of technical farming — horticulture, live stock, farm crops, market-

FlG. 48. — Henry Wallace, founder of
Wallace's Farmer.

Fig. 49.— W. D. Hoard, founder of Hoard's
Dairyman.

ing, etc. — have likewise been found to be of sufficiently nation-
wide interest to hold the readers. Hence this somewhat unique
journal has prospered and grown to over a milhon subscribers.
Another type of farm paper is that which reflects the outstanding
personality of one man. In such cases the original foimder has
been a man of power and significance in the farming world — a
real agricultural statesman. Two familiar examples of this are
the papers founded by Henry Wallace (Fig. 48) of Iowa and W. D.
Hoard (Fig. 49) of Wisconsin.^ Each of the papers founded by
these two men became an institution in its community and in the

3 Wallace 's Farmer, Des Moines, Iowa. Hoard's Dairyman, Ft. Atkin-
son, Wisconsin.

282 THE AGRICULTURAL PRESS

nation, and each paper reflected the fineness of mind and the clean,
wholesome constructive personality of its founder.

The Specialized Farm Paper. — The differentiation of the farm
press, as mentioned above, has been carried to a very high degree.
No sooner does a specialized farming interest develop, apparently,
than a paper is organized to meet that need. As an example of
this fact the case of the Lake Erie grape belt may be mentioned.
Grape culture was instituted here and finally spread to an area
some three miles wide and sixty or seventy miles long. At once
there was established the paper to fit this industry, ''The Grape
Belt" by name, and it continues to reflect faithfully conditions
in that small district. Thus the farmer interested in pigeons,
bees, any breed of poultry or live stock, any kind of tame hay or
field crop, any kind of fruit or berry, or any social aspect of rural
life, will be able to find a paper to suit his needs.

The Country Weeklies. — The country weekly newspaper, up
to recent date, has taken its color and ideals largely from the city
press. It has aimed to furnish the farmer primarily and frankly
a political newspaper, with all the advantages and limitations of
that aim. In other words, it considered the farmer as first, last
and all the time a voter and a partisan. His class interest as a
farmer was not recognized, in most cases. However, in late years,
due chiefly to the county agricultural agent movement, a change
has come over the wide-awake country weekly. The interests of
permanent agriculture begin to give color to the paper. A " literary
revolution" is taking place in the editorial make-up of these papers.
Since these papers are published in every rural community, and
literally go back to the grass roots, the significance for good of
this revolution is hard to measure.

Agricultural Press and Scientific Fanning. — ^The agricultural
press forms the most important mediimi between the farmer on
the one hand, and on the other hand the United States Department
of Agi-iculture, the State Departments of Agriculture, the State
Agricultural Colleges and State and Federal Experiment Stations.
Scientific bulletins are translated into the language of the farmer.
And conversely successful practices worked out and applied by
individual farmers, are examined and described by the agricultural
press so that aU farmers may be acquainted with what each
successful farmer is doing.

Agricultural Publishers Association. — The agricultural press
has developed an organization of its own known as the Agricultural
Publishers Association. It is hoped that one effect of this organiza-

APPENDIX 283

tion will be to raise the standard of those agricultural papers that
are not serving their community until they approach the high
type of service rendered by the best class of farm papers.

QUESTIONS ON THE TEXT

1. How many agricultural papers are published in the United States?

2. How many of these have over 100,000 circulation? How many over

500,000 ? How many over 1,000,000 ?

3. Discuss the differentiation of the agricultural press.

4. Discuss the point of view of our agricultural press. Cite a case of the

opposite view.

5. Describe the best type of farm paper.

6. Describe the worst type of farm paper.

7. Describe and illustrate some outstanding, individual types.

8. Show to what extent the specialized farm paper has been developed.

9. Comment on the country weeklies.

10. Show the relation of the agricultural press to scientific farming.

11. What is the Agricultural PubUshers Association?

12. Arrange in proper rank a list of the States having the largest number of

agricultural papers.

QUESTIONS SUGGESTED BY THE TEXT

1. Secure copies of farm papers of different classes, and compare them as to

their relative merits. Include in this study the following points: edi-
torial pohcy; amount and character of advertising; amount of original
matter and amount of reprint; appearance of paper; departments;
moral tone.

2. Make a similar study of some representative country weeklies.

REFERENCES

1. Advertising and SeUing Magazine, 95 Madison Ave., New York City.
Publishes an annual directory of farm papers.

2. Tucker, Gilbert M.: "American Agricultural Periodicals." An
Historical Sketch. Privately printed. Albany, New York, 1909.

APPENDIX

The Agricultural Press of the United States. — The following is a partial
list of farm papers of 100,000 circulation and over, for the year 1916.

1. 1,000,000 circulation and over.

Pennsylvania. Farm Journal, 1,085,000, Philadelphia.

2. 500,000 to 1,000,000.

Iowa. Successful Farming, 788,000, Des Moines.
Kansas. Missouri Valley Weekly, 501,000, Topeka.
Kansas. Household, 777,000, Topeka.
Massachusetts. Farm and Home, 686,000, Springfield.
Minnesota. Farmers Wife, 757,000, St. Paul.
Ohio. Farm and Fireside, 631,000, Springfield.

3. 300,000 to 500,000.

Illinois. American Fruit Grower, 300,000, Chicago.

Ilhnois. Better Farming, 324,000, Chicago.

Indiana. Farm Life, 405,000, Spencer.

Minnesota. Rural Weekly, 309,000, St. Paul.

Missouri. Kansas City Weekly St-ar, 350,000, Kansas City.

Ohio. Farm News, 387,000, Springfield.

Pennsylvania. Country Gentleman, 324,000, Philadelphia.

4. 100,000 to 300,000.

Alabama. Progressive Farmer, 206,000, Birmingham.
Colorado. Great Divide, 104,000, Denver.
Georgia. Smithern Ruralist, 272,000, Atlanta.
Illinois. American Farming, 200,000, Chicago.
Illinois. Orange Judd Farmer, 153,000, Chicago.

284 THE AGRICULTURAL PRESS

Illinois. Prairie Farmer, 104,000, Chicago.

Illinois. Farming Business, 103, dOO, Chicago.

Illinois. Farmer's Review, 105,000, Chicago.

Illinois. The Breeder's Gazette, 100,000, Chicago.

Indiana. Up-to-date Farming, 191, CKX), Indianapolis.

Iowa. Kimball's Dairy Farmer, 184,0Ci0, Waterloo.

Iowa. Iowa Homestead, 156,000, Des Moines.

Iowa. Wallace's Farmer, 100,000, Des Moines.

Kansas. Farmer's Mail and Breeze, 112,000, Topeka.

Kansas. Capper's Weekly, 257,000, Topeka.

Kentucky. Inland Farmer, 129,000, Louisville.

Michigan. Gleaner and Business Farmer, 101,000, Detroit.

Minnesota. Farm, Stock and Home, 138,000, Minneapolis.

Minnesota. Farmer's Dispatch, 104,000, Minneapolis.

Minnesota. Northwest Farmstead, 112,000, Minneapolis.

Minnesota. American Home Weekly, 269,000, St. Paul.

Minnesota. The Farmer, 142,000, St. Paul.

Missouri. Farmer and Stockman, 107,000, Kansas City.

Missouri. Missouri and Kansas Farmer, 112,000, Kansas City.

Missouri. Journal of Agriculture, 154,00)0, St. Louis.

Missouri. National Farmer and Stock Grower, 150,000, St. Louis.

Missouri. Kansas City Weekly Journal, 261,000, Kansas City.

Nebraska. Nebraska Farm Journal, 103,000, Omaha.

Nebraska. Twentieth Century Farmer, 111,000, Omaha.

New York. American Agriculturist, 131,000, New York.

New York. Rural New-Yorker, 172,000, New York.

Ohio. Ohio Farmer, 136,000, Cleveland.

Oklahoma. Oklahoma Farmer and Stockman, 113,000, Oklahoma City.

Pennsylvania. National Stockman and Farmer, 140,000, Pittsburgh.

South Dakota. Dakota Farmer, 100,000, Aberdeen.

Tennessee. Southern Agriculturist, 153,000, Nashville.

Wisconsin. Hoard's Dairyman, 100,000, Ft. Atkinson.

Reliable Advertising Only. — Group of six farm papers printing following
guarantee: ''We positively guarantee that each advertiser in this issue is
reliable. We agree to refund to any subscriber the purchase price of any
article advertised herein if found to be not as advertised."

Farm and Home, Springfield, Mass., and Chicago, 111.

Northwest Farmstead, Minneapohs, Minn.

Orange Judd Farmer, Chicago, 111.

American Agriculturist, New York City.

New England Homestead, Springfield, Mass.

Dakota Farmer, Aberdeen, S. D.

Two Policies in Editing a Farm Paper. — (1) Give the farmers what they
want; (2) Give the farmers what they need.

Farm papers roughly fall into two groups, as classified in the above heading.
As illustrating group No. 1 — "giving the farmers what they want" — the fol-
lowing quotation may be given from an editorial in the June 1, 1919, issue of a
prominent farm journal:

"In short, my idea (of editorial policy) is to find what the farmers want and then help
them get it. I regard (name of paper) as being in the position of an attorney for the farmers
and that all public questions should be considered from the standpoint of the farmers, and
every effort made to have them answered, so that the best interests, both economic and social,
of the farmers shall be served."

A different view is expressed in the following quotation from a successful
editor:

"Just what is a farm paper? Judging from the letters received at the editor's desk, it
ranges all the way from a class sheet that praises everybody connected directly with farming
and damns everybody else, to a paper that gathers its ideas and ideals with the scissors and
assembles them with the paste pot. Now our idea of a farm paper has been in process of
growth some thirty odd years, and is still growing. It cannot all be expressed in a paragraph,
but here is one point to consider. The farm paper that is of real service to the farmer is
one that seeks at all times to find the facts and tell the truth. In order to serve its farmer
readers well it must have more than a class vision. It must deal directly and fairly with
those problems that relate to the well being of farming and not of farming alone, but of
State and national life as well. We cannot get away from our neighbors, and our neighbors
constitute all the rest of the folks in the country. We cannot do without them any more
than they can do without us. Tolerance and charity and good-will are essential elements
of growing successful farm management because good-will and charity and tolerance make
for neighborhood and national life and happiness." — Hugh J. Hughes.

CHAPTER XIX

FARMERS' ORGANIZATIONS

In February, 1919, fifty bankers, delegated by 37 State Bankers'
Associations in thirty-seven States, were in session in Washington,
D. C, with the heads of the United States Department of Agri-
culture, the Farm Loan Board, and the Bureau of Education,
mapping out a program for agricultural development, better rural
education and the general improvement of rural social conditions.
There was no farmer present delegated to voice the farmers' views
or state their wishes. This case is typical. Many efforts have
been made to ''uplift" the farmer without consulting the farmer.
This distinguished gathering in Washington represented a very
large share of the wealth and the brains of the United States, and
very able leadership. A very comprehensive program for improv-
ing rural life was adopted. This program was next offered, ready-
made, to the farmers. Whose fault was it that farmers were not
directly represented at this conference and at many other similar
conferences devoted to the serious and worthy cause "of improving
rural conditions? The farmers themselves are to blame. Lack
of organization among the farmers explains it. Bankers' organiza-
tions in 37 States were directly represented. There was no one
organization of farmers covering 37 States. There are many differ-
ent organizations of farmers in all the States, but thus far they have
not federated or coordinated their efforts or mobilized their forces.

Means of Securing Benefits. — Farmers' organizations have two
general means of securing benefits for themselves, through self-
help and through State aid.

President Wilson, in addressing the fiftieth annual session of
the National Grange, commended the Grange for following the
principle of ''self-help." It is a significant fact that the Grange
has followed the principle of self-help, and that it is the sole
survivor of fifty years' standing of the many national farmers'
organizations in the United States. Those organizations which
have worked on the principle of State aid — except State aid as a
temporary means towards self-help — have succumbed.

Class Organization. — The comment is frequently made that
our various economic classes are all well organized, except the
farmer. Thus, it is said, the manufacturers have their organiza-
tions; the wholesalers theirs; the jobbers theirs; the commission

285

286 FARMERS' ORGANIZATIONS

merchants theirs; the credit men theirs; the bankers theirs; and
so on, and that these various interests in any one city are united
into a local Chamber of Commerce, and these local chambers
are federated into one grand central organization at Washington
known as the Chamber of Commerce of the United States. Simi-
larly, the comment is heard that various trades or crafts of laboring
men are organized into unions, and that these large unions are
federated into one grand central organization, the American
Federation of Labor, also with headquarters at Washington. The
farmer is commonly spoken of as individualistic, as inarticulate as a
class, without voice and without protection. In a superficial sense
of the word these comments are all true. The farmers are slow
in forming any one great national federation of farmers' organ-
izations comparable with those of labor or capital. But neither
does the American Federation of Labor comprise all the great
labor unions of the country. Neither do all so-called ''capitahst"
enterprises come within the purview of the Chamber of Commerce
of the United States. At the present stage of economic develop-
ment, organized capital and organized labor are able to mobilize
their forces quickly and effectively, while the farmers can mobilize
themselves but slowly and with indifferent success.^

Difficulty of Classifjdng Farmers* Organizations. — A logical
classification of farmers' organizations is desirable, but difficult to
make. This is true, whether the discussion be of the living organ-
izations or the dead ones of the past. Among living organizations
which ones, for instance, are doing most for their communities?
Two representative farm papers, one in the Pacific Northwest,

1 As a typical example of strong organization and effective mobilization,
take the following case of the National Association of Credit Men, an Asso-
ciation of 25,000 members:

"The Association Acts in an Emergency. — The adaptability and facility with which the
National Association of Credit Men, because of its peculiar composition, can act in a threat-
ening situation was well illustrated during the last fortnight. A strike of the fire fighting
forces of the city of Cleveland had lett it with practically no fire department protection.
The National office was seen by leading insurance interests in New York, and their position
explained — that, of course, a seriously increased hazard not contemplated in the policies
covering property in Cleveland had been injected by the strike, that it was not a matter
of rates, but that the companies were in no position to risk the chance of a small fire starting
in the congested district of the city becoming a conflagration. Hence they would have
to withdraw.

"The National office asked if time could be had to communicate with the Cleveland
Association of Credit Men. This was readily granted, and President Klingman fully in-
formed by wire. In a few hours the National office was informed that the officers and
directors of the Cleveland Association had met certain city officials, and it was felt that
within seventy-two hours conditions would be righted.

"This reply was communicated to the insurance interests, which said that no adverse
action would be taken pending deliberations.

"Within forty-eight hours President Klingman had wired that the mayor had arranged
for the return of the fire department force, and that the city at that moment had had restored
the normal fire protection. The insurance companies were immediately notified and ex-
pressed their sincere appreciation." — From General Letter No. 8, Feb. 1, 1919, Natiojial
Association of Credit Men, to Members.

THE FARMERS' NATIONAL HEADQUARTERS 287

one in the Mississippi Valley, made extensive inquiries in this
field, and drew from theirreaders many interesting replies.^ Readers
in the Pacific Northwest named various organizations, including
among others the following: the Grange; Farmers' Educational and
Cooperative Union; village and city Commercial Clubs; Fruit
Growers' Associations; local church; organizations within local
churches. The paper in the Mississippi Valley conducted a
^'Country Life Betterment" contest, offering substantial prizes for
the best articles written on the subject. The five winning contest-
ants named the followdng organizations: A Farmers' Club in
Montana; A Community Club in Wisconsin; A Ladies' Auxiliary
Society of a Farmers' Club in Michigan; A County Improvement
Association in Iowa; A Farmers' Cooperative Creamery in Minne-
sota. Honorable mention was also given to a church congregation
in Minnesota, and a Town and Country Community Club in New
York. The above lists include two national farmers' organizations
— the Grange and the Farmers' Union — and a great many purely
local farmers' organizations. For the purposes of this chapter
li\dng farmers' organizations are first classified as local, national,
and federation.

1. Federation of Farm Organizations. — Many efforts have
been made to federate the farmers. The most popular plan has
been to establish at Washington a central headquarters located
in a Temple of Agriculture. And now that the American Federa-
tion of Labor is occupying its own Labor Temple the idea has
gained more potency. As evidence of the growing popularity of a
national federation of agriculture, ten recent efforts may be named,
although only three may be discussed in any detail: (1) National
Agricultural Society; (2) National Chamber of Agriculture Com-
mission; (3) National Chamber of Agriculture; (4) American Agri-
cultural Association; (5) National Agricultural Association; (6)
National Agricultural Organization Society. This last is a frank
attempt to transplant Sir Horace Plunkett's Irish Agricultural
Organization Society bodily in American soil. Hence its slowness
in taking root; (7) National Milk Producers' Federation; (8)
Farmers' National Headquarters; (9) National Board of Farm
Organizations; (10) American Federation of Farm Bureaus. The
last three ^vill be considered in turn.

(a) The Farmers' National Headquarters. — In the year 1910
a group of farmers, coming from a number of State farmers' organ-

2 The papers referred to are The Washington Farmer, Spokane; and The
Farm, Stock and Home, Minneapolis.

288 FARMERS* ORGANIZATIONS

izations of somewhat progressive or radical tendencies, met in
Conference in Washington, and decided upon a plan of national
federation. Their widely circulated prospectus announced:

''The end kept steadily in view is a Temple of Agriculture as
the National home of the associated farm organizations, thus
providing for the fitting representation of the great foundation
industry of agriculture at the nation's capital."

The Conference decided in favor of establishing a Farmer's
National Headquarters in Washington. One plank in the plat-
form adopted there read as follows:

"To establish National Headquarters at Washington, to include every-
thing needed to enable farmers to keep a close watch on how theie* business
is attended to by Congress and the Departments. Such headquarters are
needed not only to attend to the farmers' interests and to insure their securing
a square deal, but they are needed to give the right support to the Representa-
tives in Congress who actively support the farmers' program, and as a clearing
house for all who desire to cooperate with the organized progressive farmers
in pubHc welfare work. We appeal to all farmers and all other pubhc-spirited
citizens, to assist in making this effort to establish a people's legislative clearing
house a success."

The purpose and scope of this federation's work are clearly
foreshadowed in the plank and prospectus quoted above. Officers
are maintained at the capital, in charge of a permanent manager.
An official organ is issued.^ The chief activity is in the legislative
field — to promote desired legislation, to oppose undesired legisla-
tion. Among measures supported in the past are these: Parcels
Post; Direct election of United States Senators; Federal Farm
Loan Act. Among pending measures for which this federation is
now working are these: Government owned and operated mer-
chant marine; Government ownership and operation of the rail-
roads; Government ownership and operation of natural resources
now in private hands. The method of work by this federation
consists largely in two things — in conferences and in farmers'
national committees. Conferences bring together representatives
from organizations specifically concerned in pending govern-
mental policies. Farmers' National Committees likewise rep-
resent these same organized farm interests, and thus form a
temporary subfederation. In this sense the Farmers' National
Headquarters becomes the joint Washington office of various active
farm organizations. In some cases the affiliation is temporary —
while the emergency lasts; in other cases a definite relationship
is established. The published fist of farm organizations having
their Washington offices in the Farmers National Headquarters

* The Farmers' Open Forum, Washington, SI. 00 a year.

AMERICAN FEDERATION OF FARM BUREAUS 289

includes the following: Farmers' National Legislative Council;
American Society of Equity; The Gleaners; The National Dairy
Union; National Creamery Butter Makers Association; American
Association of Creamery Butter Manufacturers; Rural Credit
League of America; the Postal Express Federation.

(b) The National Board of Farm Organizations. — This Feder-
ation was formed in Washington in 1917. It is laboring to secure
a Temple of Agriculture in Washington, as the home of the organ-
ization. Conferences are held from time to time; policies are
formulated and adopted; propaganda for or against legislative
measures is carried on. Advice is given to the president of the
United States on matters concerning the farmers' welfare. Pro-
tection is given to the farmeis' interests. The published list of
affiliated societies includes the following: (1) Farmers' Educational
and Cooperative Union of America (generally known as the
Farmers' Union); (2) National Council of Farmers' Cooperative
Associations; (3) National Dairy Union; (4) Pennsylvania Rural
Progress Association; (5) National Agricultural Organization
Society; (6) National Conference on Marketing and Farm Credit
(which pet in Chicago in 1914, 1915, and 1916) ; (7) Farmers'
National Congress; (8) National Milk Producers' Federation; (9)
Federation of JeAvish Farmers of America; (10) Farmers' Society
of Equity. Of the above ten organizations not all are active. And
the American Society of Equity, as a national body, is not affiliated
with the above federation. These two federations of farmers —
Farmers' National Headquarters and the National Board of Farm
Organizations — are both located in Washington, but they do not
work together. Both represent very earnest attempts to organize
a federation from the top down. It is a very difficult matter to
organize a federation of farmers from the ground up — from the
individual farmer, through his local unit, up through the State
body into a national federation or council, following the example
of the political organization of our government. The County
Agent movement, with its supporting Farm Bureau, prepared the
way for such a democratic organization.

(c) American Federation of Farm Bureaus. — A separate chap-
ter (XXI) is reserved for a discussion of the County Agent move-
ment, and in that chapter the County Farm Bureau is described
as the organization of farmers within the county which has imme-
diate charge of the County Agents' work. The Farm Bureau,
therefore, may be briefly described here, in anticipation, as a
voluntary organization of individual farmers, supported by the

19

290

FARMERS' ORGANIZATIONS

annual membership dues of these farmers. These membership
fees vary in different States, from one dollar a year to ten dollars
a year per member. The organization is clearly one of farmers,
by farmers and for farmers, free from undue domination by any
outside interests, governmental, commercial or otherwise. As
these local county units became strong, it was a logical step to
federate the county units within a State into a State Federation
of Farm Bureaus. By the beginning of the year 1919 the following
18 States had such State Federations: California, Colorado,

Delaware, Idaho, Illinois, Iowa,
Massachusetts, Michigan, Mis-
souri, Montana, Nebraska, New
Hampshire, New York, Ohio,
Pennsylvania, South Dakota,
Vermont, West Virginia. Clearly,
the next logical step was to unite
the State federations into a
National Federation of Farm
Bureaus. This was done in the
year 1919 under the presidency of
J. R. Howard of Iowa (Fig. 50).
Then for the first time, agricul-
ture as a single great industry,
became organized, mobilized,
provided with a voice in national
affairs. In this organization the
farmers have a means of formu-
lating and announcing policies;
they have the machinery for
formulating demands for legislation; they have an institution which
will encourage them to organize for the study of educational, eco-
nomic,social,and political problems; they have constituted amedium
through which the membership may act collectively. They are on
a par with so-called ''organized labor" and "organized capital."
2. National Farmers* Organizations. — It is not the purpose of
this chapter to give an encyclopedic list of all farmers' national
organizations, for their number is too great for that. Only a
few are named here, and only one is discussed in detail, the oldest
one being selected for that purpose. Among the national organiza-
tions which have survived a period of ten years and over may be
listed these larger ones : Farmers' Union, Equity Union, American
Society of Equity, The Gleaners, and the Grange.

_ pi

ident of the American Federation of Ft
Bureaus.

NATIONAL FARMERS' ORGANIZATIONS

291

The Grange. — The Grange is to-day a powerful organization of
farmers, active in thirty-three States, with its own press, its own
body of organizers, its own lecturers, its own literature, poems,
music, and traditions. The story of its rise to power, its decline, its
new growth, and its achievements forms an interesting chapter in
the annals of rural life. Perhaps no other organization ever showed
such rapid changes from prosperity to depression and back to pros-
perity, such rapid shifts in the geographical territory it occupied.
A glance at the table below illustrates in a measure these two points
— a shifting from the South to the North; a decline in organization
in some States and a growth in organization in other States.

Grange States (States Having State Granges)

State granges

in 1875

bulk in the South

State granges

in 1917

bulk in the North

Grange
Grange

Grange
Grange

Grange
Grange
Grange
Grange
Grange
Grange

Grange

Grange
Grange
Grange
Grange

Grange
Grange

Grange

Grange

Grange

Grange
Grange

Grange
Grange

Grange
Grange

Arizona

California

Grange
Grange
Grange
Grange

Connecticut

Floricia

Idaho

Grange
Grange
Grange
Grange
Grange
Grange

Illinois

Iowa ....

Kentucky

Maine

Grange
Grange
Grange
Grange
Grange

Massachusetts

Minnesota

Mississippi. .

Grange
Grange
Grange

Montana .

Nebraska

Nevada

Grange
Grange

New Jersey

New York

Grange

North Carolina

North Dakota

Grange
Grange
Grange
Grange
Grange
Grange

Ohio

Oregon

Pennsylvania .

Rhode Island

South Carolina

South Dakota

Grange

Tennessee

Texas

Utah

Vermont

Grange

Washington

Grange
Grange
Grange
Grange

West Virginia

Wyoming

292

FARMERS' ORGANIZATIONS

The Grange as a& institution is the lengthened shadow of one
man, Oliver H. Kelley, of Washington, D. C. At the close of the
Civil War, Mr. Kelley was sent by the Commissioner of Agricnl-
tm-e on a long torn- through the unhappy Southern States, to study
and report on the destruction and reconstruction of Southern
agriculture. The human side of the study made the deepest
appeal to his imagination. It was a question of the farmer rather
than farming that seemed to him to need first attention. The
rancor of sectionalism, the bitterness of defeat, the helplessness of

Fig. 51. — Home of the first local grange organized in the United States, Fredonia, N. Y.

the situation all rankled in the breast of the southern farmer.
Mr. Kelley, being a loyal Mason, conceived the idea of a secret
society with a beautiful and symbolic ritual as a means of restoring
a fraternal feeling among the farmers north and south. It was his
niece, Miss Carohne A. Hall, of Boston, who gave him the idea of
having the new secret order include women as well as men. After
some two years of study and consultation with intimate friends,
Mr. Kelley in 1868 organized his new order, the Patrons of Hus-
bandry. It was organized at the top first, namely, the national
Grange, as the central unit was called. The order was to have
three subdivisions, namely, State Granges, County Granges (or
*'Pomonas") and Subordinate Granges. It required the heroic
faith and work of Mr. Kelley about two years to make any head-

THE GRANGE AS AN INSTITUTION

293

way with the new order. The first subordinate Grange was estab-
lished at Fredonia, New York, in 1868, by Mr. Kelley himself
(Fig. 51). Subordinate Granges were next started in Minnesota,
Illinois, Indiana, Ohio and Tennessee. From Grange No. 1 comes
S. J. Lowell, present master of the National Grange (Fig. 52).

It is well to pause here and enquire what were the real purposes
of the Grange when it was organized. Since pohtics and rehgion
were ruled out as subjects for discussion, these may be omitted
from consideration. Rereading
this early Grange history in the
light of the present it is evident
that the original purposes were
not sharply defined in any one's
mind, and were not set down in
hard-and-fast rules. It is also
evident that while Mr. Kelley
was a practical man, yet he was
actuated by lofty and idealistic
views of economic, mental, moral,
and spiritual blessings for the
farmers. Apparently the spirit-
ual blessings rather than the
material were uppermost in his
mind, and being a practical man,
doubtless his views were not the

same from year to year or in Fig. 52.— S. J. Lowell, a farmer of Fredonia,

state after State which he visited. liTuI^l^' sta'Jl^Grangl: ""Sir of" til
Time and place changed them. It ^^*^°"^^ ^'^"«^-

is only fair to let Mr. Kelley speak for himself here, so the follow-
ing quotation is introduced from his early writings :

"September 4, 1867: I have traveled some in our glorious country — for it
still exists as God made it, not^vithstanding the poUtical troubles. I have
noticed particularly those engaged in cultivating the soil who comprise the
bulk of the population, and among these are noble minds, rough diamonds, that
only need the polishing wheel of education to show their real value. Agricul-
tural papers and works of art are doing much good among those who will read
and think. Agricultural fairs have accomphshed much; but these come but
once a year, and while being advertised, create an interest; but as soon as they
are over the interest is gone. Now what I design is this: An Order that will
create an interest and keep it up. . . . Among the objects in view may be
mentioned a cordial and social fraternity of the farmers all over the country.
Encourage them to read and think; to plant fruiis and flowers; beautify their
homes; elevate them; make them progressive. It will increase the subscrip-
tions to the agricultural papers."

294 FARMERS' ORGANIZATIONS

In another letter he shows the poHcy toward young people.

" Bring up the boys and girls, and as fast as they prove by good behavior
and abihty that they are worthy of advancenient, give them a higher degree.
It will stimulate them to be temperate, studious, and good. They will feel
they are respected. Every organization will be provided with a library, and
from that they can have books to impregnate their minds with sound sense
... I hope we can inaugurate an Order that will elevate our occupation as
farmers, so that it will be a work of credit, not onlv to be a member of it, but
also make it an honor to be a cultivator of the soil."

Somewhat similar views are expressed by other prominent
members of the order. For instance, L. McKinstry, charter mem-
ber of Fredonia Grange (No. 1) and its first Lecturer, in his address
of welcome to O. H. Kelley (25th Anniversary of Fredonia Grange,
1893) said:

'•But in my estimation. Brother Kelley, the Order you founded has had a
higher value than in the line of material interests. It has served to stimulate
and improve the social side of farm life. The social, parliamentary and hterary
education that has been gained in the Grange has brightened the life of many a
family that would have otherwise led a lonely existence."

The rapid growth of the Grange, after the first three years of
hard pulling, was beyond the fondest expectations of its best
friends. The years 1873, 1874, and 1875 are the banner years in
Grange history — the climax coming in 1875, reaching a member-
ship of one and a half million. For instance, in the year 1868, ten
dispensations had been issued; in 1869, thirty-six; in 1870, one
hundred and thirty-four. In February and March 1874, four
thousand dispensations were issued. Granges were springing up
all over the country, like mushrooms in the night. Not only among
farmers, but also in villages and cities, Granges were being formed
the members claiming to be ''interested in agricultural pursuits."
Three thousand organizers were in the field in 1874. During these
three banner years the moneys received at the Secretary's office
amounted to $350,000. This made the Order financially strong.
Miss Hall compiled a song book for the Order for which she was
given $1,000 by the National Grange. The Grange showed tre-
mendous strength at this time in the States of Kansas, Missouri,
Iowa, Illinois, Indiana, Kentucky, Ohio. There is clearly a con-
nection here between the growth of the Grange and the economic
depression sweeping the country at this time. It is true that the
panic of 1873 was both industrial and agricultural. But the agri-
cultural depression was more deep-seated and more enduring than
the financial and industrial crisis. The West, after the Civil War,
had been too rapidly settled. Aided by a huge government sub-

A DECLINE 295

sidy, the Union Pacific Railroad had been completed across a

thousand miles of desert to the Pacific coast; the Northern Pacific,

aided by a land grant the size of a small kingdom, had pushed on

over the trackless prairies, across the Missouri river in Dakota.

This wholesale bribery of railroads to build where they were not

needed was matched by giving to each new settler who was bold

enough to pioneer a farm of virgin soil as rich as the world has ever

known. So the roads brought in settlers and the settlers brought

in new roads. Then came the spectacle of overproduction of food,

or, more correctly stated, more food was produced than existing

marketing machinery could distribute widely, and the settlers

began to sell food below the cost of production. Cheap food,

cheap land, but dear money was the settler's lot. Much capital

was needed to open up the new country. Interest rates were high.

Mortgages were hard to pay off. Cheap food from the west was

a blow to eastern agriculture also. The whole experiment in

promoted development collapsed. The railroads went bankrupt.

The farmers had their mortgages foreclosed. Many of them left

the country. In 1872 corn reached the low price of twenty-seven

cents a bushel on the Chicago Board of Trade. This meant ten

cent corn on the farm. Wheat in 1874 reached the low point of

seventy-eight cents in Chicago, a point not reached again till ten

years later. Many farmers saw in the Grange a chance to bring

about economic reforms, not realizing the fundamental nature of

their distress. It was at this time that Secretary Kelley reported

to the National Grange as follows:

''The educational and social features of our Order offer inducements to
some to join, but the majority desire pecuniary benefits — advantages in pur-
chase of machinery and sales of produce. To bring all the Granges into direct
communication and to devise a system of cooperation, devolves upon the
National Grange. But until its membership is much increased, we must wait
patiently the appearance of our new Moses, who is to present the coveted plan."

A DecUne. — Following 1875 came a rapid decline of the Grange.
It had reached and passed the first peak of its power. At a stormy
meeting of the National Grange at Charleston a measure was
parsed for the distribution of the surplus revenue among the sub-
ordinate Granges. Thus this large fund was dissipated, an insig-
nificant amount going to each local Grange. When the Grange
had manifested its strength, politicians and others, seeking only
the loaves and fishes, hastened to join. Too many non-farmers
had joined. Two Granges were organized in New York City,
one the ''Manhattan" on Broadway, with a membership of 45
wholesale dealers, sewing machine manufacturers, etc., represent-

296 FARMERS' ORGANIZATIONS

ing many millions of capital; the other was the ''Knickerbocker.''
Boston has a similar Grange, which after much trouble was expelled
from the National. Members of these city Granges were criticized
as being interested in the farmer ''as the hawk is interested in the
sparrow." In 1876 four thousand Granges were reported dehn-
quent. Salaries were at once reduced — the Master's from $2,000
to $1,200, and the Secretary's from $2,500 to $2,000. In 1879 the
Master's salary was dropped entirely, and the secretary reduced
to $600.

Renewed Growth. — ^And now there began a new period of
rapid growth. Some writers had reported the Grange as "dead."
But it suddenly found new life, especially in the North and the
East — particularly New England — and later in the Northwest.
At the session of the National Grange in 1885, held at Boston,
delegates were present from all the States and territories but eight!
Such were the vicissitudes of ten years! Granges, dormant for
many years, were resuscitated. New Granges were organized.
During the whole life of the Grange it has thus evinced an almost
incredible power to grow weak and become dormant and then
suddenly to rise again into full might and activity. Evidently it
contains the germs of life. It is now proper to pause and enquire
into the economic aspects of Grange endeavor and also into its
substantial achievements.

Economic Program of the Grange. — What are commonly called
the "Granger laws" had no connection with the Grange. The
so-called Granger legislation was railway legislation enacted by
the separate States in the days before we had any federal Inter-
state Commerce Commission or federal regulation of the railroads.
The States in the corn belt accordingly undertook to regulate the
rates and services of these roads, and the roads in turn resisted
all such regulation. The movement began in Illinois, in the Con-
stitution of 1870 and the railway regulation Act of 1871. Other
States now followed. The farmers back of this movement were
considered radicals, and came to be commonly called "grangers,"
the term not indicating any connection with any Grange. These
laws constituted "granger legislation," but not Grange legislation.
There are at least three bits of evidence for this statement. (1)
The date of the laws. The Illinois constitution of 1870 — the
pattern for all the rest — ^was adopted in 1870, after a few years of
agitation, and the Grange at that time had not a foothold in the
State. The State Grange of Illinois was organized in March, 1872.
By 1874 seven States had enacted "Granger laws." (2) The per-

ECONOMIC PROGRAM OF THE GRANGE 297

sonnel of the movement. In Illinois the real organ of agitation was
the "State Farmers' Association," composed of local ''Farmers'
Clubs." Its President, W. C. Flagg, testified in 1873 before the
Windom Committee that he was not a member of the Grange and
that his organization was an open, political one, not like the
Grange, a secret non-political one. (3) Grange principles. The
official declaration of purposes of the Grange, adopted in 1874
at St. Louis, states that the Grange is not hostile to railroads. In
1875 a resolution from Texas favoring raih-oad legislation was
suppressed. Congressman D. W. Aiken of South Carolina, long
a member of the Grange National Executive Committee, said in
an address, ''There existed in Illinois and Wisconsin and other
sections of the Northwest agricultural clubs whose province seemed
to be to wage war against transportation companies. Anathemas
were hurled upon the Grange for making this attack, whereas
every Patron of Husbandry knows that the Grange as such was
not a participant in the fight from beginning to end."

. However, whoever the farmers were that started the railroad
reform legislation, the Grange did quite early become drawn into
various economic movements. Mr. Kelley thought he was start-
ing a social and educational movement. Hard times in the West,
hard times in the East, low prices of farm products, soon caused the
original purpose of the Grange to be overshadowed by the cooper-
ative, anti-middleman feature. It was this feature which caused
the tremendous growth of the Grange from 1870 to 1875, and
almost threatened to transform the farmers into a race of mer-
chants and traders,'* As soon as the more radical Granges of the
West got control of the National Grange a movement was started
to make of it a gigantic cooperative scheme, with three national
purchasing agents, one at New York, one at Chicago, and one at
New Orleans. This scheme was dropped as impracticable. Then
came a period of the buying of patent rights to manufacture vari-
ous machines, such as harvesters, mowers, reapers, etc. The
Executive Committee expressed the theory of it in these words:
" To secure rights to manufacture leading implements . . . is pre-
eminently a duty of the National Grange, and a measure of the

^ An amusing incident occurred in connection with a General Business
Purchasing Agent appointed by the Minnesota State Grange. The Secretary
of the Minnesota State Grange wrote a letter to Mr. Kelley in Washington,
informing him officially that the first purchasing order had reached St. Paul,
the order being for the purchase of a jackass. Mr. Kelley wrpte on this letter
the following memorandum : " This purchasing business commenced with buy-
ing jackasses; the prospects are that many will be sold."

298 ' FARMERS' ORGANIZATIONS

greatest importance, directly, because the profits of manufacture
will thus be controlled by the Order, as well as the profits of trans-
fer or dealing; indirectly, by securing facilities that will favor the
introduction of manufacturing establishments in districts at
present far removed from them, and where their products are in
demand." The theory of having the farmers' machinery manu-
factured at his door was an alluring one. And to divert the
"profits" of the manufacturer into the pockets of the farmer was
then, and it is now, the subject of many a naive scheme to *'do
something for the farmer."

Interest in Cooperation. — It was into cooperative enterprises
of buying and selling, however, that the Grange was most actively
drawn at this period. The craze for cooperation has indeed been
compared to the craze for gold in 1849. The National Grange
adopted the policy of promoting cooperation after the model of
the English Rochdale system. An envoy was sent to England to
study the question and confer with British cooperators. A large
plan was conceived, whereby the Grange was to raise a capital
fund of $125,000 for building shipping depots, and a Grange
Company, called the ''Anglo-American Cooperative Company"
was to carry on trade directly with England. Three English com-
missioners visited America and investigated the plan, and decided
to erect their otvh warehouses at four seaboard cities. They were
to furnish clothing and other manufactured goods at ten per cent
discount, and were to buy farm produce at market price from the
Grange, provided the Grange would concentrate its purchases
through them. But a volume of business large enough to justify
the venture could not be guaranteed, and the project was dropped.
In the various States village cooperative stores were now quite
extensively started, although the Rochdale plan was not very
faithfully adhered to, particularly that feature of the English plan
which distributes surplus earnings on the basis of patronage and
not on the basis of capital. It is somewhat difficult to state the
net gain derived by Grange members from all their many ventures,
for substantially all of them were short-lived. In Iowa a purchas-
ing agent bought plows and reapers for the local Granges, effecting
a savings thereby in one year of fifty thousand dollars, according
to Grange figures. If this lowered the prices of implement dealers
who were taking too wide a margin, it was a permanent benefit to
the Grange. If, however, it served to put out of business entirely
many local dealers, thus making repairs difficult to secure, it was
a loss rather than a gain in the end. At this distance, it is not easy

ACHIEVEMENTS OF THE GRANGE 299

to know all the facts. In New York a State bu3dng agency was
established and later abandoned; then district agencies were tried,
making certain savings to the buyers, these, however, were also
given up after a few years, and purchases were made through
regular dealers. If the cold-blooded test of dividends be applied
to these experiments, they were all failures. If, on the other hand,
they be looked on as mere laboratories or experiment stations in
marketing, and in part also as a potential club over the head of the
over-mercenary middlemen, then these experiments were worth
while. They may be considered in the light of "potential compe-
tition" which put a brake on high prices. In 1876 the Patrons
were reported to own five steamboat or packet lines, twenty-two
warehouses, and thirty-two grain elevators in the Chicago territory
— principally in Iowa. In some cases State Granges financed these
enterprises, having funds with which to experiment.

Effect of Low Prices. — The economic crisis through which the
country passed in 1893 and 1894, and the agricultural depression
extending well up into 1897 very naturally caused many farmers
to turn to the Grange, as they had done in the 70's as a possible
solution for their economic ills. Corn in Chicago, for instance, in
1895 touched the low point of 25 cents a bushel, and in 1896 the
final bottom of 22^/2 cents ! This meant 10 cent corn on the farms —
a price much below cost of production. Wheat in Chicago reached
52^^ cents in 1894 and 53^ cents in 1895, which meant 40
cent wheat on the farms, a price below cost of production.
No wonder the State Granges of California, Oregon, Illinois,
Washington, Missouri, Virginia, and Pennsylvania sent a speaker
to Washington to present a memorial to Congress setting forth
the evils of the existing protective tariff sj^stem and asking for
protection to agriculture in the form of export bounties.^ No
''help" was given.

Achievements of the Grange. — The Grange has always taken
part in working for agrarian legislation which it wanted and fighting
legislation which it did not want. It has unquestionably opposed
with success much pending legislation potentially harmful to
farmers. The creation of the present Department of Agriculture
is probably due more to the Grange than to any other influence.
The rural free delivery of mail is largely also a Grange achievement.
The Grange also has to its credit a long list of constructive and
important acts concerning education, parcel post, the correct label-
ing of foods and drugs, etc.

^ 54 Cong. 2 Sess. Senate Doc. 157.

300 FARMERS' ORGANIZATIONS

Aaron Jones, Worthy Master of the National Grange, speaking
before the National Grange meeting in Portland, Oregon, in 1904,
summed up Grange achievements in these words:

"A generation has passed, crowded with greater advancement than any
similar period in the world's history, since our organization was founded to
meet conditions essential to pubUc welfare. It was consecrated to develop
the best type of social conditions, to foster and promote good citizenship, to
develop agriculture, to secure equity in the business relations of the agricul-
tural classes with the industrial and commercial inteiests of our country . . .
The Grange removed the isolation of the farm homes, inculcated and promoted
education, fostered and secured better schools for our children, raised the
standard of inteUigence among the farming population, developed the latent
talent of its members, making them logical thinkers and writers and fluent
.speakers, understanding the relation of agriculture to the varied and complex
social, industrial and commercial interests of our country and the world. These
glorious results were attained by steadfast adherence to the principles of our
Order and methods suggested by the founders of our Fraternity."

The greatest significance of the Grange, as well as its most
lasting achievements, have been in the social and educational
influences which it has mobilized. Farmers and their wives and
daughters have here met together, and together have enjoyed their
music, their literature, their recreations, their beautiful and digni-
fied ritual, and their serious deliberations. This wider neighbor-
hood contact has been wholesome and pure and good. It has made
for a certain culture and refinement not so easily attainable by
the rural dweller as by the urbanite. It has tended to socialize
the community and to foster community leadership by the farmer,
for the farmer, and of the farmer.

3. Local Farmers* Organizations. — For many decades farmers
have maintained with conspicuous success local and State-wide
organizations along economic and educational lines, with the
emphasis on the educational side. Thus we have the various State
Agricultural Societies, the State Horticultural Societies, the Pomo-
logical Societies, and so on. Most of these societies meet annually
and publish a volume of proceedings. The discussions have dealt
almost entirely with the production side of the problem, rather
than with the marketing side. Live-stock associations form another
large groups of a similar nature. A mere list of the names of these
would fill many pages.^

In more recent years these local farmers' organizations have
more and more gone into marketing questions. Thus we have an

^ The 1917 Yearbook, United States Department of Agriculture, pp. 595-
608, contains a b'st of 7 National Live-stock Associations, 19 National Poultry
Associations, and 314 State Associations of live stock and poultry.

POLITICAL ORGANIZATIONS OF FARMERS 301

increasing number of farmers' organizations that are purely
cooperative marketing associations. Some typical examples of
this have already been described in the chapter on Cooperation.
Others lay stress on the general protection coming from being
banded together. As an example of this may be cited the Farmers'
Grain Elevator movement. As the movement stands at the
present writing (the year 1919), it may be graphically repre-
sented as follows:

Farmers^ Grain Elevators in the United States.

400,000 farmers own stock in grain elevators
4,000 country elevators owned by farmers

12 State Associations of Farmer Grain Dealers ]
1 National Council representing these 12 Associations
1 Journal as the official organ of this Council. ^

Among the accomplishments claimed by the above organiza-
tion of farmers are the following: sulphured oats permitted in
interstate commerce; federal grain grades; federal supervision of
grain inspection; patronage dividends exempt from income tax.
On the program of things to do are the following: handle freight
and traffic matters, particularly increase in freight rates on grain,
or regulations pertaining to loss and damage claims, or bill of
lading matters; car shortage problems; in short, protect the
interest of farmers in production, transportation, and marketing
of grain.

4. Political Organizations of Farmers. — In agriculture as in
labor the idea has often gained temporary sway in local areas that
a class party was needed. This has occurred in spite of the fact
that the trend of our political evolution has been against either
class or sectional divisions of our voters. A class party was
started in 1915 among the wheat farmers of North Dakota, under
the name of ''Nonpartisan League."

The Farmers' Nonpartisan Political League, as this party came
to be called, came into full control of the North Dakota State
government in 1919, in all three branches — legislative, executive,
and judicial. It had chosen a governor in 1916, and secured com-
plete control of the executive and judicial branches of the State
government. The League vote for governor in 1916 was 87,665;
in 1918, 54,917. This movement began both as a union (on the
labor union principle), charging a membership of six dollars a
year, and as a political party, nominating candidates and adopting

^ The 12 States are: Texas, Oklahoma, Kansas, Nebraska, South Dakota,
North Dakota, Minnesota, Iowa, lUinois, Indiana, Ohio, and Michigan.
^ This Journal is the American Cooperative Journal, Chicago.

302 FARMERS' ORGANIZATIONS

a platform. The background of the movement is both economic
and political.

Economic Background. — The movement began in North
Dakota in 1915, as a culmination of ten or fifteen years of agitation
on the wheat marketing question. By the year 1915 North Dakota
ranked second only to Kansas as a wheat producing State. But
unlike Kansas, the Dakota wheat was not milled within the State ;
it was shipped chiefly to two Minnesota points — to Duluth for
export, or to Minneapolis for milling. Hence the weighing,
inspecting, grading, and docking, were all done by interests
entirely outside the control of the North Dakota farmer or the
North Dakota government. And to the North Dakota farmer,
price fixing on his wheat seemed to be done autocratically and
arbitrarily by the Minneapolis and Duluth Grain Exchanges. In
such cases, the farmer always feels a sense of voiceless helplessness,
a sense of indignation and resentment, and a sense of rebellion.
It is now a matter of economic history that the weighing, inspec-
tion and grading of grain by the State of Minnesota had for many
years been done in a fair and efficient manner; that the old arbi-
trary margin of 8 or 10 cents a bushel on the farmer's grain, fixed
and taken by the big line elevator companies, had given place,
thanks to the hundreds of farmers' elevators, to a narrow competi-
tive margin; and that the price of wheat was fixed on a world-wide
market outside of and beyond all the Grain Exchanges of the
United States. But the North Dakota settlers, pioneering, de-
pending on one crop, had come to feel that they were the victims
of injustice in wheat marketing. All their discontent was focussed
on this one point. Leaders, selfish and otherwise, had created the
belief that the simple remedy for the injustice was in a terminal
elevator or number of terminal elevators, owned and operated by
the State. The voters amended the State Constitution — a four-
years process — to enable the Legislature to provide the terminal
elevator. The Legislature refused to pass a terminal elevator law.
This was the crowning ''injustice," the farmers felt, for their
years of hope and effort, and the whole farming population of the
State was plunged into a state of anger. It counted for naught
that the business members of the legislature, after an impartial
survey and discovery of several terminal elevators for sale at half
price, had decided that the venture was too risky for experimenta-
tion with public funds. At this juncture a group of organizers
of the Socialist party left that party and began a most vigorous
organization of a farmers' Socialist party under the name of the

FARMERS' PARTIES IN THE PAST 303

Farmers' Nonpartisan Political League — or Nonpartisan League,
as it was called for short.

Political Background. — Financial, industrial, and railroad inter-
ests had long had control of the State government, the farmer mem-
bers of the State Legislature being unable to cope with such forces.
The feeling had taken root that even the State governors were
nominated from time to time by a small group of friends in a
secret meeting in a St. Paul hotel.

Hence the canvassers for the new party found the farmer's
mind prepared for insurrection, both political and economic. And
since the canvassers themselves were receiving a liberal conmiission
on each membership sold, they developed some skill in salesman-
ship. Membership dues were raised to $9 a year, and later to
$16 for two years. Soon 40,000 farmers in North Dakota were
enrolled. This was enough to control both nominations and elec-
tions of candidates. The North Dakota Legislature in 1919
enacted into law the complete League program with a $17,000,000
bond issue back of it, the major part of which program was as fol-
lows: (1) State-owned flour mills and terminal elevators, financed
by $5,000,000 of State credit; (2) State loans to home builders,
land piu-chasers, and others, financed by $10,000,000 of State
credit; (3) a state-owned and operated bank, financed by $2,000,000
of State credit; (4) control of education transferred to board of
five persons, three of whom to be appointed by the Governor;
(5) a State printing bill, having to do chiefly with the country
press, and providing that one paper only in each county receive
official pubhc printing; (6) an Industrial Commission of three
members — the Governor, Attorney General, and Commissioner of
Agriculture and Labor — to have charge of the State Bank, the
State Elevators, the State Flour Mills, and all other State
business enterprises.

The League spread into fifteen States during its first four years.
In 1919 it had three members of Congress from North Dakota.
It also maintained a complete propaganda machinery, consisting
of three daily papers, some forty or fifty weeklies, and an able
corps of paid speakers. With its income of several millions of
dollars it was able to carry on an organized campaign such as few
other political parties were ever able to do. Its wealth and its
success drew to it the usual army of camp followers seeking only
the loaves and fishes. Its decHne began in 1920.

Farmers' Parties in the Past.— (1) The National Farmers'
League, in the year 1891, was active in twenty-eight States. This

304

FARMERS' ORGANIZATIONS

was an era of great activity, economic and political, among farmers'
organizations. The League above named came out, finally, as a
distinctly political party. In this form it speedily disappeared
from sight. (2) The Populist Party. The Farmers' Alliance of the
Middle West and South at about this same time attained to great
nimibers and strength, working for economic reforms, particularly
cooperative stores. However, by the year 1892, it had entered
poUtics under the name of "People's Party." The Populist Party,
as it was generally called, elected many State and a few Congres-
sional candidates for office. Some of its reforms were abandoned

HS^Mkll

li

%4.. J^ ^-/^ '% W' #" - » .

i

Fig. 53. — The Canadian Council of Agriculture, composed of four delegates from each of the
following organizations: United Farmers of Alberta, Saskatchewan Grain Growers' Associa-
tion, Manitoba Grain Growers' Association, Saskatchewan Cooperative ElevatorJCo., United
Grain Growers, United Farmers of Ontario, United Farmers* Cooperative Company of
Ontario, Grain Growers' Guide.

as either impracticable or ahead of the times ; others were adopted
by the dominant parties. Hence the Populist party disappeared
as suddenly as it had risen.

Canadian Council of Agriculture. — The careful reader of this
chapter, who is familiar with our economic and political history,
has already compared agricultural organizations with labor
organizations in the United States, as to aims and methods. The
two outstanding labor organizations since the Civil War have been
the Knights of Labor and the American Federation of Labor.
The Knights of Labor entered politics in order to secure the reforms
they wanted. That is, they aimed to nominate and elect candi-

CANADIAN COUNCIL OF AGRICULTURE

305

dates to public office. The Knights of Labor disappeared entirely
as a labor organization. The American Federation of Labor for
nearly forty years has gained steadily in strength and power, and
has at the same time kept out of politics. This Federation seeks
to secure legislation by asking for it, not by nominating and
electing candidates to public office. The Federation speaks for
two milhon or more organized dues-paying laboring men, and
hence its voice is heard by the national and State lawmakers.
This statement concerning the American Federation of Labor may
help to make clearer the aim and methods of the Canadian Council
of Agriculture.

The Canadian Council of Agri*
culture is a Parliament — of the
farmers, by the farmers, and for
the farmers (Fig. 53) . It holds two
regular sessions a year at Win-
nipeg, where it maintains per-
manent offices in charge of a paid
secretary (Fig. 54). The Council is
composed of four representatives
from each important province-
wide farmers' organization. In
the year 1919 the membership was
36, representing four educational
and propaganda organizations,
three cooperative commercial
organizations, one farmers' news-
paper, and one association of
women, as follows: (1) United
Farmers of Alberta, (2) Saskatche-
wan Grain Growers' Association,
(3) Manitoba Grain Growers' Association, (4) United Farmers of
Ontario, (5) Saskatchewan Cooperative Elevator Company, (6)
United Grain Growers, (7) United Farmers' Cooperative Company
of Ontario, (8) Grain Growers' Guide, (9) Canadian Farm Women's
Interprovincial Association. The Council began, in 1909, solely
as the representative body of the educational organizations. But
it lacked funds with which to finance any important activities or
services. Accordingly, in the year 1916, the great cooperative
trading companies of the grain growers were admitted to member-
ship, and a per capita fee of 25 cents charged. These trading
companies, of course, included almost the identical farmers who
20

Fig. 54. — Roderick McKenzie, one of the
organizers of the United Grain Growers, the
Grain Growers Guide and the Canadian
Council of Agriculture. First Secretary of
the Canadian Council of Agriculture.

306 FARMERS' ORGANIZATIONS

composed the educational associations. At this time the Council
took on new strength and vigor, and issued its first ''Farmers'
Platform." This platform, endorsed by the constituent organiza-
tions, was an expression of the farmers' views upon economic,
political and social questions. It was a scheme of reforms for
benefiting not merely farmers but wage earners, artisans, profes-
sional men and tradespeople. This platform calls for tariff reform
and a complete abandonment of the protective poUcy; taxes to be
imposed on unimproved land value, on incomes and on inherit-
ances; nationalization of railways, telegraph and express companies;
natural resources to be developed by the government through a
leasing system; the initiative, referendum, and recall; publicity of
campaign contributions; abolition of the patronage system; each
Province to have autonomy in liquor legislation (to the end that
federal laws might not impede local prohibition) ; woman suffrage
in any Province to confer automatically woman suffrage in federal
elections. Although the farmers' movement in Canada began in
a struggle to improve conditions in the grain trade, this platform
contains no mention of the grain trade. This is conclusive evidence
of the farmers' success in solving the grain trade problem, them-
selves, through cooperation, In 1918 a new platform was drawn
up, embodying these same principles excepting those which had
been enacted into law by the Parliament at Ottawa.

The aims of the Canadian Council of Agriculture are five, as
set forth in its Constitution, namely, (1) to encourage the farm
population of the Dominion of Canada to organize for the study
of educational, economic, social, and poKtical problems having a
bearing on the happiness and material prosperity of the people.
(2) To constitute in itself a medium through which the various
organizations in membership may act collectively where their
common interests are concerned. (3) To establish a bureau for
the collecting and disseminating of statistics and other information
bearing on rural welfare. (4) To provide unity of action on matters
of common interest to the organizations in membership and to
formulate demands for legislation and present the same to the
Parhament of Canada. (5) To investigate methods of taxation
for providing national revenue and disseminate information thus
secured through farmers' organizations.

The achievements of the Council have been substantial.
Many of its planks have been enacted into legislation. But more
important is the fact that it has been the farmer's voice. It does
not take a psychologist to recognize the truth that when the farmer

HOW SECURE ECONOMIC REFORMS? 307

is silent in the face of real or imagined wrongs, he becomes grad-
ually more bitter and rancorous in his heart, ready to follow any
demagogue or radical leader who can recite to him the story of
his wrongs, until, finally, like a giant blindfolded, he strikes out
wildly and madly at he knows not what. And monopoly, or the
semblance of monopoly in high places, whether economic or politi-
cal, is to the farmer an intolerable tyranny. The Canadian Council
of Agi-iculture has furnished farmer leadership for the rank and
file of the farmers themselves. Under this leadership, the farmer
feels that he counts in the state, that he is significant, that he has
a voice that not only is heard but is heeded. A member of the
Council summed up its achievements in these words: "There
can be no doubt that the Council has become an important factor
in moulding the public life of Canada. And we confidently look
forward to its exercising an ever increasing influence in all that
makes for the well-being of the people."

Problems to Face. — Farmers' organizations have done enough
experimenting thus far to bring out in sharp outline some very
definite problems. Assuming that we are to have more rather
than fewer farmers' organizations in the future, an early consider-
ation of the problems and a policy towards them are necessary
for the farmers and for all others interested in a broad way in a
permanent and prosperous agriculture. This chapter is therefore
concluded ^vith a brief statement of a few of these problems.

(1) How Secure Political Reforms? — Shall the farmers imitate
the Knights of Labor, and enter directly into political action as a
class? Or shall farmers imitate the American Federation of Labor,
leaving the nomination and election of candidates to existing
parties, but standing for a definite program of legislation? In
American political evolution class parties have been considered
inimical to the general welfare, and have, thus far, accomplished
but little.

(2) How Secure Economic Reforms? — In the labor world, the
farmer may study various efforts at economic reform, such as
"direct action," the strike, syndicalism, socialism, limitation of
output, and the collective bargain.

Already in several cases farmers' organizations have used the
strike with success.^ Syndicalism is roughly paralleled in those
cases where the farmers have secured the collective ownership
and operation of certain enterprises. Collective action (coopera-

^ This is notably true in the so-called "milk war" in the Chicago District
in 1915, and in the New York District in 1916 and in 1919.

308 FARMERS' ORGANIZATIONS

tion) is now very common in the marketing of farm products; it
is not common in the field of production of farm products.

Limitation of Output. — There is no close parallel here between
farmers' unions and labor unions. Limitation of output has been
practiced in a few cases by a few unions ; limitation of output by
farmers really means a shifting of output. Thus the southern
planters in the season of 1919 made a gigantic campaign to limit
the cotton acreage. This limitation of output of cotton was mis-
understood and even condemned by many. However, while it
meant less cotton, it meant more corn, more hogs, more hay — all
of which products the South consumed in great quantities. ''Limi-
tation of output" in this sense of the word is not only wise, but
necessary, if the farmers are ever, collectively, to remove some
of the "anarchy" now existing in the coordination of supply
to demand.

Collective Bargaining. — Collective bargaining is now a common
method of adjusting wages, hours, and conditions in several of
the larger labor unions of the country. The United Mine Workers
of America have repeatedly demonstrated the wisdom and value of
this orderly and democratic way of industrial functioning. The
farmer is just now beginning to use this method. But since he is
not selling his labor for ''wages" but his crop for a "price," he
has already come into collision with the law against "price fixing."
Hence collective bargaining by farmers is not making much head
against the present legal status of this method of adjusting price.
However, if there is one place above all others where the farmer
feels he is the silent victim of a system of tyranny, it is exactly
here in the field of price making. It is inevitable, therefore, that
the courts and the legislators will adjust the law to fit economic
evolution. Collective bargaining is now in successful use by
farmers in many different places. A conspicuous example is that
of the Dairymen's League and the large milk distributors of New
York City. A few steps have been taken towards this goal by the
big meat packers and the farmers in the various live-stock asso-
ciations. However, the federal and State anti-trust laws are such
as to cause hindrance and delay in actually carrying on collective
bargaining by farmers.

(3) How Secure Leadership? — In one sense the farmers seem
to be victims of the vicious circle — unable to produce real farmer
leadership without organizations and unable to produce farmers'
organizations without leadership. While the farmer is blest with
a large amount of able, unselfish leadership from the ranks of

REFERENCES 309

those not farmers, yet it is doubtless true that he would be better
off if he had more leadership from the rank and file of the farmers.
An ideal ''Council of Agriculture of the United States" would
produce exactly this kind of leadership.

QUESTIONS ON THE TEXT

1. Describe and comment on the meeting of the bankers' committee on agri-

culture in Washington in 1919.

2. In what sense is it true that the farmers are not mobOized?

3. What are the two general methods of farmers' organizations securing

benefits?

4. Which method has the Grange used, and with what success?

5. Show to what extent labor and capital are organized. Compare agriculture.

6. Cite the case of mobihzation by the Credit Men's organization.

7. Show the difficulty of classifying farmers' organizations.

8. According to two farm paper investigations, what organizations are render-

ing effective service to their communities?

9. Give examples of farmers' organizations coming under each of the following

three classes: Federation; national; local.

10. Discuss in detail the Farmers' National Headquarters; the National Board

of Farm Organizations; the American Federation of Farm Bureaus.

11. What national organization of farmers is over fifty years old?

12. Discuss the following points concerning the Grange: present status; origin

and history; second rise to power; economic program; achievements of
the Grange; relation to the so-called "granger laws."

13. Discuss scope and methods of local farmers' organizations.

14. Discuss in detail the Nonpartisan Pohtical League.

15. What is the experience of farmers' parties of the past?

16. Discuss in detail the Canadian Council of Agriculture, and compare with

Knights of Labor and American Federation of I^abor.

17. What problems of organization now face the farmers?

18. How ought farmers secure political reforms? Economic reforms?

19. Show the merits and defects of the following economic devices in organized

agriculture: strikes; syndicalism; Umitation of output; collective
bargaining.

20. How shall farmers secure farmer leadership?

QUESTIONS SUGGESTED BY THE TEXT

1. Prepare a short history of each of the five national farmers' organizations.

2. Do we need an agrarian party?

3. Discuss the achievements of the agrarian party in Germany.

4. Would an agrarian party in this country be classed as radical or

conservative?

5. How should a federation of all agricultural interests be effected?

6. Discuss the 1919 movement in the South to Umit the cotton acreage.

REFERENCES

1. Atkeson, T. C: "History of the Grange."

2. Buck, S. J.: "The Grange Movement."

3. BuTTERFiELD, Kenyon: "Chapters in Rural Progress," Chicago, 1907,
pp. 136-162.

4. Commons, John R., et. al: "Documentary History of American Indus-
trial Society," Vol. 10, Nos. 1, 2, 3, 4, 5, 6.

310 FARMERS' ORGANIZATIONS

5. Coulter, John Lee: " Organization Among the Farmers of the United
States." Yale Review, New Haven, November, 1909.

6. Darrow, J. Wallace: "History of the Grange." Chatham.

7. Drayton, C. O.: " Farmers must be Cooperators." Equity Textbook.
Equity Union Pubhshing Co., Greenville, Illinois, 1914.

8. "Grain Growers' Textbook." Published by Equity Cooperative Ex-
change, Fargo, North Dakota, 1911.

9. "Grain Growers' Textbook, No. 2." Published by Equity Cooperative
Exchange, St. Paul, 1916.

10. "Industrial Commission Report," Vol. 10, p. ccclxi.

11. Lansdon, W. C, Cooperation: "History, Necessity, Methods." A
Textbook for Kansas Cooperators. Farmers' Union Library, Vol. 1, No. 1,
Salina, Kansas, March, 1915.

12. Martin, E. W.: "History of the Grange Movement, or the Farmers'
War Against Monopoly."

13. MiCHELL, H.: "The Grange in Canada." Bulletin of the Department
of History and Pohtical and Economic Science in Queen's University, King-
ston, Ontario, Canada, No. 13, October, 1914.

14. PiERSON, Charles W.: "Rise and Fall of the Grange Movement;
The Outcome." Popular Science Monthly, December, 1887, 199-208; 368-373.

15. " Proceedings of the Annual Sessions of the Farmers' National Congress
of the United States." Published by the Secretary, 204 Second St., S. E.,
Washington.

16. "Proceedings of National Farmers' Association." Published by the
Secretary, Waukesha, Wisconsin.

17. McVey, Frank L.: "The Populist Movement." Economic Studies,
Vol. 1, No. 3, 1896.

18. Boyle, James E.: "The Agrarian Movement in the Northwest."
American Economic Retriew, Vol. 8, September, 1918, pp. 505-521.

19. Gaston, Herbert: "The Nonpartisan League."

20. "National Milk Producers' Federation." American Economic Review,
Vol. 7, No. 4, Dec, 1917. By-Laws of — See Marketing and Farm Credits
(Chicago, 1916j, 430-432.

21. "American Society of Equity." Grain Growers' Guide, April 11, 1917.

22. Drew, ■: "The Present Farmers' Movement." Political Science

Quarterly, Vol. 6, 282-310, 1891.

23. Moorhouse, Hopkins: "Deep Furrows" (Cooperation among grain
farmers of Canada).

24. Peffer, Senator: "The Farmers' Defensive Movement," Forum,
Vol. 8, 463-473, 1889.

25. Walker, • : "The Farmers' Movement." Annals, Vol. 4, 790-

798, 1894.

26. Bailey, L. H. (Editor; : "Cyclopedia American Agriculture," Vol. 4.
Ch. 7, 276-354.

27. Herron, L. S.: "An American Farmers' Movement." The Farmers'
Union. Grain Growers' Guide, Feb. 19, 1919, 7.

28. For Farmers' Organizations in Other Lands, see International Review
of Agricultural Economics, Rome.

29. Pearson, Raymond A.: "Agricultural Organizations in European
Countries," Department of. Agriculture, Albany, Bulletin 66, Dec, 1914.

APPENDIX

Principal Farmers' National Organizations, Giving Name and Address of Official

Organ

1. American Society of Equity, The Equity News, Milwaukee, Wis.

2. Equity tjnion, Equity Union Exchange, Greenville, 111.

3. Farmers' Educational and Cooperative Union of America. No national

APPENDIX 311

organ. The following are state or local organs: Farmers' Union, Salina, Kans. ;
Pacific Farmers' Union, Spokane, Wash. ; Colorado Union Farmer, Denver, Col. ;
Farmers' Union Messenger, Ft. Worth, Texas; Nebraska Union Farmer, Omaha,
Neb.; Iowa Union Farmer, Columbus Junction, Iowa; Union Helper, Mt.
Vernon, 111.; James River Clarion, Lynchburg, Va.

4. Gleaners, Gleaner and Business Farmer, Detroit, Mich.

5. Patrons of Husbandry, National Grange Monthly, Springfield, Mass.

6. National Milk Producers' Federation (no organ).

Federation of Farmers

7. American Federation of Farm Bureaus (no organ).

Political Organizations

8. Nonpartisan League, Nonpartisan Leader, St. Paul, Minn.

The Farmer in Business. — "The farmer's interest in the great staple
crops of cereals, cotton, wool, sugar beets, sugar cane, hay, beef and pork ceases
when he sells the crop. Because orange and apple growers, some truck growers
and milk and dairy producers have developed somewhat in marketing enter-
prises, all consumerdom has undertaken to say, and, worse than that, to really
think that the farmer can market his products to consumers.

"Mr. Hamilton talks and thinks about buying food direct from the pro-
ducers. He would have considerable trouble in buying sugar of the sugar beet
grower; or flour of the wheat grower, or pork of the hog raiser. He tried a few
years ago to help start a "farmers' " market in his city, and along with several
hundred other business men is now unable to understand why it has "degener-
ated" into a "huckster's" market. That mental hiatus has functioned again.

"The facts are that the farmer who is really farming, working out a well-
considered plan for farm operation which accounts for every day and every
acre; work for his men, rain or shine; and work for his stock and his machinery
which will make each individual item .self-sustaining, has no time, no surplus
energy, no talent and no training for selling. He does not wish to subject
himself to the disagreeable features of peddling, or selUng over the counter.
His Ufe habits are directed to production and sale in bulk. Mr. Hamilton
would not think of turning his sales over to the foreman of his machine shop,
but he would do worse when he expects the successful farmer to enter the selling
game. And if a group of farmers unite and hire a salesman, and provide facih-
ties for distribution, it is an open question if they can — or will — market and
distribute their products at any economy over the present competitive dis-
tribution system." — ''What Mr. Hamilton Doesn't Know" by T. C. Atkeson,
Washington Representative of the National Grange. The Nation's Business,
October, 1919, -p. 26.

CHAPTER XX

STATE AID

The preceding chapter discussed certain attempts at self-help
by organized farmers, and pointed out both the failures and suc-
cesses of these efforts. State aid is that form of aid, direct or
indirect, which is given the farmer by the government. There are
two sources of state aid, that coming from the State government
and its local divisions, and that from the Federal government.
The real aim of all state aid is to make the farmer independent
of state aid, able to take care of himself, able to walk alone with-
out leaning on his government. State aid takes many and various
forms: some, direct financial aid; some merely regulatory, such as
the pure food laws; some, purely educational. Only the more
prominent forms of state aid can be discussed here.

Direct State Aid. — This is a form of state aid which has been
discredited in many times and places, and yet which just as con-
stantly reappears in one form or another as though it were some-
thing new. Space is lacking to give a detailed history of each
State's experiences in this field. The record of one State must
serve as typical for the other States. Hence the State of Kansas
is selected, being the geographic center of the country. Kansas
experimented repeatedly with subsidies for the promotion of
certain crops, and for the development of industries for the further
utilization of crops. The following cases illustrate this practice:

Silk. — To encourage the planting of mulberry trees and the
growing of silk- worms the State of Kansas enacted a law in 1887.^
Ten years later the attempt was abandoned as a failure.

Sugar Beets. — To encourage the growing of sugar beets in
Kansas, a law was passed in 1887 providing for a bounty of two
cents a pound for all beet sugar made in the State from beets
grown in the State.^ This gave the industry quite a spurt. In
1891 the bounty claimed and paid was over $50,000. In 1891 the
rate of the bounty was cut to f of a cent a pound. This ''infant
industry" was not yet able to walk alone. In a few years the
bounty was entirely removed. A further decline in the industry
followed, and in 1897 the last piece of beet sugar machinery was
sold and sent into Nebraska where the business was still on its

1 Laws of 1887, chapter 231.

2 Laws of 1887, chapter 231.

312

KANSAS LAWS 313

feet. However, in 1901, interest in the sugar beet was again
aroused, and so the State Legislature provided a bounty of one
dollar a ton on all sugar beets grown in the State. The hope of
home sugar factories was abandoned. A limit of $5,000 in any
one year was set to the beet bounty. Sugar bounties paid on beet
sugar made in Kansas were as follows:

1889 $18,658.30

1891 50,304.08

1892 3,000.00

1893 15,303.83

1895 7,339.29

1896 5,331.00

Kansas laws were frequently enacted at the request of local
districts, to permit them to grant direct aid to agriculture. The
following are typical cases :

The city of Burlingame, Osage County, was authorized to vote
$25,000 in bonds to aid in establishing a woolen mill in that city.^

Smoky Hill Township, McPherson County, was authorized to
aid in erecting a flour mill with a subsidy of $6,000.^

All counties of over 30,000 population were authorized to sub-
sidize the construction of starch works up to $41,000 each county.^

Kentucky Township, Jefferson County^ was authorized to grant
a subsidy to a flour mill to the amount of $10,000.^

Haskell County was authorized to grant a subsidy of $1 an
acre for brealdng sod in that county, the limit to be $10,000.^

Cimarron Township, Gray County, was authorized to subsidize
the building of a flour mill.^

This same legislature authorized ten floiu- mills and three other
private enterprises.

The legislature of 1893 authorized two townships to vote $5,000
each in aid of flour mills. The 1895 legislature authorized one
township to grant a $3,000 subsidy in aid of a flour mill. The
State Auditor's bond register for 1900 shows the following grants :
Gray County, $15,000 for a beet sugar mill and $8,000 for a flour
mill and $2,000 for a cheese factory; Hamilton County, $4,000 for
a flour mill; West Plains township in Meade County, $15,000 for
a beet sugar mill.

Not only did these subsidized industries all fail, but in many
cases the County or District voting the bonds defaulted in the

^ Laws of 1870, chapter 36.
* Laws of 1872, chapter 85.
6 Laws of 1873, chapter 33.
6 Laws of 1873, chapter 48.
' Laws of 1889, chapter 154.
^ Laws of 1891, chapter 44.

314: STATE AID

payment of interest or principal of these bonds. The enterprises
were so unsound that private capital refused to have anything to
do with them. It is usually such experiments that clamor loudest
for public funds. The later history of these Kansas subsidies is
reflected in the adjustments and settlements found necessary.
Thus the Cimarron township, Gray County, mentioned above.
In 1897 the State of Kansas held in her permanent school fund
$15,000 of the flour mill bonds, due in 1902. In the statute
pertaining to this case are these words :^ ''Whereas, the said
city of Cimarron has a bonded indebtedness of $55,000 and a
floating indebtedness of about $10,000, and is in default of
interest due on bonds more than $15,000, making a total in-
debtedness of $80,000, and the property of all kinds in said
city has an aggregate assessed valuation of only $31,351, and
said city is insolvent and unable to pay but a small per cent of its
indebtedness . . . therefore . . . the mayor and council of said
city desire to scale indebtedness of said city down to a sum upon
which they can pay interest and ultimately pay the principal."
And permission was granted to scale down the debt. The city of
Anthony, Harper County, went through a similar experience twice,
so hard was it to learn the lesson that credit is a two-edged sword,
to be used with care.^^ In 1896 the commissioners of Lane County
formally declared the county insolvent, and issued instructions to
the county treasurer to refrain from further payments of interest
on the bonded indebtedness.

Kansas, in common with other States, fully demonstrated the
inherent and fundamental unsoundness of using public credit in
direct aid to agriculture. It was a mere delusion to the farmer and
a curse to the community experimenting with it.

General State Aid. — State aid to agriculture has taken such a
multiplicity of forms that it is impossible to make even a catalog
of it in one single chapter. In general, it may be said that educa-
tion, since the famous Morrill Act of 1862, represents the largest of
all single investments of State funds in agricultural matters. This
educational outlay has vastly expanded, covering teaching, re-
search, and extension work by State agricultural colleges and
Experiment Stations. Agricultural education has also been
extended into city high schools in many sections, and also into
county agricultural high schools, and into congressional district

9 Laws of 1897, chapter 178.

1° Laws of 1897, chapter 178; also Commercial and Financial Chronicle,
New York, February 20, 1897.

THE DEPARTMENT OF AGRICULTURE 315

agricultural schools in some sections. This teaching for many-
years aimed to help the farmer produce more and better crops.
In late years a new viewpoint has been gained, and education
goes beyond the '^ making of two blades of grass grow where only
one grew before": much attention is given to the marketing of
crops; to financing and warehousing and transportation problems;
to home economics, including the economic, civic, sanitary, esthetic
mental, moral, and physical well-being of the family. The so-
called ''extension" work has shown the most rapid expansion of
any form of education. It is a form of propaganda whereby experts
and specialists go out from educational centers and meet the people
that need their services. ^ »

State Department of Agriculture and the PoHcePower. — State
aid to agriculture very early took the form of exercising the police
power in protecting animals from diseaseg^nd plants from insect
pests. The destructive power of the foot-and-mouth disease of
cattle, of cholera among hogs, of glanders among horses, and of
other diseases among other animals taught the need of quarantine
regulations and of State administrative boards such as live-stock
sanitary commissions. State veterinary boards, and so on. Similar
protective and regulative measures were administered in the realms
of fruits, vegetables, and general farm crops. Anti-weed laws,
pure food laws, pure drug laws, pure paint laws, and similar
statutes have greatly increased in number in recent years. Pure
seed laws in still more recent years have appeared, as have hke-
wise laws concerning commercial fertilizers, commercial feeding
stuffs, and laws on cold storage warehouses. The administration
of such regulations has been left, in most States, to a State Depart-
ment or Commissioner of Agriculture.

Farmers' Institutes. — In some cases under the State Agricul-
tural Department, in others under the guidance of the College of
Agriculture, so-called Farmers' Institutes are now held in most
States. These consist of a group of meetings in which speakers
from outside the community, as well as local talent discuss import-
ant agricultural topics. They are a valuable open forum for the
discussion of vital topics.

Federal Government Aid. — Federal aid to agriculture comes
mainly through two channels, namely, the United States Depart-
ment of Agriculture, and financial aid given to State institutions
for teaching, research, and extension.

The Department of Agriculture. — The history of the Depart-
ment of Agriculture may be briefly stated in connection with the

316 STATE AID

three historical dates, 1839, 1862, and 1889. (1) In the year 1839
Congress made the first law recognizing the need to agriculture
of any attention from the Federal government. An appropriation
of $1,000 was voted for the "collection of agricultural statistics
and for other agricultural purposes." This money was expended
by the Commissioner of Patents, for he was the only individual
in the Government manifesting any interest in the subject of
agriculture. Hence the whole agricultural "department," such
as it was, remained in the Patent Office till the year 1862. (2)

Fig. 55.— Tornado near Isabel. S. D.. June 25. 1914. (U. S. D. A.)

The organic act of 1862 gave the country its present Department
of Agriculture, although it was not till later under a Secretary with
a cabinet position. The organic act provided foi- a "Commissioner
of Agriculture" to preside over the new department. His duties
were "to acquire and to diffuse among the people of the United
States useful information on subjects connected with agriculture
in the most general and comprehensive sense of that word, and
to procure, propagate, and distribute among the people new and
valuable seeds and plants." He was also directed to make prac-
tical experiments in agriculture. With this substantial beginning,
the department rapidly expanded, its work branching out into the
fields of plant and animal diseases, insect pests, farm crops, live

THE BUREAU OF ANIMAL INDUSTRY

317

stock, reclamation of waste lands, botany, forestry, chemistry,
and biology. (3) In 1889 the Department of Agriculture was
elevated in rank, having at its head a Secretary with a seat
in the Cabinet. Since that date its growth has been contin-
uous and rapid. The present organization of the Department
into various bureaus is shown in the appendix to this chapter.
The chief functions performed by the Department are briefly set
forth as follows:

A Weather Bureau makes studies of the various methods of
frost protection for the benefit of orchardists, truck growers, and

Fig. 56. — Applying marks of inspection to passed hog carcasses in Oklahoma. (U. S. D. A.)

others; storm warnings are set out for the benefit of both agricul-
ture and shipping; the reporting of temperature and rainfall and
the forecasting of weather in the interests of agriculture and com-
merce are important services performed. In general, this bureau
has in charge investigations in meteorology climatology, seismol-
ogy, and aerology (Fig. 55).

The Bureau of Animal Industry has charge of meat inspection
at the packing houses, of animal quarantine, of eradication of
tuberculosis of live stock and of hog cholera and of the cattle tick;
of live stock and dairy demonstrations; of dairy researjch; in short,
the bureau aims to promote the live stock and meat industries of
the United States (Fig. 56).

318

STATE AID

The Bureau of Plant Industry deals chiefly with combating
plant diseases of all kinds — a work of very great economic import-
ance (Fig. 57). It also deals with crop acclimatization and fiber-
plant investigations, sugar plant studies, cereal investigations,
seed testing, foreign seed and plant introduction, and with ''free
seed distribution." The last-named function is one which the
farmers are asking to have discontinued.

Fig. 57. — Testing out a new spray.

The Forest Service has charge of the utilization, protection
(Fig. 58) and development of the National Forests, now comprising
hundreds of miUions of acres. The work also covers investigations
into methods of preserving timber, testing of woods, and educa-
tional work in matters of forestry.

The Bureau of Chemistry devotes about half its energy to
enforcement of the Food and Drug Act (usually called the ''pure
food law"). Chemical investigations are made for other depart-
ments of the government. Its work also touches the bureaus of
plant industry and of soils (Fig, 59).

THE BUREAU OF CHEMISTRY

319

Fig. 58.— Fire patrol duty, Mt. Silcox. (U. S. D. A.)

Fig. 59.— Pharmacological laboratory, Bureau of Chemistry. (U. S. D. A.)

320

STATE AID

The Bureau of Soils conducts chemical and physical investiga-
tions of soils, seeks new sources of natural fertilizers, particularly
potash; and makes soil surveys in the different States.

The Biureau of Entomology is chiefly engaged in combating
insect pests, and cooperates in many ways with the Bureau of
Plant Industry. Campaigns are waged against the gipsy and
brown-tail moth, the boll-weevil, Hessian fly, and against various
insect carriers of plant diseases.

Fig. 60. — Results of poisoning operation by assistants of the Biological Survey in Arizona.
On 320 acres 1641 prairie dogs were collected after one night's operation. Total cost of the
extermination, including labor, $9.79. (U. S. D. A.)

The Bureau of Biological Survey has charge of the enforcement
of the Lacey Game Act, and the administration of the seventy
Federal bird reserves and five large-game preserves. Protection
is given to wild ducks, and other migratory birds, and to big game.
It also experiments with destruction of animal pests (Fig. 60).

The States Relation Service is the bureau in charge of the
supervision and control of federal funds expended through the
State Agricultural Colleges for the purposes of Research and Ex-
tension. Under the four acts mentioned below (1862, 1887, 1906,
1914) this bureau has a very important and far-reaching service
to perform, owing to the centralizing of so much power over State
education in a few hands at Washington (Fig. 61).

THE BUREAU OF CROP ESTIMATES

321

The Office of Home Economics began with food questions, but
soon widened its scope to include household management and
equipment, and family welfare.

The Bureau of Public Roads and Rural Engineering was created
primarily to carry on investigations in regard to systems of road
management, road construction and maintenance, road materials,
farm irrigation, drainage, domestic water supply, construction of
farm buildings, and miscellaneous rural engineering problems.
The ''Good Roads" movement throughout the United States
received much aid and backing from this bureau (Figs. 62 and 63).

Fig. 61. — Pig demonstration at a boys' short course. Maryland College of Agriculture.

The Bureau of Markets deals with the problems of agricultural
distribution, transportation, warehousing, grading, packing, coop-
erative marketing, rural credits, and cooperative purchasing (Fig.
64). It has charge of the Cotton Futures Act, the Grain Standards
Act, the Warehouse Act.

The Office of Farm Management covers the field of general
agricultural economics (except marketing), including studies of
cost of production, farm organization, farm finance, insurance,
taxation, farm labor, drift to cities, housing, agricultural history
and geography, land utilization and settlement, land tenure, farm
life studies, and cooperation.

The Bureau of Crop Estimates collects and publishes periodi-
cally crop and live-stock estimates. The grain trade has now come
to place great reliance on the crop estimates gathered by this
21

322

STATE AID

bureau through its nation-wide corps of volunteer crop reporters.
The ''Monthly Crop Reporter" issued by this bureau is also a
source of valuable market information (Fig. 65).

Fig. 62.— Road construction. (U. S. D. A.)

Fia. 63. — Road construction. General view of plant in operation. Note method used in
covering concrete, also small number of men used. (U. S. D. A.)

Five federal laws dealing in a broad way with agricultural edu-
cation mark the nation's increasing recognition of the basic im-
portance of a prosperous agriculture. These five acts are in brief,
as follows :

SMITH-LEVER ACT. 1914

323

(1) Morrill Act, 1862. — This is the law which established in the
United States the so-called ''Land Grant Colleges," or State Col-
leges of Agriculture. Thirty thousand acres of land for each Sena-
tor and each Representative in Congress was set aside as a
permanent fund for the endowment and maintenance of at least
one agricultural college in each State.

Fig. 64. — Government inspector examining potatoes rejected by buyer.

(2) Hatch Act, 1887. — This law established federal Experiment
Stations in connection with the Agricultural Colleges created by
the 1862 law.

(3) Adams Act, 1906. — This act makes an increase in the fed-
eral aid granted to Experiment Stations, under the Hatch Act.

(4) Smith-Lever Act, 19 14.^ — This act provides in detail a
comprehensive scheme for federal supervision and control of

^ For funds available to each State under this Act, see Appendix 1 of
next chapter.

324

STATE AID

moneys expended by the agricultural colleges under the Hatch
and Adams Acts, and under this Act, in order that the Federal
Government may be in constant touch with these institutions.
This act organizes on a vast scale the extension work of the col-
leges. The work is on a cooperative basis, both as to financial
support and as to control, each particular project being mutually
agreed upon by the college and the Secretary of Agriculture and
approved in advance. The college thus becomes the organizing

Fig. 65. — County section, division of crop reports, Bureau of Crop Estimates, expert tabula-
tors and computers, who work up returns from 3000 county reporters who report crop and
live-stock conditions in their respective counties. This constitutes one source of information
upon which the government crop reports are based.

center for the extension work, which now has four principal forms,
namely, (a) county agricultural agents; (6) boys' and girls' clubs;
(c) extension specialists, who cooperate with the county agents in
influencing the rural population directly; (d) home economics,
which is work for the farm women and the farm home.

(5) Vocational Education Act of 1917. — This act appropriates
money for the support of vocational education of secondary grade
in agriculture, home economics, and industry. The act provides a
scheme of cooperation between the Federal Government and the

VOCATIONAL EDUCATION ACT OF 1917

325

States. Under this act the Federal Government does not propose
to undertake the organization and immediate direction of voca-
tional training in the States, but does agree to make from year to
year substantial financial contribution to its support. It under-
takes to pay over to the States annually certain sums of money
and to cooperate in fostering and promoting vocational education
and the training of vocational teachers. The grants of Federal
money are conditional and the acceptance of these grants imposes

190^ OS 06 07 08 09 10 II 12 13 14 IS /6 17

07 06 09 10 II IZ 13 14 IS 16 17

u..

r./7,

pa,

tm,

'/?/■

of

Gg.

'('a

Uu

e

Stati

Co

lie

jes

of

dq*

cul

tur

e

1

1

1

1

h

9

■

1

1

i

1

1

■

e

1

1

i

m

1

i

1

1

1

1

\

r

i

r

1

i

1

1

1

■i

FiQ. 66. — Federal Government appropriations to the United States Department of Agricul-
ture and to the state agricultural colleges, for the fourteen years, 1904-1917.

on the States specific obligations to expend the money paid over
to them in accordance with the provisions of the act. The State
must show the kinds of vocational education for which it is pro-
posed that the appropriations shall be used, and the kinds of
schools and the equipment of the schools in which the instruction
is to be given. The State must set up courses of study, methods
of instruction, and qualifications of teachers who are to give
such instruction.

Every dollar of Federal funds must be matched by a dollar
of State or local funds, or both.

326 STATE AID

The administration of these funds represents a chain of three
Unks as follows: Local School — State Board — Federal Board for
Vocational Education.

This form of administration leaves initiative with the local
school and the State Board.

Money is appropriated for three kinds of education, namely,
agriculture, home economics, trades and industries.

The Federal appropriation for agriculture under this act is
as follows :

(a) For salaries of teachers, supervisors, and directors of agri-
cultural subjects:

1917-18— $548,000
Increases annually to 1925-26
1925-26, and after— $3,027,000

(6) For training teachers, a portion of which shall be used for
the training of teachers, supervisors, and directors of agriculture:

1917-18— $546,000
Increases annually to 1920-21
1920-21, and after- $1,090,000

Other Forms of Aid. — In addition to the federal aid through the
Department of Agriculture and through the five acts named
above, there are other forms of aid, more or less direct, which
should be mentioned. They are the Federal-aid Road Act, which
means more good roads for the farmers; the Farm Loan Act, which
means to the borrowing farmer a system of cheap money based
on first mortgages on the farmer's land; the International Institute
of Agriculture at Rome, furnishing basic information on agricul-
tural questions, a share of the expense of which is borne by the
United States.

Success of State Aid. — State aid of a purely educational nature
has proved an unmixed blessing to the farmer. State aid in the
form of a direct cash bounty or subsidy has failed to achieve
success. State aid in organizing farmers into groups for collective
action, particularly marketing associations, has been attended by
both success and failure. The danger in state aid of this kind is
that it may be overdone, especially when in charge of an enthusiast,
since farmers are quite easily led to form organizations. This is
particularly true when little or no capital is involved. How-
ever, more and more experience is being gained in this field
by the state agencies interested, and after the experimenting is
done, doubtless much sound state aid can be given to farmers in the

REFERENCES 327

way of forming needed organizations, or preventing the formation
of unnecessary organizations.

To repeat what has already been said, state aid must not be a
substitute for self-help. It must be a mere temporary way of
helping the farmer help himself, of tiding him over a difficulty
till he can take care of himself.

QUESTIONS ON THE TEXT

1. Show the multipUcity of forms which state aid to agriculture takes.

2. Define direct state aid,

3. Give an account in detail of the Kansas experience in aiding the following:

silk; beet sugar; woolen mills; flour mills; starch; sod breaking; cheese
factories. Show final outcome of this policy of direct aid.

4. Show in general the extent and growth of state aid in education.

5. Show functions of State Departments of Agriculture under the police

power.

6. Explain administration and functions of Farmers' Institutes.

7. Give a history of the United States Department of Agriculture, with

special reference to the dates, 1839, 1862, 1889.

8. Name each Bureau or Division of the Department of Agriculture and show

its main functions.

9. Explain scope and meaning of these five federal acts: Morrill Act; Hatch

Act; Adams Act; Smith-I^ever Act; Vocational Education Act.

10. Show how federal aid to agriculture is extended through other acts referring

to good roads and rural credits.

11. What has been the success of state aid?

12. Show correct interrelation of state aid and self-help.

QUESTIONS SUGGESTED BY THE TEXT

1. To what extent should the administration of agricultural education be

centralized at Washington? To what extent should extension work be
controlled by (1) County, (2) the State, and (3) the Federal Government?

2. To what extent should both support and control of agricultural education

be left to each State?

REFERENCES

1. Atkeson, T. C.: "Semi-centennial History of the Patrons of Husban-
dry." New York, 1916.

2. Bailey, Liberty Hyde: "The State and the Farmer." Presidential
address before the Association of American Agricultural Colleges and Experi-
ment Stations at Lansing, Michigan, May 28, 1907. Privately printed, Ithaca,
New York, 1907.

3. Boyle, James E.: "The Financial History of Kansas." Bulletin of
the University of Wisconsin, No. 247, Madison, 1908.

4. Caffey, Francis G.: "A Brief Statutory History of the United States
Department of Agriculture." Cases and Comment, Rochester, New York,
February, 1916; March, 1916.

5. Davis, Benjamin Marshall: "Agricultural Education in the United
States." Chicago, 1912.

6. "Farmers' Institutes — A Historical Sketch of." Yearbook of Agricul-
ture, Washington, 1903, pp. 149-159.

7. "Federal Board for Vocational Education," Washington. First Annual
Report, 1917. Later reports annually.

328 STATE AID

8. "Industrial Commission Report," Vol. 10, pp. ccclxviii-ccclxxx; Vol.
19, pp. 193-200.

9. International Institute of Agriculture, Rome. The following three
monthly bulletins, published by the Institute contain information on the
subject of this chapter. 1. "International Crop Report and Agricultural
Statistics." 2. "International Review of the Science and Practice of Agri-
culture." 3. "International Review of Agricultural Economics."

10. "The Experiment Station Record," published monthly by the Depart-
ment of Agriculture, Washington. This is the best pubhcation deahng with
the activities of the various experiment stations. It also contains abstracts
of articles deaUng with agriculture pubhshed in all countries.

11. "The Land Grant of 1862 and the Land Grant Colleges," Bulletin No.
13, Bureau of Education, Washington, 1918.

12. Yearbook Department of Agriculture: 1897—" Work of the U. S.
Department of Agriculture for Farmers," 59-279. 1899 — "Agricultural Edu-
cation in the U. S.," 157-190; 1899 — "Agricultural Experiment Stations in the
U. S.," 513-548; 1903— "Farmers' Institutes" (historical sketch), 149-159;
1911 — "Some Results of Farmers' Cooperative Demonstration Work," 285-
294; 1918— "Following the Produce Markets," 277-289.

13. Donaldson, T.: "The PubUc Domain" (Washington, 1884).

APPENDIX

Ldst of Publications Issued by the Department of Agriculture, Washington, D. C.

1. Farmers Bulletins — for free distribution.

2. Departmental Bulletins — technical.

3. Circulars — miscellaneous subjects.

4. Serials : (a) Journal of Agricultural Research ; (b) Experiment Station
Record; (c) The Monthly Crop Reporter; (d) The Weekly News Letter — for
Departm.ent employees and crop reporters; (e) Monthly Weather Review;
(/) National Weather and Crop Bulletin; (g) Snow and Ice Bulletin.

5. Yearbook of Agriculture.

6. Market News Service of the Bureau of Markets: (a) Reports on For-
eign Markets for Agricultural Products; (b) The Market Reporter; (c) Market
Bulletins (in season) deahng with fruits and vegetables; {d) Cold Storage
Holdings; (e) Live-stock and stock-yards reports.

CHAPTER XXI

THE COUNTY AGENT

The County Agent Movement. — The most significant move-
ment in agriculture in America in the present generation is the
County Agent movement. It is a movement which is closest to
the farmer. It is a movement that has back of it, in most cases,
a Farm Bureau composed of dues-paying farmers. The County
Agent Hves in the county among the farmers he serves. His work
is therefore responsive to local needs and conditions, although done
in cooperation with distant State and federal agencies. It is the
movement which most effectively creates agricultural leadership,
and is in turn directed by that leadership. And community
leadership of the farmer, by the farmer, and for the farmer is the
most vital need of the rural community.

Definition. — ^A County Agent is a person of agricultural educa-
tion and experience employed in a county to promote the general
welfare of agriculture in that county. For over fifty years the
agricultural colleges of the country have been teaching and have
been conducting experiments. Enough scientific information has
thus been accumulated to revolutionize agriculture and readjust
rural home life and rural community life. But the teaching force
and the printed bulletins proved wholly inadequate to carry to
the people themselves this knowledge. The natural step, therefore,
was to create an agency to make available to the farmers themselves
the accumulated information and experience of the Federal Depart-
ment of Agriculture, the State Departments of Agriculture, the
State Colleges of Agriculture, the great private experimental
farms, and the practices of the best farmers themselves. Accord-
ingly the Federal Department of Agriculture, as a first step, under
the leadership of Dr. Seaman A. Knapp, established throughout
the South Demonstration Agents, to carry to the individual farmer
suggestions, help, and advice. These itinerant teachers succeeded
in having many farmers modify their farm management in the
direction of diversification of crops, home gardens, deep plowing,
use of fertiUzers, better seed selection, and better relationships
with bankers and merchants. What the individual farmers accom-
plished under this leadership, they did on their own farms, under
their own conditions. It is a noteworthy fact that farmers are

329

330 THE COUNTY AGENT

not impressed with what they see done on ''demonstration farms,"
operated with pubhc money and not on a self-sustaining basis. ^
But they are impressed by what they do themselves. Hence the
success of the Demonstration Agent in the South — he brought
about a high degree of self-help. The County Agent movement
was the second phase of this demonstration work, and soon spread
to all parts of the country. Now there is one County Agent in
nearly every one of the three thousand counties of the United
States. The Smith-Lever Act of 1914 strengthened the basis of
the work from both the financial and the administrative stand-
point. It is to be hoped, of course, that as the movement strikes
its roots into the soil, the central control from Washington may
become less bureaucratic and the local control may become more
dominant and develop more initiative.

Functions. — The function of the County Agent is to influence
farmers by any and all wise means within his power, both as
individual farmers and as groups of farmers. Primarily his aim
is to increase the farmer's net income. He is also to serve as a
protector of the farmer's interests in all legitimate ways.^ In a
broader and more social way, he is to elevate and dignify country
life and make it more worth while (Fig. 67).

Farm Bureau Defined. — ^A definition of a Farm Bureau formu-
lated by the States Relation Service, although a lengthy one, is yet
a comprehensive statement of the functions of such a bureau. ^
It runs as follows:

"A County Farm Bureau is an association of people interested in rural
affairs, which has for its objects the development in a county of the most
profitable and permanent sj'^stem of agriculture, the estabhshment of commun-
ity ideals, and the furtherance of the well-being, prosperity, and happiness
of the rural people, through cooperation with local, State and national agencies
in the development and execution of a program of extension work in agriculture
and home economics."

1 A County Agent in Clay County, Minnesota was approached by a
creamery promoter, and offered four hundred dollars for his support in foisting
a creamery on a non-dairy community. The County Agent advised the farmers
not to organize the creamery, and. his advice was followed.

A County Agent in Lee Coimty, Illinois, was asked by a farmer concerning
the merits of a patent oats-smut treatment being sold by a soHcitor. The
County Agent advised that the "patent treatment" cost five times as much as,
and required twice the work of the simple formaldehyde treatment, with no
better results.

Fake schemes are becoming difficult to work among farmers, now that the
County Agent has the agricultural forces mobilized for protection against
frauds and fakes.

2 Circular 13, Office of Extension Work, North and West, States Relation
Service, January, 1919.

FARM BUREAU DEFINED

331

The Farm Bureau, as defined in this manner, is the usual form
of organization through which the County Agent functions. The
Farm Bureau is composed of the representative farmers of the
county, and contains, under favorable conditions, from 50 to 100
per cent of the farmers of the county in its membership. Member-
ship dues are paid annually, ranging from one dollar to ten dollars
per member. It is to be hoped that this local support will steadily
increase in volume. The Farm Bureau adopts a definite community
program and appoints necessary committees to effectuate the plans.
The Farm Bureau is, therefore, a local institution, organized by

"' ; f^%H^M^"^

Fig. 67. — County agent and a farmer in conference in the field. Shows tractor attached to
spring-tooth harrows in the background, Montgomery County, Md. (U. S. D. A.)

the people of the county. The Farm Bureau plan enables the com-
munity to carry out a wider program of community-effort than
did the organized demonstration work in the South. The Board
of Directors of the Farm Bureau chooses and appoints the Coimty
Agent and fixes his salary. The County Agent thus chosen must
be approved by the State College of Agriculture {i.e., State Director
of County Agents), if the Farm Bureau wishes to receive a share
of the State and federal moneys for this form of extension work.
A wide-spread popular error concerning the County Agent was
that his job was to give advice to the farmer. And since the
County Agent is frequently more youthful than the farmer, this
view of his functions was discouraging. The State Director of

332 THE COUNTY AGENT

Farm Bureaus for New York State stated the functions of the
Farm Bureaus to be, in the order of their importance, as follows:

1. The federation of all the existing agricultural forces and organizations
in the county to a common purpose {i.e., schools, local granges, clubs,
societies, etc.).

2. Agricultural leadership in its broad sense.

3. Organization of associations for better methods of production (e.g.,
cow testing, seed improvement, etc.).

4. Organization of marketing associations for both buying and selling. ;^

5. The study of local economic needs of the county, that correct farni
management practices may be demonstrated and introduced.

6. The giving of personal advice to farmers. This is last and least
important.

7. General — "All these functions should be exercised with the point of
view of increasing the financial profitableness of farming within the county
by increasing the net income of farmers, and of making country life and work
increasingly worth while in the larger sense." ^

These functions of the Farm Bureau are, strictly speaking, th6
functions of the County Agent, since he is the agent of the Bureau.

Finances. — The County Agent work is financed through three
sources — ^federal, State and local. The local money comes in the
form of dues from members of the Farm Bureau and from a tax
on the property in the county. The State usually raises a fund
for this work by a tax. The Federal Government, through its taxing
powers, collects funds which are apportioned to the States on a
basis of the rural population of the State. The Smith-Lever Act
made the flat appropriation of $10,000 per annum to each State.
After the fiscal year 1915-1916 the grant under this act increases
annually up to the year 1923, the maximum for that year and
each year thereafter being a total of $4,580,000. All grants above
the first $10,000 must be duplicated by the State, in order to entitle
the State to receive the federal grant. The table in the appendix
to this chapter shows the significance of these financial terms. .^

The cost of the County Agent to any individual farmer is but*
a small amount — a few dollars at most. Compared with what a
laborer pays in annual dues to his union, the average farmer is
contributing lightly to his Farm Bureau.

Growth of the Farm Bureau. — The very rapid spread of the
Farm Bureau through the North and the West is shown by the
following figures:

Dec. 1, 1916 287 Farm Bureaus 98,654 members

Dec. 1, 1917 384 Farm Bureaus 161,391 members

June 30, 1918 791 Farm Bureaus 290,000 members

3 Burritt, M. C, The County Farm Bureau Movement in New York State.
Circular 93, Department of Agriculture, Albany, New York, 1914, p. 12.

SOME DIFFICULTIES AHEAD 333

On the last date named above 29 of the 33 northern and western
States were organized on the Farm Bm-eau Plan.

Home Bureaus. — The extension work in home economies has
taken on such importance that it has gained recognition as being
coordinate with the Farm Bureau. The situation is met by expand-
ing the Farm Bureau to include home demonstration work, the
representatives of the home economics work being added to the
executive committee of the bureau. These representatives are
influential farm women of the country, qualified for the work by
their education, experience, and personality.

Boys' and Girls' Club Work. — A prominent place is now uni-
versally given to the work of boys' clubs and girls' clubs. A county
representative of this club work, qualified by capacity for leader-
ship, now has a place in ^the organization of the Farm Bureau
in many States. In other words, the Farm Bureau program is
easily expanded beyond the purely agricultural phases of the
subject, so as to include home demonstration and boys' and girls'
club work.

Some Difficulties Ahead. — The County Agent movement, in
striving for "better farming" — that is, a greater production — will^
have the hearty cooperation of the various interests of the county —
mercantile, banking, transportation, etc. The same is true of
work for better roads, better schools, better rural life conditions.
However, in the field of buying and selling, the County Agent is
likely to come into direct competition with certain interests
already more or less well established. The pressure is so great on
the County Agent to ''do something" for the farmer in the field
now occupied by the over-berated ''middleman," that many
County Agents are driven to their wits' end. Cooperative buying
and selling enterprises form a legitimate and desirable field for
farm activity, and in many instances have achieved conspicuous
success. However, the death-rate of these enterprises is so
high that the County Agent should proceed with caution in
starting new ones. He ought to be reasonably assured in ad-
vance of the real need of the new undertaking, that the enter-
prise will have a large enough volume of business to make
it worth while, that ample capital will be forthcoming to finance
it in a purely business-like way, and that an able and honest mana-
ger is in sight to conduct the business through all the severe
trials ahead of it (Fig. 68).

Pressure is also brought to bear on the County Agent to give
marketing advice which is, in fact, the forecasting of prices. Since

334

THE COUNTY AGENT

no one has yet been able to forecast price, the County Agent will
be wise not to attempt it.

The County Agent is also under pressure to do actual marketing
woik lor his clients — to sell their goods for them or to buy their
supplies. This is a prostitution of his functions, for he is there to
teach self-help, not to do the farmers' work for him. The end of
such a course is disaster.

The agent will give all possible market information within
his power, and direct the farmer to the various trade papers,
to the federal and State market reports, and other sources of

Fig. GS. — INlarkcting wool. Cooperative wool associations are formed by the County Agent.

(U. S. D. A.)

information, and then he will let the farmer decide for himself
how and when he shall use this information. In most cases of
this kind, the daily market reports issued free by the United States
Bureau of Markets will meet the farmer's need of up-to-date
market news service.

The Middleman Question. — One neglected phase of ''coopera-
tion" may well receive the attention of the County Agent. In
many cases farmers organize and bunch their buying or selling
power, and hire one of their own number as manager. It would
be equally cooperative, in many such cases, if these bunched,
buying or selling orders were turned over to some established dealer
whose services and charges were deemed fair and satisfactory.

So much fiction has been written about the farmers' 35-cent

REFERENCES 335

dollar that rather extravagant hopes have been created in the
breasts of farmers for reducing the ''toll of the middleman." For
the middleman, like the farmer, is working under competitive
conditions, where easy and big gains are rare indeed, and where
losses and failures are frequent. Hence, as stated above, the
County Agent ought to proceed with caution in making farmers
''their own middlemen."

QUESTIONS ON THE TEXT

1. Why is the County Agent movement the most significant movement in

American Agriculture in this generation?

2. Define County Agent: Show the need of.

3. Trace the origin and growth of this movement.

4. What are the functions of a County Agent?

5. Give examples of farmers' interests being protected by County Agent.

6. Define Farm Bureau.

7. Show the advantage of the Farm Bureau plan over the original demonstra-

tion work plan.

8. How are County Agents chosen? How supported?

9. According to Mr. Burritt what are the functions of a Farm Bureau, in the

order of their importance?

10. Explain the Home Bureau movement.

11. Discuss the Boys' and Girls' Club work.

12. What are some of the difficulties ahead of the County Agents?

QUESTIONS SUGGESTED BY THE TEXT

1. What should be the annual membership dues in a Farm Bureau? State

reasons for and against $1 dues; same for $10 dues.

2. What is the ideal method of financing the County Agent movement?

3. In what manner can a County Agent secure a greater degree of cooperation

between the agricultural and the other interests of his county?

REFERENCES

1. Burritt, M. C: "A Community Farm Expert at Work and What He
Has Done — The Organization, Methods of Work and the Results Obtained
by the Farm Bureau at Binghamton, Broome County, New York, in Eighteen
Months of Work — All Interests Working Together—Great Value to the Com-
munity— Lessons to be Learned from this Successful Example." Tribune
Farmer, New York, October 17, 1912.

2. Burritt, M. C: "The Farm Bureau Movement in New York State."
Circular 93, State Department of Agriculture, Albany, 1914.

3. Crocheron, B. H.: "The County Farm Adviser." Circular 133,
University of Cahfornia, College of Agriculture, Berkeley, July, 1915.

4. "Farm Bureaus and County Agricultural Agents." Bulletin Massa-
chusetts Agricultural College, Amherst, October, 1914,

5. Simons, L. R.: "Organization of a County for Extension Work — The
Farm Bureau Plan." Circular 13, States Relation Service, Department of
Agriculture, Washington, January, 1919.

6. Bulletin 60, Department of Agriculture, Albany, June, 1914. Burritt,
M. C: "The County Farm Bureau Movement in New York State." pp.
1594-1604. Robertson, F. E.: "A Brief Outline of the Jefferson County
Farm Bureau Work," pp. 1604-1611.

336

THE COUNTY AGENT

APPENDIX

AmourUs of Federal Funds Available to the Several States Under the Smith-
Lever Act.

Per cent that

rural

population of

state bears to

total rural

population *

1916-17

1917-18, 1918-

19, 1919-20*

1920-21

1921-22

1922-23
and thereafter

State

Maximum

amount each

state is entitled

to receive

For the above

fiscal years,
add each year
the amount
given below to
the total for
the immedi-
ately preceding
year

For fiscal year

1922-23
and thereafter

Alabama

3.58
.29

2.78
1.84

.80

.232

.213
1.08
4.19

.52
4.38
3.16
3.13
2.43
3.51
2.35

.731
1.29

.49
3.00
2.48
3.22
3.84

.49]
1.79

.14

.36
1.28

.57
3.90
3.82
1.04
4.26
2.71

.741
6.15

.04
2.61
1.03
3.53
5.99

.41

.38
3.21
1.09
2.01
2.69

.21

$49,404
13,147
40,580
30,236
18,789
12,563
12,347
21,898
56,151
15,702
58,184
44,729
44,456
36.686
48,660
35,839
18,047
24,203
15.374
43,005
37,315
45,438
52,232
15,412
29,668
11,529
13,909
24,043
16,259
52,979
52,081
21,431
56,855
39,802
18,144
77,637
10,402
38,768
21,308
48,870
75,945
14,468
14,170
45,323
21,958
32,130
39,634
12,290

$17,911

1,431

13,900

9,198

3,995

1,165

1,067

5,408

20,978

2,592

21,902

15,786

15,662

12,130

17,573

11,745

3,657

6,456

2,443

15,002

12,416

16,108

19,196

2,460

8,940

695

1,777

6,383

2,845

19,536

19,127

5,196

21,297

13,547

3,701

30,744

183

13,076

5,140

17,668

29,975

2,031

1,896

16,056

5,436

10,059

13,470

1,041

$156,870

21,730

Arkansas

123,980

California . . ■

85,424

Colorado

42,759

Connecticut .

19,554

Delaware

18,749

Florida .

54,345

Georgia

182,020

Idaho

31,254

Illinois

189,596

Indiana

139,442

138,428

Kansas

109,466

154,103

Louisiana

106,309

39,991

Maryland

62,936

30,029

Michigan

133,016

IVIinnesota

111,811

Mississippi

142,086

167,411

Montana

30,172

Nebraska

83,308

Nevada

15,699

New Hampshire

24,572
62,341

New Mexico

33,329

New York

170,195

North Carolina

North Dakota

166,846
52,607

Ohio

184,640

121,081

Oregon.

40,352

262,101

Rhode Island

11,497

South Carolina

117,223

South Dakota

52,148

Tennessee.

Texas

154,878
255,795

Utah . .

26,655

25,543

Virginia

141,659

Washington

West Virginia

54,571
92,484

W^isconsin. . . ....

120,454

18,541

99.988

$1,580,000

$500,000

$4,580,000

* Figures after 1920 subject to returns of Fourteenth Census on rural population.

CHAPTER XXII

THE GRAIN TRADE

International Nature of the Question. — The grain trade of the
United States is not a national matter ; it is an international matter.
This is true for two reasons. The grain crop of foreign countries
affects the prices received by the American farmer. Likewise,
the crop of the United States affects the price received for grain
by the foreign grower. For instance, the year 1915 was known
as the bumper wheat crop year in the United States, the yield
jiunping to the unheard of figure of over one billion bushels. It
was a season of prosperity for the American wheat grower. But
the international aspect of this question is apparent when we turn
to our competing neighbor in the South — ^Argentina. Our Daily
Consular and Trade Reports of September 6, 1916, tell the follow-
ing brief and significant story:

" Investigation of Grain Markets in Argentina." — "The Argentine Gov-
ernment recently appointed a commission to make an investigation of grain
markets, with a view to protecting the interests of domestic growers and ship-
pers. The report of this commission, as quoted in a recent number of the
Revista Financiera y Comercial, showed that the present low price of wheat in
Argentina is due chiefly to the extraordinarily large world production of wheat
in the 1915-16 crop year. North America alone is able to supply nearly aU
the wheat needed in Europe, and the difference in freight does not permit
Argentina to compete advantageously in this trade. The present wheat
supply of Argentina is estimated at 1,500,000 tons, which is gradually being
marketed."

This quotation illustrates the situation. A brief study of
statistics makes the question yet clearer. Note, for instance, the
world wheat crop — when it is harvested, where it is harvested,
the quantity of it, the shortage in some sections and the surplus
in others, and the consequent exportation and importation move-
ments. Since both acreage and yield fluctuate widely from year
to year, a table of facts of the above kind must represent only
general average conditions. However, such a table is interesting
and is worth while. Consequently such a table is herewith pre-
sented, for the convenience of the reader.

Wheat, as the following table shows, is being harvested some
place every month of the year.

Among all agricultural crops of the United States,' corn is first
in value, as is suggested by the popular expression ''Corn is King."
22 337

338

THE GRAIN TRADE

World's Wheat Harvest; Where and When Harvested; Quantity (In Busiiels)

Month

Country

Average
crop

Surplus
exported

Imported

Jan.

Feb.
Mar.

April

May
June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Australia and New Zealand

Chile

Argentina^— continued

Upper Egypt

Lower Egypt

India

Syria, Cyprus, Persia, Asia Minor. . .
Arabia

Mexico

Cuba

Algeria and Tunis

China

Japan

United States

Greece

Italy

Spain

Portugal

France

Jugo Slavia

United States and France — continued

Roumania

Bulgaria

Austria

Hungary

Serbia

Russia and Siberia

Germany

Switzerland

England (United Kingdom)

Czecho-slovakia

United States and Russia — continued

Belgium

Luxemburg

Holland

Denmark

Poland

Colombia

Canada

Sweden

Norway

Canada — continued

Brazil

South Africa

Argentina

Uruguay

Burmah

140,000,000
20,000,000

40,000,000

325,000,000
L50,000,000

10,000,000

40,000,000

28,000,000

750,000,000

6,000,000

175,000,000

150,000,000

8,000,000

300,000,000

20,000,000

80,000,000

40,000,000

40,000,0001

200,000,000 J

10,000,000

850,000,000

150,000,000

4,000,000

60,000,000

10,000,000

8,000,000

500,000

4,000,000

6,000,000

10,000,000

1,000,000

200,000,000

9,000,000

350,000

6,000,000

175,000,000

10,000,000

200,000

50,000,000
3,000,000

10,000,000

55,000,000
10,000,000

150,000,000

5,000,000

52,000,000
10,000,000

1,000.000

150,000,000

100,000,000

95,000,000
2,000,000

500,000

1,000,000
3,000,000

7,000,000

53,000,000

4,000,000

3,000,000

40,000,000

70,000,000

19,000,000

220,000,000

51,000,000

23,000.000
7,000,000

7.000,000

20,000,000
7,000,000

It is usual to rank cotton as second in value, considered from the
standpoint of the farm value of the crop; on this basis hay is third
and wheat is fourth; oats are fifth.

The brief table presented below shows the farm values for ten
years of the five leading farm crops.

Corn from the marketing standpoint lacks the importance of
wheat, since it does not figure largely in our exports, and since it
is so largely consumed on the farm. Wheat of necessity must
largely leave the farmers' hands. And although many writers
and speakers have been announcing yearly, since 1870, that we
are approaching a wheat famine, that we have at last arrived at

COMPETITIVE NATURE OF GRAIN TRADE

339

Farm Values of Five Leading Crops, Ten Years

(From United States Yearbook of Agriculture).

Corn

Cotton

Hay

Wheat

Oats

1918

$ 3,528,000,000

$1,616,000,000

$1,524,000,000

$1,875,000,000

$1,092,000,000

1917

3,920,000,000

1,566:000,000

1,424,000,000

1,278,000,000

1,061,000,000

1916

2,281,000,000

1,122,000,000

1,023,000,000

1,020,000,000

656,000,000

1915

1,723,000,000

631,000,000

914,000,000

942,000,000

560,000,000

1914

1,722,000,000

549,000,000

779,000,000

879,000,000

499,000,000

1913

1,692,000,000

863,000,000

797,000,000

610,000,000

440,000,000

1912

1,520,000,000

817,000,000

857,000,000

555,000,000

452,000,000

1911

1,565,000,000

688,000,000

785,000,000

543,000,000

415,000,000

1910

1,385,000,000

820,000,000

842,000,000

561,000,000

408,000,000

1909

1,477,000,000

698,000,000

722,000,000

669,000,000

405,000,000

Totals

$20,813,000,000

$9,370,000,000

$9,667,000,000

$8,932,000,000

$5,988,000,000

the point when '^production and consumption look each other in
the face," that we can no longer export, yet, in the face of all of
these dire predictions, the exports of wheat during the last ten
years greatly exceed the amount of wheat exports during any
other ten years in our history. When such distinguished scholars
as Liebig and Sir William Crookes err greatly in their attempts to
forecast future wheat conditions, who would dare attempt to say
what the next ten years may bring forth? ^

Competitive Nature of Grain Trade. — The United States
Department of Labor has for many years made a study of food
prices, in order to know^ what the consumer's dollar is able to
purchase. A study was made by this Department into ''Wheat
and Flour Prices from Farmer to Consumer." ^ The investigator
was impressed with the highly competitive nature of the business
in this field. He expressed his findings in these words:

" In a survey of the distribution of wheat and flour, three things are notice-
able: The intensely competitive character of the business, the excess in the
equipment for distribution, and the desire for independence of the people
engaged in production and distribution. If one farmer wiU not seU his wheat
at the price offered, another farmer will . . . Beginning with production,
there are more seeding and harvesting machines in the hands of farmers than
would be needed if there were cooperation in production and each machine
kept in operation the entire harvest season. There are more elevators in the
wheat area than are needed, each operating most of the time on less than
full capacity. In some sections there is useless dupUcation of railway trackage.
More grain jobbers and commission men are in the field than can find continu-
ous business. It is asserted that the mills of the United States could grind
all the wheat raised in the United States in 144 days (24 hours per day)."

1 Crookes, Sir Wilham, The Wheat Problem. New York and I^ondon,
1900. Same (3d Edition), 1917. Conrad, Dr. J. Liebig's Ansicht von der
Bodenerschopfung und ihre geschichtUche, statistische und i;ational okono
mische Begriindung. Kritisch gepriift. Jena, 1864.

2 Bulletin 130, United States Department of Labor; Bureau of Labor
Statistics, Washington, August 15, 1913, p. 14.

340 THE GRAIN TRADE

Competition. — It is true that the whole grain trade (as well as
the wheat trade) is one of fierce competition and narrow margins.
It is a trade of many ''middlemen," each taking a small margin,
rather than a few, powerful, dominating middlemen taking a big
toll. Competing farmers deal with competing country elevators.
And country elevators ship to competing mills or to competing
terminal markets. A partial list of the various grain exchanges,
given below, indicates the real nature of this competition for the
farmers' grain.

Chicago Board of Trade Louisville Board of Trade

Minneapolis Chamber of Commerce Memphis Merchants' Exchange

Duluth Board of Trade Houston Grain and Hay Exchange

Omaha Grain Exchange Topeka Board of Trade

Kansas City Board of Trade Wichita Board of Trade

St. Louis Merchants' Exchange Sahna (Kansas) Board of Trade

Milwaukee Chamber of Commerce Hutchinson (Kansas) Board of Trade

Toledo Produce Exchange Oklahoma City Board of Trade

Buffalo Corn Exchange Enid (Oklahoma) Board of Trade

Philadelphia Commercial Exchange Denver Grain Exchange

New York Produce Exchange Sioux City Grain Exchange

New Orleans Board of Trade Superior (Nebraska) Board of Trade

Cleveland Grain and Hay Exchange Cairo Board of Trade

Cincinnati Chamber of Commerce Peoria Board of Trade

Baltimore Chamber of Commerce Wichita Merchants' Exchange

Boston Chamber of Commerce Seattle Board of Trade

Indianapolis Board of Trade Lincoln Grain Exchange

Little Rock Board of Trade Des Moines Board of Trade

St. Joseph (Missouri) Grain Exchange Tacoma Grain Exchange

Atchison Board of Trade Los Angeles Grain Exchange

Ft. Worth Grain and Cotton Exchange

No one market and no one class of dealers dominate the grain
trade, although Chicago is our largest grain market, and the millers
and terminal elevator interests are the largest buyers. Where,
for instance, will the corn be sold that is in a country elevator in
central Iowa? The elevator manager receives his daily price cards,
or market letters from the nearby terminal markets, namely,
Chicago, Kansas City, Omaha, and Minneapolis. He also receives
market quotations from the important interior markets, such as
Cedar Rapids, Des Moines, Sioux City. He has the opportunity
to consign his grain to the large terminals, and receive what the
market will give when the grain arrives ; or he may ship to any one
of several buyers who send him ''To arrive" bids, that is, a definite
bid as to price and as to time of shipment. His grain may go to a
nearby Iowa cattle feeder. Or a Kansas City house, specializing
in corn, may buy the corn to ship to Maple Hill or Peabody,

PRESENT ORGANIZATION OF THE GRAIN TRADE 341

Kansas, important stock feeding centei's. Or a private wire house
in Chicago (that is, a large grain concern having its own leased
telegraph lines) may want to buy the corn for a customer operating
a feed mill in Montpelier, Vermont. Or a Sioux City grain broker
may bid for it for a South Dakota customer. Or a broker at Fort
Worth or a Terminal Elevator in Kansas City may bid on it for
the purpose of shipping to Galveston to complete a cargo. Or a
member of the Denver Grain Exchange may have a telegram from
a customer in Petaluma, California (a dealer in poultry feeds),
asking for corn, and this Denver dealer orders the Iowa corn
shipped to the California customer. This is a fair picture of what
actually happens, in the course of time, in the corn belt. The
actual flow of grain fluctuates greatly from year to year, depending
largely on local crop yields. One thing is constant, however,
namely, the competition for the farmer's grain, competition among
the various markets, and competition among the different indus-
tries that use grain. Thus; one manufacturer of corn products in
Chicago uses annually 30,000,000 bushels of corn, and there are
several manufacturers of corn products on this market. The
manufacturers of rolled oats in its various forms use an increasing
amount of oats for human food. So also with the various wheat
products breakfast foods. The mills, the industries, the exporters,
are all after a supply of grain, and are willing to bid the price which
will keep their plants busy and their orders filled. And the extent
of their orders depends in turn upon the volume the consumer is
willing to take and pay for. It is apparent to everyone studying
the grain market that the underlying forces of demand and supply
are ever present, and finally determine the flow of the grain. The
quickness and the sensitiveness with which prices constantly
respond to the ever-changing pressure of supply and demand
explain the price fluctuations. And our country has learned, as
Argentina and other foreign countries have learned, that a big
supply in our country must depress prices in competing countries.
Present Organization of the Grain Trade. — ^The present organ-
ization of the grain trade is a product of slow evolution— a growth,
many critics say, from old abuses toward highest standards of
commercial honor. The farmer hauls his grain to the country
elevator (Fig. 69), and this local elevator is an institution of one
of three classes: (1) Farmers' Elevators. In all the grain growing
States the farmers have formed corporations at the local shipping
points to own and operate grain elevators. These are generally
called ''cooperative elevators," although as yet fewer than half

342

THE GRAIN TRADE

of them can qualify as purely cooperative corporations. Elevators
of this kind are rapidly increasing in numbers. (2) Independent
Elevators. Many local grain dealers — usually individuals — own
and operate grain elevators, depending for their patronage on their
standing and reputation in the community. (3) Line Elevators.
At the terminal markets are certain large corporations engaged in
one or more branches of the grain trade, and corporations of this
kind often own and operate a large number of country elevators,
or '4ine elevators" as they are familiarly called. Line elevator
companies in the United States operate all the way from ten to

Fig. 69. — Country grain elevator in North Dakota.

six hundred country houses apiece. Elevators of this kind are
rapidly decreasing in numbers, being bought out in part by farmers'
companies and in part by flour milling corporations.

When the grain is once delivered at the local elevator at once
there emerge the problems of inspecting and grading, financing
and storing, and of transportation. Since ninety-five per cent
of the farmers part with their grain at the country elevator and
receive their pay in cash, it is unavoidably necessary for the man-
ager to grade this grain. The price he receives at the terminal or
other market will be governed by the grade there. Uniformity of
grain grades has been established by the United States Grain
Standards Act of August 11, 1916. Wheat, for instance, is divided

THE LOCAL ELEVATOR MANAGER 343

into classes and sub-classes, and these again into grades. The
grade depends on the color and condition, the test weight per
measured bushel, the moisture content, on certain inseparable
materials, and other factors. In addition to naming the grade, the
local manager must determine the dockage, that is, the amount
of foreign matter and broken kernels, which he screens out of
the sample by putting the grain over a sieve. If 100 pounds
of grain contains 10 pounds of screenings or dockage, it is
customary to pay for the 90 pounds of grain out of each 100
delivered by the farmer. More will be said later concerning the
dockage problem.

The local elevator manager may dispose of his grain in a num-
ber of ways, but the two most usual practices are to consign and
to sell to arrive. If he thinks the market is working upward, he
consigns to one or more commission houses wdth which he has
established commercial relations. The financing of the grain in
such a case is usually done in this manner. The commission house
makes an advance to the country shipper when the grain starts
to move, enabling the country manager to pay cash for the farmers'
grain. This loan is repaid as the grain is sold at the terminal. The
country shipper then forwards by mail draft with bill of lading to
his consignee, who usually honors the draft several days before
the arrival of the car, charging an interest rate for the money
advanced as fixed by the Grain Exchange at that market. This
banking function of the commission merchant is very important
in the markets of Duluth, Minneapolis, and Chicago. The
commission merchant in turn borrows from this city bank,
using bills of lading as security. To indicate the importance of
this kind of financing, it may be mentioned that one Chicago
commission house had at one time over $800,000 of borrowed
money advanced to the country on consigned grain, none of which
grain was yet unloaded at the terminal, and another house had
out $2,000,000.

If the market does not seem to be a rising one, or if a temporary
car shortage impends, or if certain other conditions prevail, the
local manager may sell his grain 'Ho arrive." In the Minneapolis
district this term usually means to arrive at Minneapolis within
20 days after acceptance of the bid. In the Chicago district the
term ''to arrive" refers to time of shipment, and hence the bids
sent out from Chicago always specify time of shipment as three
days, ten days, thirty days, ninety days, and so on. The local
shipper, when he accepts the to-arrive bid, has his grain sold at a

344 THE GRAIN TRADE

definite price. He then has no further interest in price fluctuations,
so far as this grain is concerned.

The country shipper may sell grain ''on track" terminal mar-
ket, by shipping the grain to the terminal and selling it from a
sample displayed on the table on the trading floor of the Grain
Exchange. The country shipper may ship his grain to the terminal
and there have it stored in a public elevator. In this case it is
mixed with other grain of the same grade — but this process of
mixing really began when the grain from different farms was
mixed in the local elevator.

Storage and Hedging Problems of Country Elevator. — Grain,
particularly wheat, is commonly hurried to the elevators soon
after thrashing. The farmer has the privilege of storing his grain
in the local elevator, if he so elects, taking therefore warehouse
receipts commonly in the form of * ''storage tickets." The local
elevator, holding from 25,000 to 35,000 bushels (on the average)
soon fills up with grain, a part of which is "stored giain." It is
thus often necessary to ship out stored grain. In such a case it
is a common practice for the manager to protect himself against
loss by hedging such shipments of stored grain in the future
market. He hedges by buying for future delivery as much as
he has received, shipped and sold on the cash market. He is now
insured. Then when the time comes that the farmer owning the
"stored grain" (not in the elevator) orders it sold, the future is
sold out and the transaction is closed. Any loss on the cash grain
is offset by a gain on the future; any gain on the cash grain is
offset by a loss on the fut\u*e.

The country shipper, particularly in the Minneapolis district,
also hedges his day-to-day purchases of grain. If he buys 5,000
bushels to-day, he orders a future sold in the pit against it. In a
few weeks the cash grain reaches the terminal and is sold. And
now the future is bought back. Let us assume that the cash grain
sells at a loss of ten cents a bushel, owing to a decline in the market.
Future prices usually move with cash prices. Manifestly the future
he has sold at one price may now be bought in at a profit of approx-
imately ten cents a bushel, so that he has been insured against
loss by price fluctuations. The converse is true, namely, that
should cash prices sharply advance, futures would also advance,
ordinarily, so that he would realize no speculative gain by market
changes. Hedging is insurance against loss through price fluctua-
tions. The owner of hedged grain has no further interests in
price changes.

THE GRAIN EXCHANGE 345

The hedging of grain by country shippers is common in the
North, but is not common in the Kansas City district. The chief
reasons for this lack of hedging in Kansas and that section are as
follows: (1) More grain is financed locally and less by commission
mei chants — the commission merchant requiring hedging and the
local money lenders not; (2) More local mills and industries,
buyers of grain, are situated near the local elevator, so that the
time of the grain en route is less and the risk of loss consequently
less ; (3) Considerable grain is sold to arrive, and this is hedged by
the terminal buyer.

Mixing. — As the grain flows from the country elevator to the
terminal market following the harvest season — and one-half the
wheat goes to market within four months — it is necessary to pro-
vide storage for it. Terminal elevators are the principal buyers
and storers at this time. These elevators are both ''public" and
private, the ''public" warehouses being houses owned by private
corporations which store grain for the public at a regular storage
fee. Private warehouses are those which store their own grain
only. Much grain which is wet or otherwise out of condition finds
its way to market. A class of private elevators known as Hospital
Elevators either buy this grain or condition it for their customers
at certain rates of compensation. Public elevators are not per-
mitted to mix grains of different grades, whereas private houses
mix their own grain to suit themselves and their customers. Some
private houses derive considerable income from buying low-grade
grain and mixing it with high-grade grain in such a way as to raise
the grade of much poor grain. Since the price is reflected back to
the country when low-grade grain is bought for mixing purposes,
the farmers do not suffer from this terminal practice.

The Terminal Elevators at all times have strong competition
from other buyers, such as flour and feed millers, exporters, and
the industries using grain.

The Grain Exchange. — ^At the larger terminal markets the
various buyers and sellers of grain and the receivers and shippers
of consigned grain have associated themselves together and
formed grain exchanges (Fig. 70). These exchanges are com-
monly incorporated, the corporation furnishing a place to trade,
rules for trading, and market information of every available kind,
but the corporation itself doing no trading. A strict code of
ethics is imposed on the members in their dealings -with one an-
other and with the outside public. A breach of the rules is pun-
ished by suspension or expulsion. Applicants for membership to

346 THE GRAIN TRADE

the exchanges are scrutinized carefully. Few farmers' companies
thus far have sought membership, partly owing to the high cost of
membership and partly owing to the present efficient selling
service rendered by the commission merchants. The Minneapolis
Chamber of Commerce has three farmer companies as members.
The Chicago Board of Trade has two farmers' companies among its
membership. The applicant for membership must show good
character and sound financial standing.

A visitor who sees for the first time the trading floor of one of
the great grain exchanges is most impressed with the visible
facilities for receiving and disseminating market information —

Fia. 70. — The exchange floor of the Chicago Board of Trade, the principal grain exchange
of the United States. Cash grain department to left; pits on right. There are four pits —
wheat, corn, oats and provisions. Samples are from the Illinois State Grain Inspection
Department. This picture was taken during the World War, and shows the members
pausing at the noon hour for a minute of silent prayer. (Photo by Moulton.)

the scores of telegraph and telephone instruments — the weather
maps and charts — the blackboards with statistics as to price quo-
tations in all large markets, visible supply, exports, receipts and
shipments, in and out inspections, grain afloat, and so on. The
traders are certainly trading with their eyes open, so far as the
latest and fullest market information is concerned. All exchanges
have strict rules against spreading rumors and false reports about
crops conditions or other market factors. The Chicago Board
of Trade has a standing committee on Market Reports, and this
Committee employs an expert — a grain dealer of long experience —
to devote his entire time to supervision and censorship over
crop reports, market reports and market quotations issued from
that market.

EVOLUTION OF THE ORGANIZED GRAIN EXCHANGE 347

The Farmer and the Terminal Market. — As stated above,
95 per cent of the grain reaching the terminal has already passed
out of the possession of the farmer. An increasing number of
farmers, however, are now availing themselves of the machinery
of the terminal markets, including that of the grain exchange
itself. For instance, some farmers ship their grain to the terminal
elevator and have it cleaned, and the dockage eliminated, before
selling. The screenings are then sold at their market value for
manufacture into stock feeds. A few farmers use the futures
market for disposing of their crop. Thus in the fall of 1919 many
Iowa and Illinois farmers found their corn crop assured, both as
to quantity and quality, and the December contract price, during
August, a satisfactory price. There was also at this time a tre-
mendous campaign inaugurated by the Federal government against
the high cost of living, and hence, partly in consequence of this
campaign, a strong probability of a fall in corn prices. Hence many
of these farmers sold their corn for December delivery, these future
contracts assuring them of fair profits on their crops. Their
judgment proved correct, for there was a decline in com prices
before the delivery month arrived. This service costs the farmer
only one-fourth of a cent a bushel.

Past Organization of the Grain Trade. — ^The grain trade, in
common with other commercial institutions of America within the
last thirty years, has responded to the demands for a higher code
of business ethics. In all probability the practices in the grain
trade were no better or no worse than the practices generally
prevailing in manufacturing, transportation, or other branches of
industry. The abuses in the grain trade of yesterday are so fresh
in men's minds that many clever writers and speakers find it easy
to stir up the farmer's wrath and hot indignation on this subject.
The past organization of the grain trade, with its evils laid bare,
is best traced under three topics, namely, (1) evolution of the
organized grain exchanges; (2) evolution of the terminal elevator —
railway monopoly; (3) evolution of the farmers' elevator.

(1) Evolution of the Organized Grain Exchange. — Prior to our
Civil War grain was handled very largely by independent dealers
with no fixed customs in the different markets. Some markets,
for instance, handled wheat by the measured bushel, others by
the weighed bushel (sixty pounds). Each important market, like
Buffalo and Baltimore, had its own grades. Lack of transporta-
tion facilities made it difficult to move grain to the seaboard from
the inland. Water routes were of course long the sole means of

348 THE GRAIN TRADE

transporting crops long distances. In the larger .commercial
centers "Boards of Trade," as they were called, sprang up, to
promote uniformity in the usages of merchants and to improve
and dignify commerce in general. Few of these local boards,
however, survived and became grain exchanges. The first and
most important one to do so was the Chicago Board of Trade of
1848. It was ten years before this board of trade became a grain
exchange in the modern sense of the term. The Chicago Board
of Trade at once took up the fundamental market problems of
weighing, inspecting, and grading the grain. The practice of the
Chicago grain exchange of selling wheat by weight instead of the
measured bushel was forced on the Buffalo and the New York
markets. A system of weighing was developed which proved
satisfactory to both buyers and sellers of grain. It is worthy of
note that while inspection and grading have been taken over by
the State as proper functions of State government (under Federal
supervision), yet the weighing of grain on the Chicago market is
still done exclusively by the Board of Trade. In the Kansas City
and Minneapolis markets, however, weighing as well as inspection
is now a State function.

Cash, to Arrive, and Futures : Comers. — Three forms of trading
in grain developed before the Civil War on all the grain exchanges,
namely, cash grain, to arrive grain, and future trading. Cash
grain or spot grain means the grain itself or a sample of the grain
is on hand when the trade is made. Dealers on the various ex-
changes, however, found it unsatisfactory to depend upon the
supply of cash grain to meet their requirements. Hence contracts
were made for grain to be shipped at certain times or within
certain definite periods, and this form of dealing came to be called
''to-arrive" business. As a natural outgrowth of ''to-arrive" trad-
ing came future trading. *'To-arrive" contracts were naturally
made with parties having grain stored along the canal or railw^ay.
Before the Civil War, particularly on the Chicago market, traders
began to make contracts to deliver wheat in a definite future
month at a definite price, which wheat they did not yet own, but
expected to buy and dehver. In other words, they sold short.
In this way future trading started. The careful students of this
subject are convinced that future trading began in this natural
way, as an outgrowth of to-arrive trading, and in this manner
served the interests of the cash grain business. The speculators,
however, saw the possibilities in this new field, and proceeded to
prostitute this wholesome form of trading till its abuses well-nigh

CASH, TO ARRIVE, AND FUTURES: CORNERS 349

outweighed its uses. During the Civil War the Quartermaster's
Department of the Army bought grain on contracts for future
dehvery, particularly on the Chicago Board of Trade. This gave
a new impetus to future trading. Following the War, there came
a period of tremendous speculation in railroads, in lands, and in
general commodities. The same wave of speculation hit the organ-
ized grain exchanges, and future trading became the football of
speculators. Ordinary hedging transactions became completely
overshadowed by purely speculative trading. Cornering the
market became almost a monthly occurrence, for every month
in the year was delivery month instead of four months as now.
Not till five years after the Civil War did the Chicago Board of
Trade begin to make rules covering future trading and aiming
to curb its abuses. This was the beginning of a fifty-year fight
against the two serious abuses of speculation, namely, manipula-
tion of the market and corners. The Chicago Board of Trade (and
the other exchanges where future trading is carried on) f6und it
frankly a matter of intelligent self-interest to preserve the benefits
of future trading and eliminate its abuses. Rules were gradually
added, increasing the nimiber of grades deliverable on contract,
so that corners became more difficult. Obviously if one grade
only is deliverable on a future contract, cornering is a compara-
tively simple matter. At the present time 21 grades of wheat are
deliverable on future contracts in Chicago. In case the dehvery
cannot be made, settlement can be made at a fair market price,
not at a "fictitious" price due to the corner. Again, if the grain
in the regular warehouses is held by the would-be cornerers, de-
liveries can be made on track during the last few days of the
delivery month. Again, it may be added that the Supreme Court
of the United States has declared cornering the market a crime.
Hence the exchanges now stand ready to apply the remedy of
expulsion to any member guilty of attempting a corner. As a
matter of history, nearly every attempt to corner the grain market
was a failure. Only in those few cases where actual market
shortage was on the side of the cornerer did he realize a profit.
For the natural consequence of accumulating a long line of grain in
order to corner the market is to boost the price of the grain bought;
and the second phase of the corner — unloading the long line — •
has the natural effect of lowering the price more than the buying
had raised it. As one trader expressed it, ''It is easy to corner
the market, but it is hard to bury the corpse." And this is the
reason why most attempted corners failed. In the public memory

350 THE GRAIN TRADE

there stand out three so-called corners, namely, the Hutchinson
corner of 1888, the Leiter corner of 1898, and the Pattern corner
of 1909. The Hutchinson corner was a genuine corner, his buying
coinciding with actual market shortage; the Leiter corner was a
failure, bankrupting Leiter and leading to his permanent suspen-
sion from the Chicago Board of Trade; the Pattern corner was not
a corner, but an example of grain merchandising in accordance
with a correct market forecast. For when Mr. Pattern quit the
market, after his ''May wheat deal," the prices continued to go
up and stay up till the new crop came in.

Cornering the market, under the present rules of^the organized
exchanges, is now looked upon as a danger so slight as to be negli-
gible. There have been no intentional corners in recent years.

Manipulation of the market means causing prices to rise or fall
by means of some deception usually in the form of spreading rumors
and false market reports. The rules of the organized exchanges
in recent years have been made extremely severe in this matter,
any member being subject to discipline^and expulsion for circulat-
ing any false reports. In the language of the trade, ''The crop
killer has been killed off.''

Corners and manipulations were extremely common in the
grain trade before exchanges were organized, and for the first
years of the organized exchanges. But the total effect of the organ-
ized exchanges has been very greatly to curtail these evils in the
grain trade. Corners and manipulations are still familiar, how-
ever, in commodities not dealt in on the organized exchanges.

A Wide Market. — For the purpose of carrying on legitimate
hedging transactions a "wide" market is needed, that is, a market
with enough buyers and sellers in it to absorb instantly and without
shock large trades. In the language of the trade, it is a market
"easy to get in and out of." To make a market wide enough for
hedging every day in the year some speculators are needed. They
buy till the regular consumptive buyers are ready to purchase
their contracts; or they sell short, till the holders of either cash
grain or long contracts are ready to sell to them, or till fresh
speculators step in and close the trade. A trader on the "long"
side of the market (a buyer) can close his trade in three ways:
wait till delivery month and receive the grain; wait till delivery
month and receive a "delivery notice" {i.e., a notice that the
grain is in store for him, and a warehouse receipt ready), which
notice he immediately passes on to some other trader in fulfillment
of a contract, this delivery notice passing on from hand to hand

"PHANTOM GRAIN" QUESTION 351

much like a piece of paper money; or the buyer may sell as much
as he has bought and settle by offsetting one trade against the
other, merely paying or receiving the balance due.^

Scalpers. — As a matter of fact most speculative trades are
closed out before the delivery month comes around. There is a
small class of speculators who buy and sell in the pit dming the
day on a very small fluctuation in price, but who aim to have all
their trades closed out by the time the market closes. They are
called ''pit scalpers."

" Phantom Grain " Question. — The speculators and the scal-
pers produce a large volume of future trading, which some writers
call mere dealing in "wind" or in "phantom" grain; and this
"phantom grain," these same writers claim, depresses the price
of actual grain. When such a claim as this is examined it is seen
to be preposterous. For of all places, the organized exchange is the
one center where accurate market information is collected and
disseminated, and this information fully covers the visible supply
of grain, the arrivals on all big markets, the amount afloat and in
elevators, the conditions of growing crops, and every other known
factor of significance as to supply or demand. No speculator is
fooled by any "phantom" supply of grain, or he would be too
childish a person to survive long as a speculator. Again, since the
amount of "phantom" grain bought exactly equals the amount
sold, it may be looked on as a case of demand (tending to raise
price) just as much as it is a case of supply (tending to lower price).

^ The use of delivery notices where one notice for 5,000 bushels, for in-
stance, may settle contracts for many thousands of bushels, is very much
similar to the use of money, checks, etc., in settHng contracts to pay money.
The analogj' is very striking. The following story illustrates how a piece of
paper "money" (i.e., credit money — a promise to pay money) does the work
of real money (gold).

" Mr. Brown, a Kansas gentleman, is the proprietor of a boarding-house. Around hia
table at a recent dinner sat his wife, Mrs. Brown; the village milliner, Mrs. Andrews; Mr.
Black, the baker; Mr. Jordan, a carpenter; and Mr. Hadley, a flour, feed, and lumber
merchant. Mr Brown took a ten dollar bill from his pocket and handed it to Mrs. Brown,
with the remark that there was ten dollars towards the twenty he had promised her. Mrs.
Brown handed the bill to Mrs. Andrews, the milliner, saying, ' that pays for my new bonnet.'
Mrs. Andrews, in turn, passed it on to Mr. Jordan, remarking that it would pay for the
carpentry work he had done for her. Mr. Jordan handed it to Mr. Hadley, requesting his
receipted bill for flour, feed, and lumber. Mr. Hadley gave the bill back to Mr. Brown
saying, 'That pays ten dollars on my board.' Mr. Brown again passed it to Mrs. Brown,
remarking that he had now paid her the twenty dollars he had promised her. She, in turn,
paid it to Mr. Black to settle her bread and pastry account. Mr. Black handed it to Mr.
Hadley, asking credit for the amount on his flour bill, Mr. Hadley again returning it to
Mr. Brown, with the remark that it settled for his month's board; whereupon Brown put it
back into his pocket, observing that he had not supposed a greenback would go so far."

The greenback may be presented to the United States Treasury and
exchanged for real money — gold.

The above story is quoted from "Among the Humorists and After-dinner
Speakers"; CoUier & Son, New York, 1909, p. 251.

352 THE GRAIN TRADE

Speculation and Price Fluctuations. — The fact is that this spec-
ulation is a factor tending to put on brakes when the market starts
to bulge or break. It stabilizes. It lessens the fluctuations —
makes them many and frequent and small, rather than few and
large. Prices of wheat, for instance, fluctuated much more on
the American market during the 60 years 1790-1850 (when there
were no organized grain exchanges) than they did during the 50
years of organized grain exchanges (1865-1915). And, as stated
in the chapter on speculation, grains subject to future trading
show smaller price fluctuations than grains not subject to future
trading (Figs. 71 and 72).

Cost of Future Trading. — Future trading has been defined as
of two interrelated and interdependent kinds, hedging and specu-
lation. All persons familiar with the grain trade admit the benefits
of hedging, but many critics say that speculation is of such large
volume as to overshadow completely the hedging transactions, and
that this large volume of speculative trading imposes a toll on the
public far outweighing the benefits of hedging. It is very probable
that half the future trading in grain in the United States is done
on the Chicago Board of Trade, this trading representing every
State in the Union and a few foreign countries. It is the opinion
of the writer that the volume of future trading in any one normal
year in Chicago amounts to ten billion bushels of wheat and ten
billion bushels of corn and oats together, a grand total of twenty
bilHon bushels. The normal crop in these grains is five billion
bushels, that is each bushel of cash grain is bought and sold four
times in the pit. What is the ''toll" on this amount of future
trading? Future trading may be classified as of three kinds, so
far as costs are concerned, namely, (1) members trading for them-
selves; no commission is charged on this; (2) members trading for
other members; the rate on this is the ''half rate," namely, $6.25
for 5,000 bushels bought or sold or both bought and sold (the
so-called "round turn"); (3) members trading for non-members,
on which the rate is $12.50 for 5,000 bushels round turn. Since
about one-fourth of the future trading is for non-members and
one-fourth for other members, it follows that the total commissions
collected on a year's future trading in wheat, corn and oats in
Chicago amount to approximately one-third of a cent a bushel
"toll" on the year's crop, not a very heavy price for the insurance
afforded by the hedging, which is an integral part of future trading.

Bucket-Shop Fight. — The account of the evolution of the organ-
ized grain exchange is not complete until the story of the bucket-

WHEAT PITS

353

^.

Fig. 71. — Wheat pit, Chicago Board of Trade, where future trading is carried on.

Fig. 72. — The wheat pit during an exciting moment of trade. This is a flashlight taken
during an actual period of trading, and almost every character of the trader's sign manual

is shown.

23

354 THE GRAIN TRADE

shop fight is told, although it can be told but briefly and inade-
quately here. A bucket shop is a counterfeit of a branch office of
a member of the genuine exchange, and like most counterfeits, is
a good imitation. It contains a blackboard for posting the con-
tinuous quotations as they come in over the wire. In this respect
it resembles the branch office of any large ''Private Wire house,"
that is, house operating leased wires and maintaining branch
offices. Some of the largest dealers in both cash and futures on
the organized exchanges are private wire houses. However,
private wire houses are members of the regular exchanges, and all
orders coming to them are executed on the open market on the
trading floor of the exchange — that is, become binding contracts
whose terms must be and are fulfilled. The private wire house
usually requires a customer to deposit a so-called ''margin" of
ten per cent to protect the trade against an adverse turn in the
market. Thus, if the trade happens to be for 5,000 bushels of
com at one dollar a bushel, the margin would be $500. The
bucket shop operator requires a very small margin, probably one
cent a bushel or one-half cent a bushel, so that five dollars could
margin a trade of 1,000 bushels. The operator of the bucket shop
is not a member of the Exchange. He does not execute his orders
on any exchange, and hence these "orders" are mere bets, and
have no significance in registering supply and demand influences
or in affording hedging facilities. The operator of the bucket shop
takes the other side of the trade himself, that is, in trade language,
he "buckets the trade." ^ The customer has a very slender chance
indeed of winning. His margin is so small that upon a very slight
fluctuation of the market his margin is gone and his trade is closed.
And since the operator has it within his power to post false quota-
tions, it is obvious that only enough customers are permitted to
win to serve as bait for new victims. Bucket-shop gambling
spread rapidly over the United States. Chicago, being the center
for future trading for the whole United States and for the world,
naturally became the leader in the long struggle against the power-
ful, deeply intrenched bucket-shop interests. In the early 80's
the evil became so prominent as to engage a very large share of
the attention of the meetings of the Directors of the Board of
Trade. In the year 1890 the Board decided to stop the giving
out of all quotations on futures, and such an embargo was actually

* This practice formerly occurred at intervals on the exchanges. It is now
strictly forbidden. One exchange expelled one of its ex-presidents for bucket-
ing trades. The exchanges have now practically eliminated this practice.

BUCKET SHOP FIGHT 355

put into effect. But, by hook or crook, the bucket shops were
ingenious enough to get the quotations — mostly by theft. Presi-
dent Baker of the Board was re-elected to office in 1891 on the
issue of embargoing quotations. He denounced the Western
Union Telegraph Company as a secret enemy of the Board of
Trade. In 1892 a return to open quotations was made, the embargo
having proven ineffective. The bucket-shop fight now defined
itself as a question of the control of quotations. President Warren
of the Board of Trade called a convention of all leading grain
exchanges to discuss ways and means of fighting bucket shops,
and particularly the adoption of a national anti-bucket-shop law.
Finally, after spending many tens of thousands of dollars on the
fight, the Chicago Board of Trade evolved a successful plan. A
telegraph company (the Cleveland Telegraph Company) was
formed in 1900 to collect the quotations on the floor and to assume
control of all wires and instruments on the floor. The Western
Union Telegraph Company, now enjoying great revenue from the
sale of quotations, was ordered off the floor. Quotations from this
time on were furnished to the Western Union, or other companies,
only upon the signing of a contract not to furnish them to bucket
shops, and giving the Board itself the right to decide to what
applicants such quotations should be furnished, and from whom
they should be cut off. From this time on the Federal Department
of Justice and various State legal departments joined in with the
attorney of the Chicago Board of Trade, and a nation-wide cam-
paign was relentlessly pushed. In 1905 came the Christie decision
of the United States Supreme Court, giving the Board of Trade a
property right in its quotations, and hence full control over them.
By the year 1915 existing bucket shops had all been closed. Since
that date an occasional one shows its head under some disguise, but
the special agent of the Chicago Board of Trade or of the New York
Stock Exchange, or the two working together, soon eliminate it.
Much of the condemnation of grain exchanges as "gambling
places" come from the old bucket shops — bastard exchanges —
which were 100 per cent gambling places. These counterfeits
have hurt the standing of the genuine exchanges. The fact
remains, however, that the Board of Trade of Chicago and the
other great organized grain exchanges, as they are now developed,
are efficient pieces of market machinery, operating at a low margin
of cost per bushel, under democratic rules of self-government, and
managed by boards of directors responsive to the welfare and
interests of the general public.

356 THE GRAIN TRADE

(2) Evolution of Terminal Elevator — ^Railroad Monopoly. —

Following the Civil War, the competing railroads in the grain
States found it necessary to erect terminal storage in order to
secure their share of the grain business. Later these terminal
elevators or warehouses were also built by large grain firms on
the terminal markets. These firms, in many cases, then built a
series or ''hne" of country elevators along particular railroads.
There soon developed a form of combination between railroad
and terminal elevator whereby rebates or other privileges were
given to the terminal elevator companies, so that one firm would
have a monopoly of the grain business along a certain railroad.
Terminal elevator companies were at first mere custodians of
grain. But this practice failed to yield enough income, so these
companies became grain merchants in competition with their
customers hiring storage in their bins. This gave them vast
advantages, particularly in the mixing of grain and the manipula-
tion of grades. Several scandals arose out of the sale of fraudulent
warehouse receipts. When the terminal elevator companies had
well-nigh completed their railroad monop'oly of the country grain
trade and had entered the terminal market as grain dealers, and
the future market as heavy grain speculators, they were in a fair
way to drive out all competitors. Seats on the grain exchanges
fell in value. Grain commission firms were fast quitting the
business as a losing game. When things reached this stage,
reforms began to be worked out from within. The Chicago Board
of Trade, for instance, sent a group to the capital of Illinois to
lobby for a bill for a State warehouse act, prohibiting a public
warehouse owner to be a dealer in grain and a custodian of grain
in the same warehouse at the same time. Consequently any mixing
of grain in Illinois had to be done in private warehouses, following
the passage of this Act in 1871. The railroad rebate evil continued,
however, for many years, even after the passage of the Interstate
Commerce Act of 1887. It remained for one member of the Mil-
waukee Chamber of Commerce, trying to operate a terminal
elevator in that market in the face of the railway-elevator combine,
to bring the concrete situation to the attention of President Roose-
velt. The significance of this act in securing remedial legislation
in the form of the Hepburn Act is thus told by the editor of the
Price Current Grain Reporter : ^

"Of the many things that stand to his credit as a statesman, for one at
least Theodore Roosevelt will be held in grateful remembrance by the American

^Osman, E. G., Price Current Grain Reporter, Jan. 15, 1919, p. 7.

EVOLUTION OF FARMERS' ELEVATORS 357

grain trade. Conceived in the brain of the late E. P. Bacon and forced through
a reluctant Congress in defiance of the opposition of the leaders of his own
party by the inflexible determination of President Roosevelt to do the right
thing in this, the Hepburn Act made the railroads for the first time, what they
had been in name only before, 'common carriers,' compelled by law to treat
all men as equals. Those only who know to what depths of meanness the rail-
ways had descended in the treatment of individuals before the Hepburn Act
became law, and how they fought to retain their power to continue such
practices, can reaUze how great is the debt of the grain trade to these two men.
And yet so short is the pubHc memory, or so great is pubhc ignorance, most of
the things for which railway reform agitators to-day are still clamoring will
be found embodied in the Hepburn Act and its subsequent amendments bear-
ing the signature of Theodore Roosevelt.

" The greatest evil of railroad management in the past was removed with-
out revolution, although the influence of the Hepburn Act upon the conduct
of the grain trade was revolutionary. It gave new life to competition in the
grain trade of individuals and locaHties and rescued the trade from a state of
monopoly that was rapidly becoming supreme throughout the surplus grain
States. In other hues of trade and industry the same tendency towards con-
centration of trade in a few hands was in like manner checked in so far as
equahty of transportation service can ever stop that tendency."

In recent years railroads are forbidden to operate terminal
elevators. Consequently their terminal elevators are either sold
or leased to grain firms.

Terminal warehouses are now of two general kinds, pubUcand
private. In public houses, the grain of the public is stored for
fixed storage charges, and grains of different grades are kept in
separate bins. The owner of the warehouse is a custodian only
and cannot use the house for storing his own grain. Private ware-
houses are used by owners for storing their own grain, which they
are at liberty to mix in any manner they see fit. Grain sold for
future delivery must be stored in the regular public warehouses,
and receipts of these warehouses are used in making such deliveries.
Private houses often contain machinery for drying wet grain, a
serious problem in some years (as corn in 1917), and also machinery
for cleaning and conditioning out-of-condition grain and grain
not fit for storage or milling. These ''hospital" elevators thus
make a market for low-grade grain. Some buy the grain outright ;
some perform the service for the general public at fixed charges.

Under the presidency of Hiram N. Sager, the Chicago Board of
Trade made a working agreement with the terminal elevator
interests (Fig. 73). The terminal market machinery, so far as
terminal storage is concerned, has finally been evolved so that the
benefits of it accrue to the grain trade in general, including the
country elevator and the farmer who raises the grain.

(3) Evolution of Farmers* Elevators. — Under the impetus of
the Grange movement a few farmers' grain elevators were started

358

THE GRAIN TRADE

during the early 70's. But the indications are that these all went
out of existence. After this there grew up two kinds of country
elevators, namely, the ''independent" house, owned by some
local business man, and the ''line" house, belonging to some grain
firm operating a number or line of country elevators. Most large
terminal elevator companies owned a line of country houses; so
did the larger mills. These elevators in each grain State were
loosely federated in a State Grain Dealers' Association, to check
irresponsible grain dealers, to fight "scoop shovelers," and for

general protective purposes. To
prevent price wars and destruc-
tive competition the " regular"
elevators (as they came to be
called) developed a price fixing
scheme. A small committee,when
terminal price changes warranted,
would send out to the country, to
each house, a new price schedule.
This prevented any price war.
But more important yet, it guar-
anteed a very liberal margin of
profit to the terminal dealers, at
the expense of the farmers. The
State of Nebraska, for instance,
was divided into 13 districts, on
the basis of freight rates, and
prices were fixed accordingly for
each district. In Iowa the price
fixing was administered through
the Secretary of the Iowa Grain Dealers' Association, with head-
quarters at Des Moines. In Illinois, in a similar manner, the
secretary of the Grain Dealers' Association safeguarded the inter-
ests of the "regulars." This system of graft at the expense of the
farmer finally reached the breaking point. So far as our historical
records go, the revolt of the farmers began at Rockwell, Iowa, in
1889, when the first successful farmers' elevator was erected. This
little corporation inserted in its by-laws that very much discussed
provision, namely, the "penalty clause." This meant that the
member of the company delivering his grain to the competitor
must pay a penalty to his own company of so much a bushel.
Whether legal or illegal, it worked. And the "regular" house,
after securing much farmer grain by raising its price, found that

Fig. 73. — Hiram N. Sager, Ex-President of

the Chicago Board of Trade. A type of the

American grain merchant.

BIG DIVIDENDS ' 359

this increment in price was turned back to the farmers' company.
Obviously, the more competition of this kind, the stronger would
grow the farmer company. The fight was then shifted to the
terminal market, and every effort was made to prevent the com-
mission merchants or other dealers from handling grain from these
farmers' houses. The fight now reached a critical stage, and the
farmers' elevator movement was on the verge of being quickly
put to death. Two commission firms on the Chicago Board of
Trade at this time (1903-1904) came to the rescue of the farmers'
movement.^ They sent speakers and organizers into Iowa and
soon organized a large number of farmers' elevators. They re-
ceived and sold the farmers' grain. The fight was won. The
opposition collapsed. The farmers' elevator movement soon
spread to twelve States, and in each State so-called Farmers' Grain
Dealers' Associations were formed, with their own federation and
their own official organ, the American Cooperative Journal.

The immediate effect of the farmers' elevator movement was
to lower the spread in prices between the terminal and the local
markets. Here the farmer had won his greatest victory, had over-
come the greatest evil in the grain trade. He had won his fight
partly by his own organization, partly by the help of members
of the Chicago Board of Trade. Now a large per cent of the grain
received on all markets comes direct from farmers' elevators.

The Fight in Canada. — It is worthy of note that a similar fight
was had in Canada, and that there the farmers won a very signal
victory, and succeeded in forming the largest cooperative company
on the American continent, with a business exceeding in volume
one hundred miUion dollars a year.

Farmers' Elevators Copy " Regulars." — The farmers' elevator
movement having become a successful commercial venture is now
copying many of the practices of the "regulars." The farmers
have secured seats on the grain exchanges — two in Winnipeg,
three in Minneapohs, and two in Chicago. The Canadian com-
panies are already operating ''line elevators." They own their
own terminal elevators, including hospital elevators. They have
their private wire from Winnipeg to Calgary (one thousand miles).
In the United States many farmers' companies now operate lines
of elevators. One farmers' company owns a terminal elevator.

Big Dividends. — One great weakness of the farmers' elevator
is its undue fondness for big dividends, many of, these houses

^ These firms were Eschenburg & Dalton, and Lowell Hoit & Company.

360 * THE GRAIN TRADE

paying a dividend of one hundred per cent or more, year after
year. The non-member who sells to the house, of course, does
not participate in the dividend, although he helps create it.

Dockage Question. — The present problem of dockage is a
pressing one. The farmers' elevator now usually follows one of
four practices: (1) Runs the grain through a cleaner, and ships
the clean grain to market. The ''screenings" (dockage) accumu-
late until a carload is on hand, which is then shipped to the ter-
minal and sold to the mills making stock feeds. In this way the
farmer receives full market price for his screenings. (2) the grain
is shipped, dirt and all, to the terminal, and is sold there on its
merits, a certain per cent being deducted (or "docked") on account
of the foreign matter contained. The freight has been paid on
this matter, and yet nothing is received for it, in this case. (3)
The grain may be sent to a terminal elevator, ordered cleaned, the
screenings sold on the market, and the clean grain sold on the
market. (4) The farmer may have a cleaning mill on his farm,
clean his own grain, and keep the screenings at home for poultry
and stock feed. If he has a feed mill for grinding the screenings,
he will not thus scatter foul seeds about his farm.

It is only within veiy recent years of high prices that screenings
have taken on value and importance in grain marketing. A fifth
suggestion may well be added concerning the heavy dockage in
all spring wheat regions, namely, that if the farmers had a crop
rotation and raised a few cultivated crops, they would thus
eliminate the weeds, and then there would be no dockage prob-
lem. For after all, dockage is a weed problem, and the fundamental
solution is to quit raising weeds.

QUESTIONS ON THE TEXT

1. Show that the grain trade of the United States is an "international

matter." Cite Argentina's experience.

2. Name chief exporting countries (wheat), average amount exported; chief

importing countries, and average amount imported.

3. Rank in order of money value the leading crops of the United States.

4. Show relative importance on the markets of wheat and com.

5. Show the competitive nature of the grain trade. What markets, for

instance, bid for Iowa corn?

6. Locate the more important grain exchanges of the United States.

7. Discuss present organization of the grain trade under the following topics :

country elevator (three kinds); grading and dockage; selling the local
grain; financing the local elevator; mixing; storage and hedging prob-
lem of country elevator; hedging in North and South compared; pubUc
and private terminal elevators; hospital elevators; grain exchange
(organization, membership, market news service).

8. Show relation of farmer to the terminal market and how he may improve

this relationship.

REFERENCES 361

9. Discuss in detail the past organization of the grain trade under the three
following topics: (1) Evolution of organized exchanges (weighing,
inspection, grading, cash grain, to-arrive grain, future trading, short
selling, speculation and manipulation, corners and rules on — Hutchin-
son, Leiter, and Pattern corners — hedging speculation and the wide
market question, dehvery notices, pit scalpers, "phantom" grain ques-
tions, effect of speculation on price, cost of future trading, volume of
future trading, the bucket-shop fight, present condition of exchanges).

(2) Evolution of terminal elevators (early terminal storage, relation to
railroads, early evils of system, early regulation, Hepburn Act and its
effects, present situation as regards railroads and terminal elevators).

(3) Evolution of farmers' elevators (first and second beginnings, ''reg-
ular" houses, price fixing, Rockwell Iowa in 1889, "penalty clause,"
struggle of farmers to help themselves, aid from Chicago Board of Trade
members, outcome, present commercial methods of farmers' elevators,
problem of dockage and its fundamental solution).

QUESTIONS SUGGESTED BY THE TEXT

1. Compare the statements of Liebig and Sir WilUam Crookes as to soil

exhaustion, and criticise the position taken by each. What error, if
any, did each make?

2. Compare the costs of marketing grain, through the organized exchanges,

with the costs of marketing hay (without organized exchanges).

3. Can speculation in grain be limited to those who are members of the grain

trade?

4. Is the cost of hedging-insurance too much?

5. Secure a copy of the annual report and of the rules of any leading grain

exchange, and study them carefully. Are these rules fair to both
farmers and consumers? Are the membership requirements too high?

6. Is the grain exchange an "open market"? Is it a competitive market?

REFERENCES

1. See Annual Reports issued by Secretaries of the following grain
exchanges :

Chicago Board of Trade St. Louis Merchants' Exchange

Minneapolis Chamber of Commerce Milwaukee Chamber of Commerce

Winnipeg Grain Exchange Toledo Produce Exchange

Duluth Board of Trade Baltimore Chamber of Commerce

Omaha Grain Exchange New York Produce Exchange
Kansas City Board of Trade

2. On Weighing, Inspection, Grading, see following Reports :

Annual Reports, State Weighmasters' Department, St. Paul, Minnesota.

Annual Reports, State Grain Inspection Department, St. Paul, Minnesota.

Annual Reports, Illinois Railroad and Warehouse Commission, Spring-
field, Illinois.

Annual Reports, Missouri State Grain Inspector, Kansas City, Missouri.

Bulletins on Federal Grain Supervision, issued by United States Bureau
of Markets, Washington, D. C.

3. Government PubUcations:

(1) Prices of wheat to producers in Kaasas, etc., 63 Cong. 3 Sess. House
Doc. 1271.

(2) Report of State Grain Commissioners. Bismarck, North Dakota,
PubHc Document No. 26 (1910).

362 THE GRAIN TRADE

(3) Report of the Board of Grain Commissioners to Governor John Burke,
Bismarck, North Dakota. PubUc Document, No. 37 (1908).

(4) Report on Terminal Grain Elevators made to the Fourteenth Legis-
lative Assembly of the State of North Dakota by the Board of Control of
State Institutions (1915). Also "Further Report" of same Board, in Journal
of the House, Fourteenth Legislative Assembly of North Dakota, February
18, 1915, pp. 77-107.

(5) Journal of the House, Thirty-eighth session. State Legislature of Minne-
sota, April 17, 1913. Report of the Special House Grain Investigating Com-
mittee, pp. 2-12.

(6) Journal of the Senate, Thirty-eighth session, State Legislature of
Minnesota, April 22, 1913. Report of the Work's Grain Investigating Com-
mittee, pp. 49-79.

(7) Report of the Grain Markets Commission of the Province of Saskatche-
wan, 1914, Regina.

(8) Grain Inspection in Canada, By R. Magill, chief commissioner Board
of Grain Commissioners of Canada. Issued by the Department of Trade and
Commerce, Ottawa, Canada.

(9) The Canada Grain Act of 1912 with Amendments, Ottawa. This
law may be termed the "Federal Inspection of Grain" as employed in Canada.

(10) Report of the Royal Commission on the Grain Trade of Canada,
1906. Ottawa, Canada.

(11) Report of the Elevator Commission of the Province of Saskatche-
wan, 1910. Regina.

(12) Progress Report from the Royal Commission on the Marketing,
Transportation and Storage of Grain, Presented to the Parhament of Victoria,
Australia, 1913. Melbourne.

(13) United States Industrial Commission Report, Nineteen volumes,
1898. Washington, Volume 10, Volume 19.

(14) Wheat and Flour Prices from Farmer to Consumer. Bulletin, United
States Bureau of Labor Statistics, No. 130. Washington.

(15) Bucknell, Frank W., Wheat Production and Farm Life in Argentina.
Bulletin No. 27, Bureau of Statistics, United States Department of Agricul-
ture. Washington, 1904.

(16) La Follette, R. M., Speech on the Railroad and Elevator Monopoly.
Congressional Record XL, Part 10, p. 9093.

(17) Testimony taken by Interstate Commerce Commission October 15-
November 23, 1906, in Matter of Relations of Common Carriers to the Grain
Trade. 59 Cong. 2 Sess. Senate Doc. No. 278. Washington, 1907.

4. Non-ofhcial publications:

(1) The Siege of Ottawa. Being the story of the 800 farmers from Ontario,
etc., who demanded more equitable legislation, etc. Published by Grain
Growers' Guide, Winnipeg.

(2) American Produce Exchanges. Annals of the American Academy,
September, 1911, Philadelphia.

(3) Speculation on the Stock and Produce Exchanges of the United States.
By H. C. Emery. Pubhshed by Columbia University^ New York City, 1896.

(4) The Stock Exchange from Within, by W. C. Van Antwerp. Pubhshed
by Doubleday, Page & Co., Garden City, N. Y., 1913. Pages 415-446 contain
the full report of Governor Hughes' Committee on Speculation in Securities
and Commodities.

(5) Wheat Fields and Markets of the World, by Rollin E. Smith. Modern
Miller Publishing Co., Chicago, 1908. This book contains very full accounts
of the following exchanges and terminal elevators dealing in grain : Chicago,
Minneapolis, Duluth, Kansas City, St. Louis, Winnipeg. Also the grain
markets of the following places are discussed: Liverpool, London, Antwerp,
Paris, Berlin, Buda Pesth.

APPENDIX 363

(6) Grain Exchange Facts. Two special numbers of the American Coop-
erative Journal, Chicago, August and September, 1915.

(7) Weld, L. D. H. The Marketing of Farm Products. New York,
Macmillan, 1916.

(8) Huebner, Grover. Agricultural Commerce. New York, Appleton,
1915.

(9) Piper, C. B. Principles of the Grain Trade of Western Canada.
Empire Elevator Company, Winnipeg, 1915.

(10) Usher, A. P. The History of the Grain Trade in France, 1400-1700.
Cambridge, Massachusetts, 1913.

(11) Refsell, V. N. The Farmers' Elevator Movement. Journal of
Pohtical Economy (Chicago), Vol. 22, pp. 872-895; 969-992.

(12) The Saskatchewan Cooperative Elevator News. Regina (current
files), June, 1916.

(13) Schelle, Gustave. Turgot et le pacte de famine. Institut de France,
Acad. d. sci. Mor. et poht. Seances et travaux. n. s. V, 74, pp. 189-217.
Paris, 1910.

(14) Perlmann, Louis. Die bewegung der weizenpreise und ihre ursachen.
Miinchen und Leipzig, 1914.

(15) Kirkland, John. Three centuries of prices of wheat, flour, and bread.
War prices and their causes, London, 1917.

(16) Boyle, James E. Speculation and the Chicago Board of Trade, New
York, Macmillan, 1920.

(17) Taylor, Charles H. (Editor). History of the Board of Trade of the
City of Chicago. 3 Volumes. Chicago, Robert O. Law Company, 1917.

(18) Grain Grading in Minnesota. Grain Growers' Guide, June 6, 1917.

(19) Wheat Marketing Through Pacific Northwest Non-profit, Coopera-
tive marketing Associations (Washington, Oregon, and Idaho Wheat Growers'
Associations). Pamphlet (16 pages) issued by Organization Committee of
Wheat Growers' Associations of Pacific Northwest, Empire Building. Spokane,
Wash., n. d. (January, 1920?).

APPENDIX

Relation of Future Trading to the Financing of the Grain Trade. — From
an article in the National Hay and Grain Reporter of May 20, 1911, by David
R. Forgan, President National City Bank, Chicago, Ilhnois.

"Warehouse receipts for grain, or anything else that finally becomes human food, are,
in my opinion, the best possible collateral for bank loans. I have seen the time more than
once when high-class stocks and bonds, and even Government bonds, could not readily be
sold, but I have never seen the time, nor do I ever expect to see it, when anything that has
to be eaten could not be sold. The warehouse receipts, therefore, above alluded to, consti-
tute a collateral which is always available for the payment of debts.

"Furthermore, if the grain or provisions represented by warehouse receipts are already
sold for future delivery, that fact adds a great element of strength to the loan, because there
is a third party obligated to take the grain at a certain time for a given price. When I lived
in Minneapolis I had the only unpleasant experience I have ever had in connection with the
elevator business. A terminal elevator concern filled its elevators with wheat, and thinking
that the market was likely to go up they did not hedge it by selling for future delivery. In
other words they speculated on their wheat. The market had a large and a sudden drop,
with the result that the elevator concern failed, and the bank with which I was connected
made a loss. The present method, therefore, of carriers of grain or provisions selling them for
future delivery is a highly satisfactory one to the banks whose money is loaned to the carriers.
The sale for future delivery is the link in the chain that makes such loans the best."

An Argentina Need. — "There is no gambling in grain in Argentina, so
frequently denounced in our Congress and by the pubhc in this country. The
grain business in Argentma is in the hands of a trust, which pays its own price
as a rule for the products of the soil, exacting an enormous tolj not only on the
grain, but even on the bags which are furnished for transporting the grain.

"What the Argentine producer would hke to have is a great Chicago or
Minneapolis market where he could know just what the world thinks concern-

364 THE GRAIN TRADE

ing grain prices. What he has are a few enormously wealthy exporters setting
their own price upon his product.

"Argentina will never be a great agricultural country until she emerges
from the chrysalis of monopoly which surrounds her grain trade. If the
American farmer desires to test the efficacy of our own system of marketing
and handling grain, and of our own methods of estabhshing prices for grain,
let him proceed to study the Argentina sj'^stem.

" I returned with a most wholesome respect for the American farmer, and
I reahze as never before, that the stability of this country depends upon the
prosperity of the man wno produces its wealth just as much or perhaps more
than the man who consumes the products of the soil. But I also came back
with a more intelligent regard for the great economic system which prevails
in this country, which enables us to market grain at a minimum of profit
between the man who produces it and the man who consumes it." — Pwkdl, J.
Ralph, Agricultural Argentina, pp. 58-59.

CHAPTER XXIII

LIVE-STOCK AND MEAT INDUSTRY

Introductory. — By reason of the large capital invested, the
number of persons employed, and the value of the output,
the meat packing industry of the United States ranks high
among the great and fundamental industries of the country.
Since American cotton, wheat and meat play such an import-
ant role in clothing and feeding the world, the meat and
live-stock situation is one not merely of national but also of inter-
national concern.

The shifting of live-stock production to the open lands of the
West and the concomitant growth of large centralized packing
houses are the two outstanding features of the meat question in
the United States. Five great packing house companies have
risen above all competitors to a prominent position. Since the
meat packing industry is one not protected by patents or monopoly,
privileges or exclusive franchises of any kind, but represents the
free play of competitive forces in American industrial evolu-
tion, the rise of five pacldng companies to a position of such
vast and far-reaching power presents in concrete form certain
unsolved economic and legal questions of public policy. Our
eighteenth century legal philosophy of competition among small
units does not square with our present-day economic facts of
large scale business — of efficient competition eliminating the
weaker competitor.

This chapter aims to present in larger outline the basic factors
involved, since the issue presented to the country by the meat
packing industry is one of public concern and one which needs
constructive rather than destructive criticism.

The Live-stock Situation. — The live-stock question andthemeat
packing question are, from the public standpoint, merely two
aspects of the one problem of furnisTiing to the public a continuing
supply of animal food at fair prices. The welfare of the live-stock
producers and the welfare of the packers are of public concern
merely as they influence the permanent and practical problem of
producing meat and distributing the same to the consumers, the
meat to be of the quality and quantity desired, at the time desired,
and at a fair price for each service rendered.

365

366 LIVE-STOCK AND MEAT INDUSTRY

Meat a Dear Food. — Meat is among the most expensive foods
of mankind. As population increases, and cheap lands disappear,
the live-stock increase fails to keep pace with the population
increase. The live-stock industry, or at least the cattle and sheep
industry, is characteristic of sparsely settled countries — empty
countries with plenty of ranges for grazing purposes. In the past,
at any rate, cattle and sheep raising has been a matter of extensive
rather than of intensive farming.

Westward Movement of Live-stock Industry. — The develop-
ment of manufacturing in the East and the consequent growth
of large cities there have made it impossible for the farms of that
section to supply their population with food. The grazing lands
demanded for the raising of cattle and sheep are found in the West.
The center of the production of corn and hay has moved to the
more fertile lands of the Mississippi Valley. The fat cattle and
hogs are fed in this section — over a thousand miles from the
great cities of the seaboard. To reduce transportation costs,
the dressed meats rather than the live animals are shipped
east for consumption, and thus it is that the slaughtering
business has moved westward with the live-stock industry. The
dressed beef, for instance, weighs 55 per cent of the live beef,
the remaining forty-five per cent of the animal going into by-
products or waste.

Shifts. — Taking the twenty-year period, 1880-1900, as repre-
sentative, we find shifts occurring as follows in various branches
of the live-stock industry: (1) Practically the only sections of the
country showing an increase in the number of cattle on farms were
those west of the Mississippi. Here the number rose 75 per cent.
The States east of the Mississippi, on the other hand, showed
an actual decrease in the number of cattle of over a million and
a quarter head. In 1880, 47 per cent of the cattle were west of
the Mississippi; in 1900, the number was 62 per cent. The East
of necessity furnishes whole milk to its city population, which
necessitates a large number of dairy cattle, and a large slaughter
of calves and of culls from dairy herds. In the year 1900, 72 per
cent of the steers one year of age and over were west of the Missis-
sippi, and 85 per cent of the cows two years of age and over not
used for dairy purposes. In short, the beef industry had moved
west of the Mississippi. (2) Much the greater part of the increase
in the number of swine from 1880 to 1900 was in States west of the
Mississippi. These western States had 39 per cent of the swine
in 1880 and 50 per cent in 1900. (3) There has been a very marked

OUTLOOK FOR THE FUTURE OF LIVE STOCK 367

decrease in the number of sheep in the section east of the Missis-
sippi, the shrink amounting to about 8,000,000 head in 20 years.
In 1880, 51 per cent of the sheep were west of the Mississippi;
in 1900, 68 per cent were found there. The west showed an increase
of five and a half miUion head of sheep in these twenty years.

Live-stock Countries. — Live-stock production follows the open
country, not only in the United States, but also in other countries.
Thus it is that the five other surplus meat countries, besides the
United States, are Argentina, Australia, Canada, New Zealand,
and Uruguay. Denmark, by reason of her bacon export is a factor
of importance, but Denmark is unimportant as a beef or mutton
producing country, and hence is no exception to the above rule.

Decrease in Number of Live Stock. — In the United States it
was a matter of much comment, prior to the World War, that live-
stock population was not increasing at so fast a rate as the human
population. While maintaining large exports of pork products,
we also became in certain months a large importer of meat.

Using the figiu-es published by the United States Department
of Agriculture in its Report on the Meat Situation in the United
States, we have the following facts regarding live-stock production :
On the basis of the number of animals per 100 people, the returns
for 70 years are as follows:

I. Cattle

1840- 88 animals 1870-62 1900-89 June 1.
1850- 77 1880-72 1910-71 April 15.

1860- 81 1890-82 1914-57 January 1.*

II. Sheep

1840-113 animals 1870-74 1900-81 June 1.

1850- 94 1880-70 1910-57 AprU 15.

1860- 71 1890-57 1914-50 January 1.*

III. Hogs

1840-154 animals 1870-65 1900-83 June 1.
1850-131 1880-95 1910-63 April 15.

1860-107 1890-91 1914-60 January 1.*

* Figures for January 1, 1914, omit crop of calves, lambs, and pigs, and hence are not
comparable with figures for 1910 or 1900. In this connection mention must be made of the
tremendous increase in Hvestock production from 1914 to 1918, under war conditions, show-
ing the possibilities in this field of agriculture.

In the United States, and in the rest of the world, meat is
becoming a relatively scarce article of diet. However, this may be
merely a temporary reaction from our glutting the markets thirty
years ago.

Outlook for the Future of Live Stock. — With the passing of
cheap lands and of the great open ranges of the West,, the question
of our future live-stock supply becomes a serious one. Will we
maintain our live-stock production? And if so, how? The packers,

368 LIVE-STOCK AND MEAT INDUSTRY

the railroads, the bankers, the Federal and State governments
and many other interests are now cooperating with the farmers
for the purpose of increasing the number and improving the breed
of live stock. The factors making for and the factors making
against an increase may be considered in turn.

(1) For an Increase.— The breeding of cattle and sheep on the
ranges represents one phase of extensive agriculture. But inten-
sive agriculture is gradually encroaching on this area. This means
that the breeding of live stock will need to shift to the more inten-
sive form of agriculture, in most cases, if any increase is to be
expected. The problem of an increase is therefore, a two-fold one,
namely, an increase in live stock in the so-called range country of
the West, and an increase in livestock in the farming sections of
the rest of the country. The Federal Department of Agriculture
made an optimistic report in the year 1916 on the subject ** Live-
stock Production in the Eleven Far Western Range States." In
these eleven States (Arizona, California, Colorado, Idaho, Mon-
ana, Nevada, New Mexico, Oregon, Utah, Washington and
Wyoming) the investigators for the Government found a dechne
of 13 per 'cent in the number of live stock between the years 1910
and 1914. This decline was attributed to the settlement of pubUc
lands and the consequent reduction of the range. However, in
spite of this actual decline, the prediction was made that this
decrease would in the future give way to an actual increase. The
belief in an increase was based on the probability that the number
of live stock on farms would be greater in the future ; that the stock
ranges in the national forests would continue to improve ; that the
carrying capacity of the range on the public domain would be
increased by legal regulations; and that, finally, better and more
scientific use would be made of forage. The Government's opti-
mistic prediction is based on the calculation that the carrying
capacity of the forest reserves can be increased by 15 per cent, and
of the public domain by 30 per cent. Some consideration is also
given to the use of better sires, and to more scientific feeding
methods. The chief conclusions reached by this federal investi-
gation are, to sum up, that hereafter there should be a slow increase
in the output of beef and mutton in the range States of the West,
but that this increase is likely to be accompanied by an increase
in the cost of production. However, the problem of live stock
increase cannot be solved by the eleven range States alone. As
one of our leading publicists, Easton G. Osman, states it, ''The
future of meat depends on intensive agriculture rather than exten-

AGAINST AN INCREASE 369

sive grazing." ^ The limiting factor in producing live stock under
conditions of intensive agriculture is of course the cost of the teed.
This comparatively simple problem is further complicated by the
farm management problems of crop rotation systems and the
maintenance of soil fertility by the use of manure. Doubtless in
many cases where the original range has been put under the plow
and alfalfa or other forms of tame hay substituted for the wild
hay, there has followed an actual increase in the amount of live-
stock feed produced. It is also true that much original range has
been plowed with disastrous results. Aside from hay and corn,
the principal feeds now used in fattening (or ^'finishing") cattle
for the market, there is a rapidly swelling list of feeding stuffs
coming onto the market. The Department of Agriculture, in
reporting on the ''Meat Situation in the United States," issues
one report on the subject, "Utilization and Efficiency of Available
American Feed Stuffs." In this report consideration was given
to the following feeding stuffs: straw, corn stover, cottonseed
meal and cake, linseed meal and cake, soy bean cake, peanut cake,
sesame cake, copra (cocoanut by-products), palm-nut meal, winter
wheat and winter oats as grazing crops, spineless cactus, sugar
cane, feterita, sudan grass, teosinte, velvet bean, kudzu vine, sweet
clover, cassava, beggar weed, rape, roots (mangels, beets, turnips),
silage, canning factory refuse, beet pulp, sugar cane, and molasses.
Corn and corn products and alfalfa and alfalfa products are, of
course, the important feed stuffs in the region contiguous to the
great packing centers. It is obvious that an intensive agriculture
can furnish more and better live stock than can extensive agri-
culture. But the comparative costs cannot be calculated in
advance. The tendency is for cities to increase in population
faster than rural districts, and for manufacturing to assume
greater and greater importance. And the by-products of many
lines of manufacture furnish feed for live stock, such for instance,
as the by-products of the various oil-bearing seeds. It is impos-
sible to predict the future development of commercial manufac-
tured feed stuffs, or even the changes in method of preparing
and feeding silage.

(2) Against an Increase. — There are at least three factors
which make against any substantial increase in the number of
live stock in the United States — disease, substitution of vegetable
oils for animal fats and oils, and the increase in tenancy. Disease
is an important factor repressing meat production. The packers

1 Editorial, Price Current Grain-Reporter, Chicago. July 31, 1918, p. 7.
24

370 LIVE-STOCK AND MEAT INDUSTRY

have aided other interests in a campaign against tuberculosis,
which is rampant in dairy sections. West of the Missouri River
contagious abortion is a more serious menace to cattle production.
In the South the so-called Texas tick is a serious handicap. Hog
cholera, the deadliest foe of swine, is only partially under control
by vaccination/V \ Sheep on higher altitudes are comparatively
healthy, while at lower altitudes internal parasites and other
ailments play havoc with flocks. Lack of care in winter is also
a cause of many severe losses.

On the demand side of the market we are confronted with the
fact that the people are eating less meat and more meat substitutes.
Vegetable fats and oils are very rapidly establishing themselves
in the dietary of the people. The nations which do consume less
meat and more meat substitutes fail to show any loss in physical
stamina thereby. The average annual meat consumption, per
capita, of the meat eating countries of the world is 93.3 pounds of
beef, mutton and pork. In the United States the meat consump-
tion decreased from 181.5 pounds in 1900 to 170.6 pounds in 1909.
Only two countries exceed this — Australia, 263 pounds (in 1902)
and New Zealand 212 pounds (in 1902). In 1906 the consumption
of meat in the United Kingdom amounted to 125 pounds per
capita; in France, in 1904, to 77 pounds; in Germany in 1913, to
100 pounds.^ The most serious factor of all making against an
increase in live stock is the long-continued and steady increase in
tenancy in the United States. Renters do not raise live stock,
especially the short-term renters, which is the class known in this
country. The tenant is not interested in live stock from the stand-
point of maintaining the fertility of the soil, for it is not his soil.
He is concerned chiefly with a ''cash crop." He is not therefore
concerned with a rotation system in which live stock forms a part.

Summing up the arguments for and against the probable
increase in the number of live stock in the United States, it seems
that the argimients against an increase outweigh the arguments
for an increase.

Foreign Competition. — Foreign competition is taking the form
both of producing live stock and of packing meat for the market.
So far as South America is concerned, this competition is largely
by transplanted American men and American capital. Thus in
1912 Murdo McKenzie of Texas and Denver, America's most
prominent cattleman, went to Brazil to develop the cattle resources

2 Meat Situation in the United States. Report 109, United States De-
partment of Agriculture, pp. 16, 17. Washington, 1916.

FOREIGN COMPETITION 371

of that country.^ The live stock census of 1913 gave Brazil
30,705,000 head of cattle, 10,653,000 sheep, and 18,399,000 hogs.
The Brazilian government is offering substantial encouragement
to breeders of cattle in order to improve the strain. Argentina
has long been famous as a country which imports very expensive
pure bred sires from England, and which has made much progress
in breeding pure-bred cattle. Australia, New Zealand, and South
Africa are also important market factors in producing live stock
and exporting surplus meat.

It was not until 1901, when the exports of beef from the United
States began to decline materially, that exports of Argentine beef be-
gan to assume commercial importance. Since that date the increase
has been steady and rapid. The export of foreign mutton was left to
Austraha and New Zealand, which already dominated that field, and
the beef industry, rather than pork, received Argentina's attention.
During the years 1908 to 1914, however, there was an increase in
Argentina's hog crop and a decrease in the cattle and sheep crop.
The large American packers have established meat packing
plants in foreign countries as follows.^
Armour and Company.

Armour & Company of Australasia (Australia and New Zealand).

Armour & Company of Uruguay.

Compania Armour do Brazil.

Frigorifico Armour de la Plata (Argentina).
Cudahy Packing Company.

Cudahy & Company, Limited, Australia.
Swift & Company.

Australian Meat Export Company, Limited, Australia.

Compania Swift do Brazil.

Compania Swift de la Plata (Argentina).

Compania Swift de Montevideo (Uruguay).

Compania Paraguaga de Frigorifico (Paraguay).
Wilson & Company, Inc.

Frigorifico Wilson de la Argentina (Argentina).
Armour & Morris.

Sociedad Anonima La Blanca (Argentina).

The United States for many years enjoyed first place as an
exporter of beef. First place has now passed to Argentina, with
the United States second and Australia third. Argentina forged

2 Murdo McKenzie, in the course of an address at the annual meeting
of the cattlemen at the Kansas State Agricultural College, spoke of the possi-
bihty of extending the hve stock trade in South America, particularly in Brazil.
Tuberculosis he named as the big evil in cattle. His company, he said, had
bought 750,000 acres of land at 29 cents an acre and another large tract at
89 cents an acre, land equal to any land in Kansas. — Wallace^s Farmer, June
22, 1917, p. 4.

4 Summary of the Report of the Federal Trade Commission on the Meat
Packing Industry, p. 12. Washington, 1918.

372

LIVE-STOCK AND MEAT INDUSTRY

steadily ahead and permanently passed the United States in exports
of beef in 1909. The lead was held through the World War, al-
though both Australia and the United States made incredibly
large increase in exports to meet the needs of the Allies. The

■ mr'^-ftiilii.

Fia. 74. — The Cliicago stock yard in 1861.

Fig. 75. — The Chicago stock yards fifty years later.

average yearly exports of beef from these three countries together
increased from 925,000,000 pounds in 1895-1904 to 1,344,000,000
pounds in 1905-1914, and to 1,909,000,000 pounds in 1915-1917.
This huge feat was performed by the combined efforts of producers
and packers.

The Meat Packing Industry. — The meat packing industry is
one of the best examples of large-scale production in the United

A LARGE-SCALE BUSINESS

373

States (Figs. 74 and 75). One of the severest indictments brought
against the competitive regime by the SociaHsts is the wastes of
competition. The meat packing business, as now conducted by
the five large-scale packing concerns is a business which has gone
a long way towards eliminating the wastes incident to competition.
And in arriving at the point of ''large-scale production," the meat
packing industry has challenged certain economic and legal
doctrines of the country.

A Large-Scale Business. — While there are many small slaugh-
tering establishments throughout the United States and an increas-
ing number of municipal abattoirs, yet the high position of size

in

^'^^^^^kmm^.

Fig. 76. — Evolution of the packing industry. The first plant of a big Chicago packer.

attained by five of the largest packers makes the packing industry
in reality a large-scale business (Figs. 76 and 77) . It is estimated
that five companies now kill 70 per cent of the live stock slaughtered
by all packers and butchers engaged in interstate commerce, which
amounts to forty per cent of the total meat supply of the country.
The largest single packer handles 15 per cent of the total meat
supply of the country. According to the federal government's
figures, there is only one packer, outside the five large ones, who
slaughters as much as one per cent of the interstate total of cattle,
and only nine who slaughter as much as one per cent of the inter-
state total of hogs. In other words, the 30 per cent of -the live stock
slaughtered by ''small-scale business" concerns is slaughtered by a
large number of relatively very small concerns. Of course there
is a vast volume of cattle and hogs slaughtered by local butchers

374

LIVE-STOCK AND MEAT INDUSTRY

DIVISION OF LABOR 375

for their city trade which does not figure in the above calculations,
not entering into interstate commerce. The five large companies
own and operate packing houses at the following points : Chicago,
Kansas City, South Omaha, St. Joseph, St. Louis and East St.
Louis, South St. Paul, Fort Worth, New York, Sioux City, Los
Angeles, Denver, Oklahoma City, Portland (Oregon), Cleveland,
Andalusia (Alabama), Moultrie (Georgia), Harrisburg, Milwaukee,
Albert Lea, Wichita. The advantages of large-scale production
in meat packing are evidenced in five ways, namely, division of
labor, utilization of by-products, better transportation and market
distribution, better inspection and grading, and the number of
''side lines" economically carried. The final economic test of the
big packers is : Do they function economically in getting the live
stock of the West to the cities of the East?

(1) Division of Labor. — Slaughtering on the farm or at the
butcher shop is commonly done by two men. In this way two men
can butcher two animals in ten hours. But in the big packing
house the work is done by a ''gang" consisting of about 150 men,
who in ten hours handle more than a thousand cattle. In other
words, by increasing the size of the gang seventy-five fold the
packers increase the output five hundred fold. For instance, in a
large Chicago packing plant a gang of 157 men, by the minute
division of labor in use there, were able to handle in a typical
working day of ten hours 1050 cattle. The work was divided as
follows: 1 general foreman; 1 foreman over yard gang; 1 driver up;

2 penners; 2 knockers; 2 shacklers; 1 hanger off for shackler;
1 squeezing blood from beds; 1 switcher onto heading beds and
putting up heads; 1 throwing down heads; 1 pritcher up; 1 dropper;
1 pritcher up helper; 1 sticker; 3 headers; 1 ripper; 4 leg breakers;

3 feet skinners; 1 gullet raiser; 7 floormen; 1 breast sawyer; 1 aitch
sawyer; 23^ caul pullers; 2 putting in hooks to hoists for fell cutter;
1 floor squeezer; 1 washing crutches and bellies; 4 fell cutters;
1 cutting out bladders; 2 rumpers; 1 rump helper and drop hide
feller; 2 backers; 4 splitters; 1 back and rump hand; 1 washing
hind shanks; 1 ripping tails and cutting out; 1. puUing tails; 23^
gutters; 2 throwing down guts and paunches; 3 tail sawyers; 2
hanging off from splitter; 3 beating out fells; 1 helper sawdng tails
and ripping open; 2 neck spUtters; 1 tallow lot man; 1 trucking
feet; 1 trucking up hocks; 1 hanging up hooks; 2^ clearing out;
3 dropping hides; washing gang as follows: 1 foreman; 1 trimmer;
1 wiper; 1 putting in neck and kidney cloths; 1 scribe sawyer; 1
hoseman; 1 washing shanks; 1 switchman; 3 washing ribs and necks

376 LIVE-STOCK AND MEAT INDUSTRY

inside; 1 squeezing beef; 1 pumping kidneys; 3 long brush washers;
1 washing rags; 2 wiping hinds; 2 ladder men (knife) ; 2 bruise trim-
mei*s; 1 cutting off cords and shanks; 1 tying veins; 2 trimming
skirts and necks; 1 pumping necks; Weighing beef and helpers as
follows: 1 scaler; 1 grader; 1 pushing on scale or tagger; 1 pulhng off
scale; 1 elevator man; Refrigerating and car loading as follows:
14 beef coolers; 5 trimmers; 7 carriers and loaders; 11 laborers.
Such division of labor means that highly skilled workers are
put on speciahzed jobs, and cheaper and less skilled labor is em-
ployed on the simpler jobs. In this way the utmost economy of
time and effort is secured.

(2) Utilization of By-products. — It is literally true that no
part of the animal entering the large packing house is wasted.
The blood that falls on the floor passes down a chute and goes
into fertilizer. During the World War blood was also made into
albumen which was in turn used in the manufacture of airplanes.
Hair, hide, bones, all are utilized. Liver, sweetbread, brains,
tongue, heart, tail — all find their way into hmnan foodstuffs.
Buttons, knife handles, glue, gelatin, soap, curled hair, brewers'
isinglass, sandpaper, music strings, combs, artificial teeth, pipe
stems — these and many other commercial articles are by-products
of the packing house. One of the large Chicago packers makes
the statement that his company sells the dressed meat from a
steer for less than the live animal cost on the hoof. Thus, as a
typical example, a 1,000-pound steer was bought by this packer
in September, 1918, for $160.00, and from it 565 pounds of dressed
beef were obtained. This beef was sold at wholesale for $141.25.
The hide sold for $15.75 — a total for the beef and hide of $157 or
three dollars less than the cost of the live animal. The cost of
slaughtering, dressing, and distributing was $5.79 more, or a total
deficit of $8.79. The by-products of this steer in addition to the
hide, however, amounted to $9.77, leaving a profit of 98 cents on
the animal. The by-product business is one feature of the large-
scale production, and means, in the case of the packers, the fruits
of much experimentation, the development of private laboratories,
and the work of scientists. This is particularly true of the chemical
and medical preparations developed in the packing houses, such as
pancreatin, thyroids, supra-renal, pineal substance, thrombo-
plastin, and so on. Practically all these by-products are entirely
wasted in the small packing houses.

(3) Transportation and Distribution. — ^The large packers own
their own refrigerator cars and have volume enough of business

LEGAL AND ECONOMIC QUESTIONS

377

to send out full loads under ice to distant markets. They own
'iheir own branch houses which sell direct to retail stores. Market
gluts can thus be avoided by shipping promptly to points of great-
est scarcity. Car routes reach towns which are not handled from
branch houses.

(4) Inspection and Grading. — The large packing houses make
government inspection feasible (Figs. 78 and 79). The govern-
ment stamp on meat has come to be looked upon' as a guarantee of
the health of the animal. The large-scale business also permits

w

Fig. 78. — Private chemical laboratory of a big packing house.

the packer to furnish any consuming market the quaUty as well as
the quantity of meat desired, and at any time desired.

(5) Side Lines. — The facilities for conducting the meat pack-
ing business and for distributing it by fast refrigerator car service,
through branch houses in all population centers, also enable the
packers to handle many side lines with economy of time and money,
with mimimum of overhead expense.

Legal and Economic Questions. — ^The forefathers who drew
up the Maryland Constitution of 1776 inserted these words:

"That monopolies are odious, contrary to the spirit of a free government,
and the principles of commerce, and ought not to be suffered."

378

LIVE-STOCK AND MEAT INDUSTRY

Forty-one days before the writing of these words bj^ the Mary-
land fathers, the Continental Congress had adopted the Declara-
tion of Independence, marking the severance of the new Republic
from the Old King. Autocratic political power was the thing
abhorred by the people of the New World. In the century and a

FiQ. 79. — Government inspection of meat in a large packing house.

half which has elapsed since that struggle began autocratic political
power has nearly vanished from the whole world. The same in-
stinct of abhorrence towards autocratic political power which then
existed now continues as an instinct against autocratic economic
power. And so, in the last third of a century, we have seen the
power of the federal courts invoked against the great consolidated
business units operating in sugar, steel, oil, tobacco, harvesting

"BIG SIX" AND THEIR CAPITALIZATION 379

machinery, and meat packing. Whether this instinct is now wise
or unwise, whether well founded or ill founded, is not a profitable
question to debate. The existence of such an instinct must be
taken for granted. The existence of this instinct explains the per-
sistent demand on the part of the people that the government *'do
something" with this great economic problem. Granting that the
mere bigness of these various large-scale industrial corporations
gives them power, does it also give them autocratic power? And do
they use this big power so that society benefits thereby or so that
society suffers thereby? These are some of the politico-economic
questions underlying this phase of our nation's development.

The meat packing industry has been subject to many investi-
gations. State and Federal. Out of this vast mass of material of
lawsuits, hearings, investigations, injunctions, regulations, and so
on, two investigations only will be reviewed here, since they bring
out the fundamental issues which must be faced and settled.

The Garfield Report. — The Report of the Commissioner of
Corporations in 1905, known as the Garfield Report, was made in
response to a Resolution passed by the House of Representatives
March 7, 1904. The Resolution stated the object of the investiga-
tion as follows :

"Resolved, that the Secretary of Commerce and Labor be, and he is
hereby, requested to investigate the cause of the low prices of beef cattle in
the United States since July first, nineteen hundred and three, and the un-
usually large margins between the prices of beef cattle and the selling prices
of fresh beef, and whether the said conditions have resulted in whole or in
part from any contract, combination, in the form of a trust or otherwise, or
conspiracy, in restraint of commerce among the several States and Territories
or with foreign countries; also whether the said prices have been controlled
in whole or in part by any corporation, joint stock company, or corporate
combination engaged in commerce among the several States or with foreign
nations; and if so, to investigate the organizations, companies, and corporate
combinations, and to make early report of his findings according to law,"

Accordingly the report on ''The Beef Industry" was the first
report issued by the new Bureau of Corporations in the movement
against the ''Trusts" initiated by President Roosevelt. The chief
findings of this Report are as follows.

(1) "Big Six" and Their Capitalization.— By far the most
important concerns in the beef business were the following com-
panies, frequently designated in the trade as the "Big Six"

Name Capitalization

Armour & Company $20,000,000 .

Armour Packing Company 7,500,000

Swift & Company 35,000,000

Morris & Company 3,000,000

National Packing Company 15,000,000

Scwarzschild & Sulzberger 4,373,400

Cudahy Packing Company 7,500,000

380 LIVE-STOCK AND MEAT INDUSTRY

*'It appears," says the Report, ''reasonably clear that the capital-
ization of none of these companies is excessive as compared with
its actual investments." In other words, there was found no
watered stock.

(2) Extent of Control. — " The six concerns described are
almost the only extensive shippers of dressed beef; that is, they
are almost the only concerns which slaughter cattle in the great
western markets and transport the product elsewhere for consump-
tion. At the same time these companies do a smaller proportion
of the beef business of the country than is ordinarily supposed,
and comparatively narrow limits are placed upon the control which
they could, even if they acted in harmony, exercise over the prices
of cattle and of beef."

The Bureau estimated that in 1903 there were slaughtered in
the United States 12,500,000 head of cattle, of which these six
companies slaughtered 5,521,697 or 45 per cent. On the other
hand, these concerns slaughtered 98 per cent of the cattle killed
in the eight leading western packing centers — Chicago, Kansas
City, South Omaha, East St. Louis, South St. Joseph, Fort Worth,
Sioux City, and South St. Paul. The proportion of beef consump-
tion which was furnished by these packers varied greatly with
different cities and sections. The area east of Pittsburg differed
greatly from the area west of Pittsburg. In New York these
packers furnished about 75 per cent of the beef consumed; in
Boston, 85 per cent; in Philadelphia, 60 per cent; in Provi-
dence, 95 per cent; in Baltimore, 50 per cent; Buffalo and
cities west (such as Cleveland, Cincinnati, and Indianapolis)
only from 10 to 333^ per cent. In the dairy sections the
dairy industry was found to furnish a large number of surplus
cattle for slaughter.

(3) Potential Competition. — On this subject the Report says:
''Should the western packers try to obtain a much higher per-
centage of profit than they do at present, existing local slaughter
houses at all consuming points would tend to expand their busi-
ness materially, and new concerns would spring into existence.
The possibility of a rapid increase in competition of local slaugh-
terers was illustrated during the packing house strike of the summer
of 1904, when the shortage in the beef furnished by the western
packers was to a very considerable extent made up by increased
killing on the part of small concerns. . . . The business is not
controlled by patents, secret processes, or monopoly of raw
material, and the amount of capital necessary to provide even a

^

THE PROFITS 381

system of several plants, with transportation lines and marketing
facilities, is not so large as seriously to hinder new competition
in case a very high margin of profit should be maintained by the
present concerns."

Little fresh beef is sold to dwellers in the country. In fact a
large proportion of the packers' beef is consumed in a few large
cities. The packers might by predatory competition and price
cutting in one locaUty, drive out a competitor, and recoup in other
localities. But, says the Report, such a practice was unlikely,
for the cutting of price in any of the large cities would mean a
general reduction in that entire local market.

(4) The Price Question. — ''During the year from July 1902,
to June 1903, these packers slaughtered at the selected plants
2,017,864 cattle. The average live weight of these cattle was
1,092 pounds, and the actual average cost $4.45 per hundredweight,
the cost per head being $48.58. The cost of operation and adminis-
tration at the packing plants averaged $1.90 per head, making
the total cost $50.48. The weight of the beef derived from these
cattle was equal to 55.68 per cent of the live weight, or 609 pounds
per head. The average net selling price of the beef was $6.47 per
hundredweight, or $39.32 per head. The net value of by-products
from the cattle was $11.96 per head, making the total proceeds
$51.28 per head. This showed an average profit of 80 cents per
head, or 13.1 cents per hundredweight of dressed beef." This is a
profit of about y^g of a cent a pound on the beef sold.

'Tor the year from July 1903 to June, 1904, the computation
covered 2,013,658 cattle. The average live weight was 1,115
pounds, and the average cost at $4.15 per hundredweight was
$46.23 per head, the total cost, including killing, etc., being $48.19.
The average selling price of the beef was $6.25, or $39.26 per head,
the average dressed weight being 629 pounds. The net value of
by-products was $9.75 per head, or more than $2 per head less
than in the preceding year. The total proceeds of the beef and
the by-products were $49.01, leaving a profit of 82 cents per head,
equal to 13.5 cents per hundredweight of dressed beef."

(5) The Profits. — This Report states the profits of two of the
large packers, based on the total volume of the year's business,
the figures for Swift & Company being 1.9 per cent, and for Cudahy
& Company 1.8 per cent.

The 1912 Case. — A lawsuit was carried through the courts in
1912, with a regular jury trial, to decide the question of "monopoly
control." It was found by the jury that no monopoly existed.

382 LIVE-STOCK AND MEAT INDUSTRY

It happened that 1905 was the low-water mark in the value of
cattle, and from that date on, up to the end of the World War, there
was an upward trend in the price of beef cattle. The price, how-
ever, was a very fluctuating one, so that the live-stock producers
continued to feel dissatisfaction and distrust towards the packers.
High prices of beef caused the consumers to feel that ''something
was wrong somewhere." Accordingly the President in 1917
addressed a letter to the Federal Trade Commission, dealing with
the production and distribution of the nation's food supply, and
containing these words:

"Unjustifiable fluctuations in prices are not merely demoralizing; they
inevitably deter adequate production. It has been alleged before Committees
of Congress, and elsewhere, that the course of trade in important food products
is not free, but is restricted and controlled by artificial and illegal means. It
is of the highest public concern to ascertain the truth or falsity of these alle-
gations. No business can be transacted effectively in an atmosphere of sus-
picion. If the allegations are well-grounded, it is necessary that the nature
and extent of the evils and abuses be accurately determined, so that proper
remedies, legislative or administrative, may be apphed. If they are not true,
it is equally essential that the public be informed, so that unrest and dissatis-
faction may be allayed ... Therefore I direct the Commission, within the
scope of its powers, to investigate and report the facts relating to the produc-
tion, ownership, manufacture, storage, and distribution of foodstuffs and the
products or by-products arising from or in connection with their preparation
and manufacture; to ascertain the facts bearing on alleged violations of the
anti-trust acts, and particularly upon the question whether there are manipu-
lations, controls, trusts, combinations, conspiracies, or restraints of trade out
of harmony with the law or the pubhc interest."

Federal Trade Commission Report, 1918. — The Trade Com-
mission, after a year's investigation, stated that the packing
industry was dominated by five concerns, namely. Armour & Com-
pany, Swift & Company, Morris & Company, Wilson & Company,
Inc., and the Cudahy Packing Company. The Commission ex-
amined witnesses, held public hearings, and examined minutely
the letters and memoranda in the files of the packers. Unlike
the Garfield Report, this Report does not endeavor to explain
the margin between price paid for live cattle and price received
for dressed beef. This Report is concerned chiefly with the
magnitude of the operations of the packers and with the question
of a "combination" among the so-called ''Big Five."

(1) Magnitude of Business. — ^The five packers, together with
their subsidiaries and affiliated concerns, were found to be exten-
sively engaged in purveying other foodstuffs than meat, and to be
engaged in various related and non-related side lines and businesses.
In addition to packing houses, these packers also had extensive
holdings in stockyards, private refrigerator cars, cold storage

MAGNITUDE OF BUSINESS

383

plants, branch-house system of distribution, banks and real estate.

As parent companies, or through affiliated or subsidiary companies.

these packers manufactured or handled, among other things, the

following products (arranged alphabetically):

acid phosphate cocoa melts

albumen cofifee milk

alfalfa meal cold cream molasses

alundum cloth combs mutton

ammonia corpus luteum oleomargarine

apple butter cottonseed oil oUves

apricots cremol ox hps

asparagus dry kelp ox tongues

bacon ducks pancreatin

baked beans eggs peaches

bath salts emery paper peanuts

beef evaporated milk pepper

beets fertilizers pepsin

belting fish phosphate rock

bladders flour pickled ears

blood gallstones pickled hocks

blood pudding garlic pickled pigs' feet

boiled kidneys gelatine pickled slats

bone meal ginger pickled snouts

boneless pigs' feet glycerine pickled tongue

brains grape juice pickled tripe

brawn gut strings pig tails

bristle hair potash

buckwheat ham poultry

butter hides produce

calf heads and feet hog serum renin

calf hvers hoofs rennet

calf sweetbreads horns rice

calves' hearts jams salt

catgut ligatures jeUies sandpaper

catsup jowls soap

cattle tail switches knife handles sohd ox tails

cauls krout souse

cheese lamb's tongue stock food

cherries lard suet

chryotolon cloth leather sulphuric acid

chymogen lecithal suprarenahn

chymol loins thyroid powder

coca-cola lungs tripe

wool

In developing these extensive by-products, side lines, and
other lines these five packers made large use of the industrial
principle of ''integration of services" (that is, elimination of the
middleman; direct production and marketing).

The five companies had the following capitalization in 1917:

Armour & Company $150,000,000

The Cudahy Packing Company 28,747,300

Morris & Company ". 13,900,000

Swift & Company 132,261,000 '

Wilson & Company 45,476,400

384 LIVE-STOCK AND MEAT INDUSTRY

''The most satisfactory single index of the proportion of the meat
industry controlled by the Big Five," says the Report, "is the fact
that they kill, in round figures, 70 per cent of the live stock slaugh-
tered by all packers and butchers engaged in interstate commerce."
No exact figures could be given for the per cent of all slaughtering
done by these packers, since there are thousands of butchers who
kill for the local village or city trade, in addition to the slaughter-
ing done on the farms by hundreds of thousands of farmers.

(2) Combination Among Packers. — The Commission found
that in the purchase of live stock, there was a remarkable uniformit}^
from year to year in the percentages purchased by each of the big
packers, and concluded that this was circumstantial evidence of a
combination. However, since the same uniformity exists among
the small packers in the purchase of their requirements, and in
many other industries, this evidence of combination is not con-
vincing. No evidence was found that there was any ''combina-
tion" among the big packers in fixing prices paid for live stock or
fixing prices received for dressed meats, or that large profits were
made on the volume of business done.

The conclusions reached by the Commission as to the auto-
cratic powers of the packers were stated in these words:

"The great power of the five packers in the meat, by-product, and food
industries, the history of their growth, the ramifications of their control and
influence, their interrelations, and the corporate machinery through which
they work, are matters that command pubhc attention. A fair consideration
of the course the five packers have followed and the position they have already
reached must lead to the conclusion that they threaten the freedom of the
market of the country's food industries and of the by-product industries linked
therewith. They constitute a force operating with increasing power in the
direction of monopoly of an important part of the country's necessities. An
approaching packer domination of all important foods in this country . . .
seems a certainty unless fundamental action is taken to prevent it."

Remedies. — The Trade Commission considered various remedies
for the situation which they found to exist, such as government
ownership of the packing houses, private ownership and operation
under federal license, and so on. The final "remedy" proposed by
the Commission was a simple one, containing these four provisions :

(1) Government ownership of all cars used in transporting
meat animals.

(2) Government ownership of the stockyards.

(3) Government ownership of all privately owned refrigera-
tor cars.

(4) Government ownership of the branch houses of the packers,
and of their cold storage plants and warehouses.

THE REAL EVIL AND THE REMEDY 385

The Reply of the Packers. — ^When the above Repont of the
Federal Trade Commission was pubUshed, the packers involved
rephed that the proposed *' remedy" would not result in better
prices to producers, or lower prices to consumers, or prove in any
way beneficial to the public. The packers very vigorously denied
that they '* dominated" the live stock market or were able to over-
ride the forces of supply and demand. Fluctuations in the prices
of live stock and of meats they attributed solely to the two factors
of supply of live stock and consumers' demand for meat.

The Real Evil and the Remedy. — The many investigations of
the packers have generally been weak either in diagnosis or in
therapeutics, or both. The mere bigness of the packers has chal-
lenged attention. Their prominent position — financial, industrial
and otherwise — has created a state of mind among many producers
and consumers that in these packers was vested autocratic indus-
trial power. A popular feeling has been created that these big
packers have not merely great power, but irresponsible power. This
feeling is more than a mere belief, or mere conviction; it is a state
of mind. This is the diagnosis of the situation. And it suggests
the remedy. The principle of the cure is simple enough, namely,
to preserve the economies of the large-scale business system devel-
oped by the packers and at the same time establish what may be
termed a ''responsible government" of the packers. This latter
phrase needs some further elucidation.

A quotation was given above from the old Maryland Consti-
tution, to illustrate the instinct of our people against autocratic,
irresponsible power, both political and economic. Our forefathers
established, or attempted to establish, a political government
which would reflect and respond to the will of the people governed.
The modern industrial clash between large aggregations of capital
(popularly and wrongly called "Trusts") and the mass of the
people themselves is due to this ancient instinct of abhorrence of
irresponsible power. The almost childUke faith in competition as
the "life of trade" reflects this same instinct. Hence came our
Sherman Anti-Trust law, saying, in substance, "Thou shalt com-
pete." And yet some of the most progressive nations have found
it wise to pass laws, as concerns certain fields of commerce, saying,
in substance, "Thou shalt not compete." ^

^ The paradox of the Sherman law is apparent. It says, thou shalt compete.
In competition (which is industrial warfare) the strong survive, the weak
perish. By oJDeying this law too well, the powerful finally ehminate the weak,
and competition ceases. Not to compete is, under the Sherman law, a crime.
To compete too well is hkewise a crime.
25

386 LIVE-STOCK AND MEAT INDUSTRY

Responsible Government for the Packers. — ^The principle of
''responsible government" is as sound in economics as it is in
politics. The small-scale business maintains the personal contact
of owner and public to such a degree that the question never
arises as to its ''responsibihty." The question to be solved is,
how give those concerned in the meat business, as producers of
live stock or consumers of meat, a ''voice" in this business? For
there must be a voice representing these interests if the business
is to be in fact responsible. The simplest and most logical solution
would be to let the producers' organizations and the organized
consumers send duly elected representatives to meet in a confer-
ence or "parliament" with representatives of the packers. The
consumers are not organized, as yet, to any extent, and such a
proposal would have only a theoretical interest for them, for the
immediate present. Producers of live stock are already fairly well
organized in specialized associations. However, the live stock
associations would do well to ally themselves, for such a conference
as outlined, with the strongest farmers' organization in America,
namely, the American Federation of Farm Bureaus. Or at any
rate, a section of the American Federation, representing the
packing house territory, would be very much interested in
such a fundamental question as the issues between packers and
live stock growers.

Such a conference would be in the nature of a collective bargain
parliament. The producers would have to accept the economic
law of supply and demand as fundamental in governing prices
of live stock, rather than the cost-of-production theory.^ The
producers' ancient grievance is price fluctuations from day to day.
Doubtless a collective bargain could be made, stabilizing live stock
prices over certain periods, such as is now done in the milk busi-
ness with monthly jpilk prices. Only it would likely be impossible
to stabilize live stock prices over periods exceeding one week in
length. At any rate, the producer would feel that in such a confer-
ence he had a voice, and that he had a part in the directing, under
economic laws, of the production and marketing of live stock. He
would feel his own strength, his own power. He would perceive
then, for the first time, that the packers' power, like his own, was
not autocratic — except temporarily and locally and within very
narrow limits. His instinct for "representative government"
would be satisfied. Of course representative government does
not make all men happy or cure all ills or level all inequalities or

^ See Appendix to chapter XV for further discussion of this point.

MISCELLANEOUS PROBLEMS 387

destroy the power of the strong leader, but it does satisfy that
inexorable and eternal demand for a responsible government.
The cherished belief in the "consent of the governed" must
be honored.

A "solution" of the packing house problem that would substi-
tute a bureaucratic government ownership for the initiative and
enterprise of private ownership would be too costly a remedy to
deserve serious consideration. It would inevitably result in poorer
service at greater cost. The solution proposed above, however,
would go far towards preserving all the good in the present system
and eliminating its evils. Government control by licensing, by
commissions or other administrative bodies would likely prove in
the future, as it has in the past, wherever tried, too narrowly
bureaucratic or too political. Such a "remedy" would be worse
than the disease.

" Dissolution " of the Big Five Packers. — Under pressure of
public opinion, the large packers began negotiations with the
Federal Department of Justice, which led, in December, 1919, to a
compromise solution, for the time, of the major points in dispute.
A voluntary agreement was reached, the same to be made the
subject of a "consent decree," which had for its main purpose
the divorce of the packers from many side lines and subsidiary
businesses. Under this agreement the packers were allowed two
years to sell their stockyard holdings, their market newspaper
interests, their cold-storage warehouses not used in the meat busi-
ness, to quit the retail meat business, to drop various side lines,
including groceries, fish, vegetables, fruits, molasses, honey, jams,
jellies, preserves, ices, sauces, relishes, coffee, tea, chocolate, cocoa,
milk, flour, sugar, rice, bread, crackers, biscuits, spaghetti, vermi-
celli, macaroni, cigars, china, furniture, etc. They were allowed
two years to dispose of all branch liouses, route cars, and automo-
bile trucks not used in their own nieat and dairy products business.
Eggs, butter, poultry and cheese remain as side lines. The Attor-
ney General of the United States announced this voluntary agree-
ment to be a "victory" for the government, since, under it, "the
price of meat is within the control of the people themselves." The
public has already seen more than one "trust "dissolved by the
government, and hence will wait for time to show whether this
"dissolution" will lower the cost or improve the quality of meat
on the consumer's table.

Miscellaneous Problems. — (1) Cooperative Packing Houses.
Cooperative meat packing houses have been tried in the Middle

388 LIVE-STOCK AND MEAT INDUSTRY

West, particularly Wisconsin, Iowa, Minnesota, and North Dakota.
The record of these attempts is not an encouraging one. The
death-rate has been very high among them. Apparently they are
too small to conduct a large-scale business — which meat packing is,
par excellence; they can buy live stock and kill it and prepare good
meat ; they are weak in marketing their product, because they can
not furnish at any and all times the quality and the quantity of
meat the buyer wants. This is because their supply of live stock
is not constant and regular in quantity, quality, or time.

(2) Mtinicipal Abattoirs. — Largely as a sanitary measure,
American cities are beginning to erect and operate municipal
abattoirs, and as experience accumulates, and as public health
becomes more the concern of every taxpayer, there is certain to
come an increase in the number of these slaughter houses. The
unspeakable filth which surrounds many (probably most) small
butchers' private slaughter houses, near the villages and cities,
is certainly a condition to challenge the attention of public health
officers. In time the municipal abattoir will doubtless be a very
important economic factor in the fresh meat business. The posi-
tion of the large packers in the cured meats, however, seems to be
safe from any local competition of this kind.

QUESTIONS ON THE TEXT

1. How does the packing industry rank in importance among American

industries?

2. Show that this industry is of more than national importance.

3. Describe the course of Hve stock production in the United States. Signifi-

cance of movement.

4. What economic and legal questions are involved in the study of meat

packing? ,

5. Discuss the live stock situation under these topics: meat as food; geo-

graphical shift; change in number of Uve stock; future outlook for an
increase and for a decrease; summarize.

6. State outlook for foreign competition.

7. Discuss the meat packing industry of the United States under following

topics: large-scale business; division of labor; by-products; distribution;
inspection.

8. Show American attitude toward monopoly, pohtical or economic.

9. Give the findings of the Garfield Report.

10. Quote the President's letter of 1917 directing an investigation by the

Federal Trade Commission.

11. Give findings of the Federal Trade Commission.

12. What remedies did the Trade Commission propose?

13. Give reply of the packers.

14. What is the real evil? The fitting remedy?

15. Discuss advisability of government ownership of the meat packing

industry.

16. Give status of cooperative packing house movement.

17. Give situation as regards municipal abattoirs.

REFERENCES 389

QUESTIONS SUGGESTED BY THE TEXT

1. Debate: Resolved, that we should adopt the pohcy of government owner-

ship and operation of the packing houses.

2. Give an account of the cooperative packing houses at La Crosse, Wiscon-

sin; Madison, Wisconsin; Fairbault, Minnesota; Fargo, North Dakota.

3. What is the social value of competition in large-scale industries?

4. Should the large packing houses be ordered to compete or to cooperate?

5. What method or system would best render the power of the Packers

"responsible"?

REFERENCES

1. "The Beef Industry." Report of the Commissioner of Corporations,
March 3, 1905. Washington, 1905.

2. "Report of the Federal Trade Commission on the Meat Packing
Industry." Two Parts. Washington, 1918 and 1919. Summary and Part I,
1919; Part II, Evidence of Combination Among Packers, 1918.

3. Meat Situation in the United States. Five Parts:

I. "Statistics of Live Stock, Meat Production and Consumption, Prices
and International Trade for Many Countries." By George K. Holmes.
(Report 109.)

II. "Live Stock Production in the Eleven Far Western Range States."
By Will C. Barnes, and J.\mes T. Jardine. (Report 110.)

III. "Methods and Costs of Growing Beef Cattle in the Com Belt States."
By J. S. Cotton, Morton O. Cooper, W. F. Ward, and S. H. Ray. (Re-
port 111.)

IV. "Utilization and Efficiency of Available American Feed Stuffs." By
W. F. Ward and S. H. Ray. (Report 112.)

V. " Methods and Costs of Marketing Live Stock and Meats." By Louis
D. Hall, F. M. Simpsqn and S. W. Doty. (Report 113.) Office of the Secre-
tary, Department of Agriculture, Washington, 1916.

4. "Proceedings of the Conference Relative to the Marketing of Live
Stock: Distribution of Meats and Related Matters." Held by the Direction
of David Franklin Houston, Secretary of Agriculture. Conducted by the
Office of Markets and Rural Organization, Charles J. Brand, Chief. Held at
Chicago, November 15-16, 1915. 64 Cong., 1 Sess. House Doe. No. 855.

5. "Report of the United States Industrial Commission." 19 volumes.
Vol. 6, pp. 225-267. Washington, 1898-1902.

6. "Swift and Company's Analysis and Criticism of Part II of the Report
of the Federal Trade Commission on the Meat Packing Industry of November
25, 1918." Swift and Company, Chicago, April 5, 1919.

7. "Testimony of J. Ogden Armour on Behalf of Armour and Company,
January 21, 1919, Before the Committee on Interstate and Foreign Commerce
in the Matter of the Investigation of the Packing Industrv." H. R. 13324.
Washington, 1919.

8. de Ricqles, a. E. : "Statement Prepared by, on Live Stock Marketing
Questions for the Use of Dwight B. Heard, President of the American National
Live Stock Association, and the Market Committee of the American National
Live Stock Association, and the Federal Trade Commission," n.d.

9. : "Address on Live Stock Marketing, Before the Third Annual

Conference on Marketing and Farm Credits," Chicago, 1916.

10. Weld, L. D. H.: "A Big Vital American Industry. The Story of
Swift & Company.'? The Bankers* Magazine, January, 1919. Vol. XCVIII.
New York, 1919.

11. : "From Live Cattle to Beef." Cornell Countryman, April,

1919, Ithaca, New York.

12. Armour, J. Ogden: "The Packers, the Private Car Lines and the
People." Philadelphia, 1906.

390 LIVE-STOCK AND MEAT INDUSTRY

13. Scientific American, November 7, 1857. Article on the First Refrig-
erator Car.

14. Leffingwell, Albert: "American Meat" (on order).

15. Andes, Louis E.: "Animal Fats and Oils."

16. Wilder, F. W.: "Wilder's Modern Packing House."

17. "Douglas's Encyclopedia of the Meat Packing Industry."

18. NiMMo, Joseph: "Report in Regard to the Range and Ranch Cattle
Business of the United States." Annual report on the internal commerce of
the U. S., 1885, pp. 95-294, with five maps. U. S. Treasury Department,
Bureau of Statistics. Reprinted without the maps. House Exec. Document,
No. 267, 48 Cong. 2 Session.

19. "Testimony taken by the Select Committee of the United States
Senate on the Transportation and Sale of Meat Products." Washington, 1889.

20. "The Sheep and Wool Industry in the United States." Special Bulle-
tin, Chamber of Commerce of the United States, Washington, April 26, 1918.

APPENDIX

Stabilizing Supplies and Prices. — A report of the Conference held in
Chicago, March 10th and 11th, 1919, between representatives of the Kansas
Live Stock Association, The Corn Belt Meat Producers Association, Missouri
Live Stock Breeders Association, Illinois Live Stock Association, Illinois Agri-
cultural Association, The Buyers and Sellers Association of Texas, and repre-
sentatives of seventeen packing companies.

Proposed Agreement for the "Conference Committee" of the Live Stock Industry. —
At a conference held in Chicago on March 10 and 11, 1919, the representatives of the Kansas
Live Stock Association, Corn Belt Meat Producers' Association, Missouri Live Stock Associ-
ation, Illinois Live Stock Association, and The Buyers' and Sellers' Association of Texas met
with the five large packers and eleven other packers.

It is the sense of those participating in the conference that it would be to the mutual
benefit of the live-stock industry, the packers, and the consumer, that steps should be taken
to bring about a closer cooperation between the various interests concerned.

Realizing that the live-stock industry is on the threshold of an era of reconstruction,
and with the prospect of removal of such control as has been exercised by the Food Admin-
istration during the war period, we are impressed with the importance of reaching a better
understanding of the problems affecting the whole industry, and of effecting, if possible,
more economic methods of production and distribution to the end that our businesses may
be placed on a sounder basis, and in order that the finished product be furnished the con-
sumer at a minimum price compatible with cost of production.

It is suggested that these ends may be obtained through the formation of a central
committee composed of producers and representatives of the packing industry, the Bureau
of Markets, and the National Live Stock Exchange, which should meet in Chicago once a
month, or oftener, if necessary, for the purpose of taking such measures as may tend toward
the stabilization of live stock receipts at various markets, and for the further purpose of
studying one another's problems, of adjusting grievances, and of inaugurating such systems
as will be helpful to the producer, the packer, and the consumer. The greatest possible
publicity should be given to all of the proceedings. It is understood that if this proposal
becomes effective it shall not be construed as in any way restraining the activities of the
parties hereto in working for or against the passage of pending or future federal legislation
for the regulation of the packing and allied industries. Its purpose is wholly constructivei
looking to a better understanding and fuller cooperation between all interests involved.

It is obviously to the best interests of all concerned that receipts of live stock at all
markets should be stabilized and distributed as evenly as possible in order that a five-day
market may be established for all classes of live stock, and to this end it shall be distinctly
the function of the committee to make effective such measures as may be possible for the
accomplishment of this object.

It is contemplated that the producer shall obtain and furnish the committee all import-
ant information concerning the supply of meat animals in the various sections of the country.
Shall advise the committee regarding feed conditions, and the amount of live stock which
shall be ready for market during the various seasons, and in other ways be a source from
which valuable information, including cost of production, may he- placed at the disposal
of the committee.

It is contemplated that the packers shall prepare and submit to the committee informa-
tion relative to the amount of finished product on hand, the foreign and home demands for
meat products, together with the cost of live animals and the expense of slaughter, packing,
and distribution of the finished products. The packers shall recommend any plans which
tend to reduce their expense of operation, such as the equalization of receipts, etc.

APPENDIX 391

It is contemplated that the committee shall carefully investigate the annual earnings
of the packing industry, including all the subsidiary companies; it shall be the privilege of
the committee to employ a committee of public accountants of recognized standing to audit
the yearly statements of the packers. Any statements or figures furnished to the committee
by the packers, or by the producers, from time to time, may also be subject to verification
by public accountants. Whenever duplication and unnecessary overhead expense are dis-
closed, it shall be the duty of the committee to recommend the elimination of the same.

It is contemplated that whenever certain methods and systems used by the producers
may be shown to be wasteful or detrimental to the industry, it shall be the duty of the com-
mittee to recommend the elimination of the same.

It is contemplated that in regulating the receipts of livestock during abnormal times
it will be essential that the committee shall have the support of the Railroad Administration
or the Interstate Commerce Commission to the end that the regulation of transportation
as recommended by this committee may control the receipts at market centers.

We feel that the membership of this central committee should be composed of the
following representatives: One from the Bureau of Markets of the United States Department
of Agriculture; two from the National Livestock Exchange, ten packers, and ten producers,
representing the cattle, hog, and sheep industries, with alternates — a total of twenty-three.
This central committee shall have authority to add one representative of the stockyards
and one of the railroads, if it sees fit.

It is understood that the producers here present will take steps as soon as possible to
notify all livestock producing organizations of the action here taken, and to call a general
meeting of three delegates from each state, to be selected by the State Associations, and three
delegates at large from each of the National Livestock Associations and the Southern Live-
stock Association, and it shall be the province of this meeting to select the ten producer
representatives that are to serve on the central committee.

It is contemplated that the producers will exercise the utmost care and diligence in
selecting their representatives, who will be men of unquestioned standing and ability, and
that the packers shall name as their representatives the principals of the institutions
represented.

It is understood that this committee, when appointed, shall formulate the rules and
regulations governing its operation, and that a producer shall be selected as its chairman.
The headquarters of the committee we feel should be in Chicago.

The permanent committee shall create the sub-committees at various markets and shall
formulate the rules and regulations governing their operations. The purpose of these local
committees is the immediate adjustment of any grievances, such as dilatory handUng of
excessive variations in the purchase price paid for the same grade of live stock on the same day.

We suggest that the financing of this organization be divided equally between the pack-
ing industry and the live stock associations, and that the methods of raising the necessary
funds be left to the central committee.

Parties Who Participated in the Conference Were:

Geo. T. Donaldson, President Kansas Live Stock Association, Greensburg, Kan.

J. H. Mercer, Secretary Kansas Live Stock Association, Topeka, Kan.

Pet Nation, Kansas Live Stock Association, Hutchinson, Kan.

John Edwards, Kansas Live Stock Association, Eureka, Kan.

Dan Casement, Kansas Live Stock Association, Manhattan, Kan.

Arnold Berns, Kansas Live Stock Association, Peabody, Kan.

C. L. Daughters, Kansas Live Stock Association, Manhattan, Kan.

J. G. Imboden, President Illinois Live Stock Association, Decatur, Illinois.

Carl Marshall, Illinois Live Stock Association, Ipava, Illinois.

E. F. Keefer, Illinois Live Stock Association, Chicago, Illinois.

C. D. Yancey, President Missouri Live Stock Association, Liberty, Mo.

S. P. Houston, Vice-President Missouri Live Stock Association, Malta Bend, Mo.
S. T. Simpson, Secretary Missouri Live Stock Association, Columbia, Mo.
A. W. Nelson, Missouri Live Stock Association, Bunceton, Mo.
A. Sykes, President Corn Belt Meat Producers' Association, Ida Grove, Iowa.
Henry C. Wallace, Secretary Corn Belt Meat Producers' Association, Des Moines.
E. L. Burke, Omaha, Nebraska.

T. F. Moody, Buyers' and Sellers' Association of Texas, Canadian, Texas.
Peter Fleming, Prairie Farmer, Chicago.
Thos. E. Wilson, Wilson & Company, Chicago.
V. D. Skipworth, Wilson & Company, Chicago.
R. F. Eagle, Wilson & Company, Chicago.
., Arthur Meeker, Armour & Company, Chicago.
J. Ogden Armour, Armour & Company, Chicago.
R. D. McManus, Armour & Company, Chicago.
Edward F. Swift, Swift & Company, Chicago.
G. F. Swift, Swift & Company, Chicago.
T. H. Ingwersen, Swift & Company, Chicago.
W. B. Traynor, Swift & Company, Chicago.
L. D. H. Weld, Swift & Company, Chicago.
Edward Morris, Morris & Company, Chicago.

D. R. Buckham, Morris & Company, Chicago.

E. A. Cudahy, Cudahy & Company, Chicago.

392 LIVE-STOCK AND MEAT INDUSTRY

Parties Who Participated in the Conference Were — (Continued) :

J. G. Connie, Dold Packing Company, Buffalo.

E. C. Merritt, Indianapolis Packing Company, Indianapolis.
J. R. Kingan, Kingan Packing Company, Indianapolis.
James Craig, Parker Webb, Detroit.

L. D. Nash, Cleveland Provisions Company, Cleveland.

F. J. Sullivan, Sullivan -Packing Company, Detroit.

A. I. Eberhardt, Hornell Packing Company, Austin, Texas.
W. R. Miller, Miller & Hart, Chicago.

G. Bishoff, Independent Packing Company, St. Louis.

Chas. I. Hammond, Hammond-Standish Packing Company, Detroit.

C. H. Nuckles, Nuckles Packing Company, Pueblo, Colorado.

W. G. Eckart, Pueblo, Colorado.

Harold Swift, Swift & Company, Chicago.

Stabilizing Supplies and Prices. (A Producers' Committee of Fifteen, Chosen at Kansas
City, April 12, 1919.)— "It is the sense of those participating in the conference that it
would be to the mutual benefit of the live-stock industry, the packers and the con-
sumers, that steps should be taken to bring about a closer cooperation between the various
interests concerned.

"Realizing that the live-stock industry is on the threshold of an era of reconstruction,
and with the prospect of removal of such control as has been exercised by the Food Admin-
istration during the war period, we are impressed with the importance of reaching a better
understanding of the problems affecting the whole industry, and of effecting, if possible,
more economic methods of production and distribution, to the end that our businesses
may be placed on a sounder basis, and in order that the finished product be furnished the
consumer at a minimum price compatible with cost of production.

" It is recommended that these ends may be promoted through the formation of a com-
mittee of live-stock producers which shall meet from time to time as may be found necessary,
and counsel with similar committees representing the packers and other interests. Said
producers' committee shall be selected at a national meeting composed of delegates from the
several states (said delegates to be selected at state meetings attended by representatives
of the various producers' organizations), and the members to represent the range cattle
industry, the cattle-feeding industry, the hog industry and the sheep industry, the propor-
tion of representation and the number constituting the committee to be decided by the
national convention. Said convention shall be planned and called by the committee of
fifteen which it is now proposed to create.

"Pending said national convention and the appointment of said committee, a live-stock
producers' committee shall now be formed as follows:

" The committee ^hall consist of fifteen members, of whom four shall represent the range
interests, eight the feeding states, two the hog industry and one the sheep industry. Those
representing the range interests shall be selected, two by the American National Live Stock
Association, one by the Cattle Raisers' Association of Texas, and one by the Southern Cattle-
men's Association. Those representing the feeding interests shall be selected one each by the
associations of the states of Kansas, Missouri, Illinois, Iowa, Nebraska and Indiana, and two
by the associations of the states in territory east of Indiana. The two representatives of the
hog industry shall be named by joint action of the various national swine associations, and
the one representing the sheep industry shall be named by the National Wool Growers'
Association. The committee thus created shall have full authority to meet with the com-
mittees representing the packers and other interests and to do whatever may seem to it
to be necessary to promote the interests of the producers, by taking such measures as may
tend toward the stabilization of the live-stock industry and for the further purpose of study-
ing one another's problems, of adjusting grievances, and of inaugurating such systems as
will be helpful to the producer, the packer and the consumer. The various associations are
requested before May 10th to select their representatives on this committee of fifteen, and
the committee shall meet at Chicago on May 15th, at which time it shall organize, elect
its own chairman and secretary, and provide for such sub-committees as it may deem neces-
sary to carry out the purposes for which it is created.

"To effect the proposed organization, a committee of six, in addition to himself as
chairman, shall be chosen at this time by the chairman of this meeting, to put this plan
into effect without delay, to notify the various state producers' associations, and to invite
the packers and other interests to cooperate with the producers' committee thus created
in promoting the meat industry of the nation."

Note. — The Producers' Committee of Fifteen failed to function, and the committee
was dissolved in November, 1919. Its work was turned over to the American Federation
of Farm Bureaus. The action of the committee in dissolving itself did not have the universal
approval of the stockmen whom it was supposed to represent.

CHAPTER XXIV

TAXATION PROBLEMS: SINGLE TAX; PROTECTIVE

TARIFF

I. SINGLE TAX

The writings of Henry George have popularized the single tax in
our own land and in many other lands. The fervor of his eloquence,
the beauty and grace of his literary style, and the pure sincerity of
his motives have given his work a strong appeal. He has succeeded,
as few writers have, in yoking together economics and ethics.

Definition. — ^A single tax means a tax on land value. By land
value is meant the rental value of the land, what it is worth annu-
ally for use, its economic rent. The word land, as used by the
single taxers, includes minerals, water, oils, and every other thing
of value created by nature and forming a part of the earth; and,
conversely, the word land excludes all buildings, structures, and
creations of man upon or in the land. To illustrate. If the single
tax were applied as a substitute for all other forms of taxes, as its
name implies it should be, there would cease to be any tax on
incomes, or inheritances, on personal property, on imports, on
business, on consmnption, and so on. In the city, all buildings
and their contents would b6 exempt from taxation — the land value
alone being taxed. In the country, there would be no tax on houses,
barns, other buildings, live stock, tools, grain, or any kind of per-
sonal property — the land value alone being taxed.

Incidence of the Tax. — The tax burden would be the same total
amount, whether the money were secured from the single tax as
advocated or from the multiple taxes now in use. But it would
fall on different persons — on the owners of land values. The
farmer, thinking of the millions of acres of farm lands as against the
relatively few acres of city land, wonders whether the single tax
would not shift the tax burden in large part from the city to the
country. Obviously not. For the bulk of the land value is in the
cities. Thus the land values in New York City alone are worth
more than the total farm land values of one-half the States in the
Union. The tax burden, therefore, under the single tax, would
somewhat raise taxes in cities and lower taxes on farms, should
the single tax be applied at once over the whole nation. However,
if the single tax were applied in a State having no- great metro-

393

394 TAXATION PROBLEMS

politan districts, there would be little change in the burden as
between city and country.

Argument for the Single Tax.— For a person who is not a single
taxer to state the arguments for the single tax fairly is not an easy
task. However, the effort will be made here. Condensed within
very narrow limits the argument runs substantially as follows:

The private appropriation of ground rent is a privilege — in fact
it is our worst form of special privilege to-day. No man created
the earth or gave it value. The Almighty created the land, and
society gives it value. Man cannot create new land. The supply
is strictl}^ limited. The use of the land is absolutely necessary for
the existence of man. Society does not permit any one to mark
off a certain area of the ocean, for instance, and require all users
thereof to pay a toll for it. Were this permitted, especially useful
parts of it, such as the entrances to harbors, would have a barrier
thrown across them and their use permitted by the ''owners" only
to those who would pay a rent for them. The sea belongs to those
who use it. Neither does society now permit private individuals
to appropriate the use of socialized strips of land, such as streets
and highways, and exact toll (rent) from the users thereof. So an
individual who uses the land, like an individual who ventures to
sea in his fishing schooner, is entitled to a wage on his labor and to
interest on his capital, but not to a rent on the land which he did
nothing to create. The rent of the land — the economic rent (the
market value of its use) — is due to society, and hence should be
appropriated by society. Society should collect this economic
rent and call it a tax. For the individual to collect wages and
interest is wise and just; for him to collect economic rent is a special
privilege and is uneconomic and unjust. In other words, if he
farms the land and receives a fair wage for his labor and a fair
interest return on every cent he has invested in machinery, im-
provements, drainage, fertilizers, etc., he has received all the
income he is entitled to. He who goes beyond this is reaping where
he has not sown, and is to that extent a social parasite.

Speculation in farm lands would be stopped, and these vast
non-productive funds now so employed (to the curse of society)
would be diverted into industrial channels, in investments in mills
and factories, in workshops and tools, in various productive enter-
prises calling for the employment of labor and capital (to the
enrichment of society). For obviously a man having money to
invest would not put it into land and expect to reap a reward by
the rise in value of land (as many now do), because this increase.

ARGUMENT FOR THE SINGLE TAX 395

this ''unearned increment" as they term it, would be taken by
society that creates it. Neither could he buy a farm and expect
to sublet it at a profit, while he retired and lives in ease and luxury
off his tenants, because the economic rent would go to the state,
not to him. Of course, the farmer who had put improvements on
his farm of great value could and w^ould retire, if he pleased, and
''rent" this farm, but the land value rent or tax would go to the
state, while his "rent" would be merely the interest on his outlay
for improvements, equipment, tile, stock, etc. Speculative funds
diverted from land speculation into productive capital would
actually raise wages and bring general prosperity, say the single
taxers, and, indeed, abolish poverty from the earth.

More fundamental yet, is the argument advanced by Henry
George in his work "Progress and Poverty," his chief contention
being that om' boasted increase in population is accompanied with
an iron law of wages, interest, and rent, namely, wages must fall;
interest must fall; rent must increase. In short, progress means
poverty — poverty for the many, wealth for the few who appro-
priate ground rent. His logic is very simple. As population in-
creases, there are more mouths to feed. More food is needed. It
must come from the land. The supply of land is fixed. It cannot
be increased. As this demand on the land steadily grows greater
and greater and more food must be wrung from the soil, food prices
must rise; land values must rise; rents must rise. The landlords
wall be able to receive a larger and larger share of the products,
leaving less and less for labor and capital. To make the illustration
concrete. Here is a ten-acre field of wheat — and the country is
new and sparsely settled. This field must furnish bread for the
man and his mfe and two children. A generation later (and our
population has doubled); this field must now feed eight people.
The relative scarcity of this food makes it dearer than it was before.
This is equivalent to saying that the value of the land is more —
that its economic rent has increased. These eight people must be
fed from this land, and the owner of the land can and does demand
a higher rent for the use of his land — because population has
increased, not because he has improved the land. Let this ten
acre field stand for the whole United States. The area of the
continental United States is, in round numbers three and a half
million square miles. It was this size one hundred years ago, and
will be this size a hundred years hence. But the population to
occupy this area was but 4,000,000 in 1790. This population was
nearly doubled by 1810, reaching l}/i millions. Thirty years later

396 TAXATION PROBLEMS

it was again doubled (standing at 17 millions in 1840). Thirty
years later it was again doubled (standing at 383^ millions in
1870). Thirty years later it was again doubled (standing at 76
millions in 1900). So the process of doubling goes on every thirty
years. The food supply must be doubled every thirty years. And
the vacant lands are long since all occupied. Is Henry George
right in his basic argument that an increase in food supply can be
had only at increased cost? Must each added bushel of wheat be a
dearer bushel than the preceding? If so, rents must rise. Land
values must increase with increase in population. The owner of
the land (the ''appropriator of ground rent ") will be the beneficiary.

The Question at Issue. — ^An iron law of rent of this kind is
based on the theory of ''diminishing returns" in agriculture, for
agriculture as a whole. The individual farmer, in any case, doubt-
less has some land on the basis of increasing returns (where, for
instance, increasing his investment of labor or capital or both by
10 per cent will increase his returns 15 per cent) ; some on the basis
of stationary returns (where, for instance, increasing his invest-
ment of labor or capital or both by 10 per cent will increase his
yield by 10 per cent) ; and some on the basis of diminishing returns
(where, for instance, increasing his investment of labor or capital
or both by 10 per cent will increase his yield by 5 per cent).

The food supply can be increased. It can be increased by using
more labor — farming more intensively; by using better machinery;
by using better tillage methods; by using better seed selection; by
using pure bred live stock; by proper animal nutrition; by more
scientific crop rotation; by introducing new legimies and farm
crops; and in many other ways. The question at issue is: Does
each added bushel of crop cost more than the preceding bushel?
In other words, has agriculture reached the state of diminishing
returns in the United States? Very clearly, a general answer
cannot be given. Rents have fallen in some sections, and risen in
others. Some farms are operated on the basis of diminishing
returns; some on the basis of increasing returns. The various
surveys that have been made and are now being made clearly
illustrate this truth. If all farmers were operating on the basis
of the few best farmers, the increase in food supply would be so
enormous as to cause a slump in prices of foodstuffs, and a conse-
quent fall in rents of land.

If the Single Tax Were Applied. — The single taxers would
apply their single tax to both city and farm land, but base their
chief arguments on the city land. For it is in city lands that ground

PROTECTIVE TARIFF 397

rents are conspicuously high. Our discussion in this book, how-
ever, is concerned almost entirely with farm lands. While the
large claims of the single taxers as to the efficacy of the single
tax are doubtless far from being one hundred per cent true, yet
they are in part true so far as urban conditions are concerned.
Here land has only site value. But this view has little validity as
applied to farm lands. The site of the land is secondary; its fer-
tility is primary. And its fertility, if maintained and increased,
is due in large part to the brains of the owner. If the single tax
were applied to farm lands, it would have the immediate effect of
increasing the taxes on those lands that are unimproved but yet
have use value; on small farms with costly buildings and improve-
ments the taxes would be lessened; on the average farm with
average buildings the improvements exempted would just about
offset the increase in the land tax — or in other words, there would
be little change in the size of the tax. In fact, the Minnesota
State Tax Commission, after giving very careful and sympathetic
consideration to the whole single tax question — both in theory
and in practice — reached the conclusion (in their 1912 Report)
that, *'To the average owner and occupant of a home or a farm the
change (to a single tax) would probably not mean much one way
or the other." ^

II. PROTECTIVE TARIFF

Introductory Statement. — The United States ranks among the
'^ protective tariff" countries of the world. With the exception of
about thirty years of our history (the period from 1830 to the Civil
War, 1860) we have been frankly for high ''protection." A pro-
tective tariff takes two forms: (1) it may be so high as to prohibit
entirely the importation of the foreign competing article; (2) it
may impose a duty, not prohibitive, on imports, causing the im-
ported article to sell so high in America as not to compete on even
terms with the American made article. The American manufac-
turer, in such a case, is able to charge more for his wares, evidently,
than if competition were unrestricted, and the ultimate consumer
is the one who pays the tax. The first strictly high protective
tariff act was the Act of 1816. The duties were raised in the next
act — that of 1824. Four years later came a substantial increase,
with the so-called "Bill of Abominations" of 1828. Since this led
to the near-secession of South Carolina from the Union, and the
Nullification (of the tariff) controversy, rates were lowered in the
next acts. Tariff and Slavery, Nullification and Secession, then

^ Third Biennial Report, Minnesota State Tax Commission, 1912, p. 177.

398 ' TAXATION PROBLEMS

kept Congress occupied for thirty years, till the Civil War settled
the slavery issue. The subsequent tariff acts, namely, 1883, 1890,
1894, 1897, 1909, and 1913 were all highly protective to the manu-
facturing industry. After the abolition of slavery in the South,
and the growth of modern industrialism in that section under free
labor, the South, too, came to favor a protective tariff on such
products as were manufactured there. But prior to the Civil War,
the tariff was referred to, quite generally, as a sectional issue, the
North being the section benefited.

Theory and Practice. — Most great doctrines, like the doctrine
of a protective tariff, should be tested by both theory and practice.
The controversy in this country over the theory of protection is
apparently as far from abatement now as it was at its inception a
hundred and thirty years ago. It is more profitable, therefore, first"
to examine very briefly the workings of a protective tariff, as related-
to agriculture, before giving attention to the theory of the subject.

Iq New England. — New England is the one section of the coun-
try in which the cycle of protection is most nearly complete, and it
will therefore be used to illustrate the workings of our protective
system. Since the first ''protective tariffs" were designed solely
to protect manufacturing, and since manufacturing, prior to the
Civil War, was confined almost wholly to the North, it seems fair
to turn to this section to study the fruits of the protective system.

The first tariff act ever enacted by this government (July 4,
1789) bore this preamble:

"Sec. 1. Whereas it is necessary for the support of government, for the
discharge of the debts of the United States, and the encouragement and pro-
tection of manufactures, that duties be laid on goods, wares and merchandise
imported: Be it enacted ..."

Condition of the Country in 1789. — Documents of that day
bespoke a period of prosperity for agriculture, for labor, and for?
manufactures. The abundance of free land made it possible for
any man of ordinary ability to own a good home and a good farm.
The second profound influence of free land was to keep wages high.
One of the early fathers had written many years before this time,,
"Our children's children will hardly see this great continent filled^
with people, soe that our servants will still desire freedom to plant
for themselves, and not stay but for verie great wages." A royal
official wrote in 1723, "North America containing a vast tract of
land, every one is able to procure a piece of land at an inconsider-
able rate, and therefore is fond to set up for himself rather than
work for hire. This makes labor continue very dear, a common

CONDITION OF THE COUNTRY IN 1789 399

laborer usually earning three shillings by the day ..." Albert
Gallatin, when ex-Secretary of the Treasury, reported that as
early as 1810, there were north of the Potomac fifty mills for spin-
ning cotton in operation, and twenty-five more went into operation
the ensuing year. The date mentioned by Gallatin is interesting,
since the protective policy was not apphed to cotton manufactures
till 1816. And finally we may fall back on the most noted report
of the period, Hamilton's Report on Manufactures (1791), in order
to determine the condition of prosperity already reached by manu-
factures, under the natural protection of 3,000 miles of sea between
them and the competition of the mother country, and only slow
sailing vessels for transportation. Hamilton wrote as follows:

"To all the arguments which are brought to evince the impracticability
of success in manufacturing estabHshments in the United States, it might have
been a sufficient answer to have referred to the experience of what has already
been done; it is certain that several important branches have grown up and
flourished with a rapidity which surprises, affording an encouraging assurance
of success in future attempts. Of these it may not be improper to enumerate
the most considerable:

1. Of Skins. — Tanned and tawed leather, dressed skins, shoes, boots, and
sUppers, harness and saddlery of all kinds, portmanteaus and trunks, leather
breeches, gloves, muffs, and tippets, parchment and glue.

2. Of Iron. — Bar and sheet iron, steel, nail rods and nails, implements of
husbandry, stoves, pots, and other household utensils, the steel and iron work
of carriages and for shipouilding, anchors, scalebeams, and weights, and various
tools of artificers, arms of different kinds, though the manufacture of these
last has of late diminished for want of demand.

3. Of Wood. — Ships, cabinet wares and turnery, wool and cotton cards,
and other machinery for manufactures and husbandry, mathematical instru-
ments, cooper wares of every kind.

4. Of Flax and Hemp. — Cables, sail-cloth, cordage, twine and packthread.

5. Bricks, and coarse tiles and potter's wares.

6. Ardent spirits and malt liquors.

7. Writing and printing paper, sheathing and wrapping paper, paste-
boards, fuller's or press papers, paper hangings.

8. Hats of fur and wool, and of mixtures of both, women's stuff and
silk shoes.

9. Refined sugars.

10. Oils and animals and seeds, soaps, spermaceti and tallow candles.

11. Copper and brass wares (particularly utensils for distillers, sugar
refiners and brewers), andirons and other articles for household use, philo-
sophical apparatus.

12. Tin wares for most purposes of ordinary use.

13. Carriages of all kinds.

14. Snuff, chewing and smoking tobacco.

15. Starch and hair powder.

16. Lampblack and other painters' colors.

17. Gunpowder.

Also vast amount of household manufacture (coarse cloth, coating, serges,
flannels, linsey-woolseys, hosiery, coarse fustians, jeans and mushns, checked
and striped cotton and linen goods, bed ticks, coverlets, tow linens, shirtings,
sheeting, towels, table linen). Also flour, pitch, tar, turpentine, etc."

400 TAXATION PROBLEMS

Hamilton's Report is generally quoted by the friends of pro-
tection as the mighty bulwark of their faith. It is an able summary
of the argimients both for and against protection, Hamilton's own
conclusions being for protection. He takes for granted that manu-
factures are needed (to furnish a home market, and for other rea-
sons) ; he assumes that protection is needed in order to have manu-
factures because foreign governments were using bounties, etc.,
and because of (1) the scarcity of labor, (2) the dearness of labor,
and (3) the want of capital. He does, however, refer to the many
towns ''of size," as indicating a growing supply of labor; his Ust
of successful manufactures has just been given above, indicating
that without government aid manufacturing was thriving. Look-
ing into the future workings of protection, he emphasized these
two points, namely,

(1) UtiHzation of women and child labor;

(2) Utilization of immigrants.

''But there are," says Hamilton, "circumstances which have been
already noticed with another view, that materially diminish every-
where the effect of scarcity of hands. These circumstances are:
the great use which can be made of women and children . . .
lastly, the attraction of foreign inamigrants ... It is a natural
inference from the experience we have already had, that as soon
as the United States shall present the countenance of a serious
prosecution of manufactures, as soon as foreign artists shall be
made sensible that the state of things here affords a moral certainty
of employment and encouragement, competent numbers of Euro-
pean workmen will transplant themselves effectually to insure the
success of our design."

Hamilton's forecast of the future was correct, for these two
things happened — women and child labor was utilized, and inami-
grants did flock to the factories. The statistics gathered after
nearly a hundred years of protection to manufactures tell the
story. The platform adopted by one of the major political parties
in 1912 reaffkmed its belief in the protective tariff policy, crediting
this policy with protecting our workmen against (1) local compe-
tition, (2) foreign. But the statistics, quoted below, do not reveal
this American workman in these protected factories (unless the
word American workman means women and children) ; neither do
they reveal absence of competition by the foreign laborer (but
rather the success of the "foreigner" in driving the "American
workman" out of the factory).

NEW ENGLAND AGRICULTURE

401

Number and Per Cent of Americans and Foreign Bom, Males and Females, in
Ifi Representative Cotton Mills in Maine, New Hampshire^ Massachusetts
and Rhode Island."^

(After 100 years of Protection.)

Race

16 and over

Under 16

Total, all ages

Males

Females

Males

Females

No. Per cent
286- 4.5
604- 9.5
2610-40.9
334- 5.2
303- 4.8
920-14.4
322- 5.0
1001-15.7

No. Per cent

1134- 8.2

1350- 9.7

5633-40.5

2288-16.5

249- 1.8

1759-12.6

680- 4.9

803- 5.8

No. Per cent
76- 9.7
87-11.2
410-52.6
50- 6.4
36- 4.6
26- 3.3
34- 4.4
61- 7.8

No. Per cent
73- 8.5
73- 8.5
499-58.1
63- 7.3
35- 4.1
38- 4.4
41- 4.8
37- 4.3

No. Per cent
1569- 7.2

English

2114- 9.6

French Canadian. .
Irish

9152-41.8
2735-12.5

Italian

623- 2.8

Polish

2743-12.5

Portuguese

Others

1077- 4.9
1902- 8.7

6380-100

13896-100

780-100

859-100

21915-100

Note. — Seven out of each hundred "workmen" are Americans. Two-thirds of
these "workmen" are women or girls. This illustrates how literally Hamilton's prophesy
was fulfilled.

New England Agriculture. — Early protection to manufacturing
gave this occupation a form of preferential treatment which enabled
it to draw the boys and girls from the farms. The ''home market,"
consisting of the numerous manufacturing towns which cover New
England, did not prove sufficient stimulus to keep agricultm-e
from sagging. A hundred years of this history, and manufacturing
had apparently reached its zenith, agricultiu*e its nadir. New
England became famous throughout the country as the land of
"abandoned farms."

A chance news item in the Rural New Yorker stated the matter
vividly in these words :

" Farming conditions in New England are at a critical point. New England
imports 85 per cent of her food supplies for man and beast. She can and should
produce 85 per cent or more thereof. The seriousness of the situation is attested
by the recent formation of a league of manufacturers in Massachusetts to
promote agriculture in order that New England's industrial supremacy may
not be further endangered by enforced removal to centers of larger food pro-
duction and lower food costs. J. S. B." ^

The Eastern States Agricultural and Industrial League (as the
league referred to above is termed) is backed by large capital,
and is now making a strenuous effort to rehabilitate agriculture in
New England. In a prospectus of theirs, describing the objects
of the new league, they present the following melancholy figures
showing the low estate of rural life in New England.

2 Report on Condition of Women and Child Wage Earners in the United
States, 19 vols. 61 Cong. 2 Sess. Sen. Doc. 645, Vol. 1, p. 99.'

3 Rural New Yorker, March 29, 1919, p. 572, New York City.

26

402 TAXATION PROBLEMS

" New England Industrial Supremacy Imperilled by Agricultural Decline.
— From 1860 to 1910 there was a startling decline in New England agriculture,
clearly indicated by the following facts:

Farm land under cultivation decreased 5,103,073 acres, or 42 per cent.

Cattle decreased from 56 to 20 per 100 population.

Sheep decreased from 60 to 4 per 100 population.

Population of 828 rural towns decreased 32 per cent.

Total population increased 110 per cent.

Wage earners increased during this same period from 390,806 to 1,191,290,
or 359 per cent.

New England must to-day import over 75 per cent of the food consumed.

As long as the food production in New England becomes less in comparison
with the consumption, the differential must increase and ultimately reach a
point where it will become increasingly difficult for New England to maintain
its industries.

A successful farming community is one of the strongest factors in main-
taining social stabiUty. The farmer is not only a producer of the primary
source of wealth, but is also a property owner and a small employer of labor
and naturally stands for stability."

In order to secure an increasing element of "stability" of
society, and in order to overcome the industrial handicap of dear
food, the League is promoting agriculture, functioning through
these various agencies: The Eastern States Agricultural and Indus-
trial Exposition (to improve herds, crops, fruits, and farm practice) ;
Market Bureau; Farm Finance Bureau; Boys' and Girls' Bureau;
Publicity Bureau; New England Farm and Food Foundation. The
last named agency "seeks to combine from ten to fifteen thousand
manufacturing, mercantile and banking institutions with the
progressive farmers of New England, in a joint effort to make
effective such agencies as will enable the farmers to introduce
modern methods for the purpose of greater, better and more
economic production, and to effect a more efficient system of
distribution, as well as estabhsh adequate credit facilities."

It is not claimed that the protective tariff caused this decline
in New England agriculture, but only that it contributed largely
to this end by disturbing, artificially, the balance that first existed
among agriculture, manufacturing, and commerce in New England.
The law created an artificial status. It has now reached its logical
fruition. Many a shrewd Yankee farmer is still raising wheat for
his New England cousins — only he now is raising this wheat in
Kansas and Nebraska, where one day's work will produce much
more wheat than in New England, transportation costs included.

Webster's great tariff speech of 1824 set forth the true situation

as concerned New England, a region then enjoying a prosperous

agriculture and a prosperous commerce. He said:

*' With me it is a fundamental axiom, it is interwoven with all my opinions,
that the great interests of the country are united and inseparable; that agri-

WALKER'S REPORT 403

culture, commerce, and manufactures will prosper together, or languish
together, and that all legislation is dangerous which proposes to benefit one
of these without looking to consequences which may fall on the others."

When Congress singled out one of these three interests and pen-
sioned it, so to speak, and bestowed on it special favor, special
privileges, this favored industry, naturally forged ahead of the
other two in the race. Congress did not ' ' look to the consequences ' '
which would ''fall on the others." Both commerce and agriculture
in New England steadily fell further and further behind in the
competitive rate. Hence the lopsided growth of the present day,
and the belated effort to take out of manufacturing large sums
of money and put them back into agriculture. This is not done
now as a charity to agriculture, but to obviate the ''industrial
handicap of dear food" and to establish islands of "stability" in
the turbulent industrial sea of foreign wage earners who now com-
pose the typical New England community.

Gallatin's Memorial. — ^Albert Gallatin, writing his Memorial
on the Tariff in 1831, paid attention to the various theories of pro-
tection promulgated by Hamilton. Speaking of the "home
market" for agricultural products, he said that flour prices rose
and fell with foreign demand, and not with the growth of domestic
manufactures; that the "foreign market," therefore, deserved
consideration. Foreign commerce is, he declared, exactly like
domestic commerce in principle; unrestricted intercourse between
sections is needed.

Prosperity and high wages he connected in no way with the
tariff. Prosperity he attributed to our vast natural resources. On
labor he said, "After two centuries of free commerce with Great
Britain and fifty years of similar intercourse with the rest of the
world, the price of labor continues without alteration to be higher
in the United States than in England or any other country."

Walker's Report. — Robert J. Walker, Secretary of the Treasury,
made one of the few notable contributions to the tariff discussion,
in his Report for December 3, 1845. He foretold with uncanny
accuracy the labor difficulties of the factories, particularly the low-
wage issue which formed a very unpleasant feature of the New
England factory system till the first decade of the twentieth century.

Secretary Walker reported to Congress in part as follows:

Labor and Capital. — Capital's power over wages. — "When the number of
manufactures is not great, the power of the system to regulate the wages of
labor is inconsiderable; but as the profit of capital invested in manufactures
is augmented by the protective tariff, there is a corresponding increase of
power, until the control of such ca"pital over the wages of labor becomes irre-

404 TAXATION PROBLEMS

sistible. As this power is exercised from time to time, we find it resisted by
combinations among the working classes, by turning out for higher wages,
or for shorter time; by trades-union; and in some countries, unfortunately, by
violence and bloodshed. But the government, by protective duties, arrays
itself on the side of the manufacturing system, and by thus augmenting its
wealth and power, soon terminates in its favor the struggle between man and
money — between capital and labor. When the tariff of 1842 was enact^d^
the maximum duty was 20 per cent. By that act the average of duties on
the protected article was more than doubled. But the wages of labor did not
increase in a corresponding ratio, or in any ratio whatever. On the contrary,
whilst wages in some cases have diminished, the prices of many articles used
by the working classes have greatly appreciated.

Profits. — ^A protective tariff is a question regarding the enhancement of
the profit of capital. That is the object, and not to augment the wages of
labor, which would reduce those profits. It is a question of percentages, and
is to decide whether money vested in our manufactures shall, by special
legislation, yield a profit of 10, 20 or 30 per cent, or whether it shall remain
satisfied with a dividend equal to that accruing from the same capital invested
in agriculture, commerce, or navigation.

"No prejudice is felt by the Secretary of the Treasury against manufac-
turers. His opposition is to the protective system, and not to classes or
individuals. He doubts not that the manufacturers are sincerely persuaded
that the system which is a source of so much profit to them is beneficial also
to the country. He entertains a contrary opinion, and claims for the oppo-
nents of the system a settled conviction of its injurious effects.

Free Trade Principle. — Soil, climate, and other causes vary very much, in
different countries, the pursuits which are most profitable in each; and the
prosperity of all of them will be best promoted by leaving them unrestricted
by legislation, to exchange with each other those fabrics and products which
they severally raise most cheaply. This is clearly illustrated by the perfect
free trade which exists among all the States of the Union, and by the acknowl-
edged fact that any one of these States would be injured by imposing duties
upon the products of the others. It is generally conceded that reciprocal
trade among nations would best advance the interests of all."

Secretary Walker also discussed the ''home market" argument
— the favorite argument used by the manufacturers to convince
farmers that prosperity was being ''passed around," and to secure
the support of farmers for a taxing system which took money from
the pocket of the farmer and transferred it to the pocket of the
manufacturer. We have, reasoned Walker, a surplus of agricul-
tural products; therefore we must have a foreign market; the real
question is then, not the home market, but how. best develop a
foreign market? Walker's answer was free trade.

Hamilton's Errors. — As the first Secretary of the Treasury,
Hamilton, a young man of thirty-two, was confronted with gigantic
national problems of credit, of money and banking, and of revenues,
and with few precedents to guide him. The wonderful genius he
displayed in successfully and rapidly solving his major problems
has given him a rank in history as the second greatest man pro-
duced by the Revolution. He had never seen Europe, but he was
greatly influenced in his decisions of policy by European practices.

PROTECTION OF AGRICULTURE AND LABOR 405

Thus, in his two great reports, his Report on the Coinage, and his
Report on Manufacturers, both made in 1791, he seems to have
decided the two issues involved (BimetaUism, Protection) on the
basis of what was actually the practice of the moment in Europe,
rather than on the basis of his own logic. For instance, there is
no better statement of Gresham's Law anywhere than in his
report on the Coinage, for he clearly shows the impossibility of
maintaining a double standard of value. But his conclusions are
in favor of bimetallism, largely, it would seem, because no Euro-
pean country had yet adopted the single standard, and England
was several years off from the status. It took a great many years
for the country to correct this error. And so with his tariff policy.
He was faced with the actual condition of protection in various
forms in use by foreign governments. His words on this point are :

''But the greatest obstacle of all to the successful prosecution of a new
branch of industry, in a country in which it was before unknown, consists,
as far as the instances apply, in the bounties, premiums, and other aids which
are granted in a variety of cases by the nations in which the establishments to
be imitated are previously introduced. It is well known that nations grant
bounties on the exportation of particular commodities to enable their own
workmen to undersell and supplant all competitors in the countries to which
those commodities are sent. Hence the undertakers of a new manufacture
have to contend not only with the natural disadvantages of a new undertaking,
but with the gratuities and remunerations which other governments bestow.
To be enabled to contend with success it is evident that the interference and
aid of their own governments are indispensable."

The Corn Laws of England furnish the outstanding example
of government ''protection" to one interest, in this case, the
growers of wheat. Since the whole evil system of Corn Laws has
long since been swept into England's large rubbish heap entitled
''Reforms," even the champions of protection in England would
not defend this unhappy venture in "protection." In becoming
the first gold-standard country and the first free-trade country,
England, Hamilton's chief example, showed that the great Secre-
tary's two errors came from confusing the practice of the moment
with the established policies of the future.

Present Theory of Protection of Agriculture and Labor. —
"Wages are high because of the tariff," is now a familiar saying,
on the part of some very respectable politicians, about election
time in the United States. This is a strange confusing of cause
and effect. First, a tariff was asked because wages were high.
Natural resources then (and now) were the chief cause of high
wages. A protective tariff does not keep out foreign labor; indeed,
in the factories enjoying the most protection are found the most

406 TAXATION PROBLEMS

foreign-born laborers. This competition lowers wages. In no
instance is it apparent that tariff on manufactured goods does or
can raise wages. A prohibitive tariff on labor (immigration) would
do this, but such a form of protection has never been advocated
by factory owners. The farmer was likewise told that a tariff of
ten cents a bushel on corn (the rate some time in effect) protected
him to that extent. Since we were exporting corn, not importing
it, it is obvious that such a tariff could have no effect on price.
In other words, had the tariff been ten dollars a bushel instead of
ten cents a bushel, the price of corn in America would have re-
mained the same, uninfluenced, one way or the other, by it. As
a matter of fact, while the tariff on corn was ten cents a bushel,
many farmers in Kansas and Nebraska, owing to larger production
one season, sold their corn at nine cents a bushel. The United
States has been an exporter (not an importer) of wheat from 1776
to date. Yet a tariff of twenty-five cents a bushel was in effect
for many years, not to raise the price of wheat (which was fixed
in the world's markets buying the surplus), but to give color to the
idea that the farmer also, like the manufacturer, was enjoying
''protection.^' So the protective tariff on the farmers' crops has
served its real purpose, namely, to keep the farmer satisfied with
the protective system while contributing cheerfully to its costs,
and reaping none of its benefits.

QUESTIONS ON THE TEXT

1. Define Single Tax. Illustrate its meaning.

2. Under the single tax, what change would there be in the incidence of

taxation? Refer particularly to question of city and farm lands.

3. State the arguments for the single tax referring to privilege; to Henry

George's "Progress and Poverty."

4. Does the "iron law of rent" establish the claims of the single taxeis?

Reasons for and against. .

5. What is the future outlook for a continued rise in rent?

6. If the single tax were applied, how would it affect the farmer?

7. State also conclusions of Minnesota Tax Commission.

8. Define Protective Tariff. Illustrate its meaning.

9. What has been the tariff pohcy of the United States during the past

100 years?

10. In what sense does New England illustrate the workings of our protec-

tive system?

11. What was the economic condition of the country in 1789? Illustrate.

12. Quote Hamilton as to the prosperity of manufacturing.

13. Discuss Hamilton's Report on Manufactures; need of protection; women

and child labor; immigrant labor.

14. Show the accuracy of Hamilton's forecast of the future. '

15. Compare New England agriculture and manufacturing. Cite article in

Rural New-Yorker.
16 Describe the need, purpose and method of the Eastern States Agricultural
and Industrial League.

REFERENCES 407

17. Cite statistics on rural conditions in New England.

18. Show the need of "cheap food" and ''stabihty" of society, from the stand-

point of the manufacturer.

19. To what extent, if any, is the tariff responsible for the present condition

of New England agriculture?

20. Cite Webster's 1824 speech on this point.

21. Cite Albert Gallatin's arguments on the "home market" theory; on

high wages.

22. Cite the arguments of Secretary Walker on the factory- labor problem;

relation of protection to high wages; profits; free trade; home markets.

23. Cite and explain Hamilton's two errors.

24. Cite modern theories of protection to labor and agriculture. Criticize.

25. What is the relation of the farmer to the protective tariff?

QUESTIONS SUGGESTED BY THE TEXT

1. Resolved, that our protective tariff poUcy has added to the prosperity

of American agriculture.

2. Debate. Resolved, that the Single Tax, as proposed by Henry George,

should be put into operation for all national, state and local purposes.

3. Assuming that free trade is desirable as among all the so-called white

races, should or should not the principle be extended to include all races
of the earth?

4. Show the fallacy implied in the words "cheap labor " in the following

sentences: We cannot compete with the cheap labor of Europe. We
cannot compete with the cheap labor of the Orient.

5. Show by citing reliable data that in American factories paying the highest

wages, the labor cost of the product is less than in similar plants paying
lower wages.

REFERENCES

1. George, Henry: "Progress and Poverty."

2. : "The Land Question."

3. FiLLEBRowN, C. B. : "The A B C of Taxation." Boston, 1912.
4. : "A Single Tax Hand Book." Boston, 1913.

5. Shearman, Thomas G.: "National Taxation."

6. "The American Economic League, Pubhcations of." Cincinnati. (A
league to promote the Single Tax idea.)

7. Hyder, Joseph: "The Case for Land Nationalization; with a special
introduction by Alfred Russell Wallace." London, 1913.

8. Whittaker, Sir Thomas P.: "The Ownership, Tenure and Taxation
of Land. Some Facts, Fallacies and Proposals Relating Thereto." London,
1914.

9. Miller, Joseph Dana: "The Single Tax Five- Year Book." New
York, 1919.

10. Taussig, F. W. (Editor) : "State Papers and Speeches on the Tariff."
Pubhshed by Harvard University, 1892.

11. : "Tariff History of the United States." 6 edition. New York

and London, 1914.

12. : "How not to Revise the Tariff." American Economic

Renew, I, pp. 20-37, March, 1911.

13. Commons, John R. : "Tariff and Protection to American Labor."
Annals of American Academy of Pohtical and Social Science, September,
1908, pp. 51-56.

14. Bigelow, Poultney: "In Darkest Connecticut." The Independent,
October 19, 1911.

15. Tarbell, Ida M.: "The Tariff in Our Times." New York, 1911.

16. "Reciprocity and Commercial Treaties." United States Tariff Com-
mission, Washington, 1919.

408 TAXATION PROBLEMS

17. "Periodical. The Single Tax Review." 150 Nassau St., New York
City, $2.50 a year.

18. Wright C. W.: ''Wool Growing and the Tariff." Harvard Economic
Studies, Vol. 5, 1910.

19. Rhodes, James Ford: "History of the United States." Vol. 3, 27-60.

20. DoMERATZKY : "European Tariff PoUcies after the World War."

The Americas, Aug., Sept., Oct., Nov., 1919.

21. "Single Tax in Canada — for Unimproved Lands." Grain Growers'
Guide, January 7, 1920, 6.

22. Brown, Harry G.: "International Trade and Exchange," (especially
chapters 4, 5, 6 of Part II), New York, 1914.

APPENDIX

Speech of Daniel Webster. — (House of Representatives, April 6, 1814.)
"I am not anxious to accelerate the approach of the period when the great-
mass of American labor shall not find its employment in the field; when the
young men of the country shall be obliged to shut their eyes upon external
nature, upon the heavens and the earth, and immerse themselves in close
and unwholesome workshops, when they shall be obliged to shut their ears
to the bleatings of their own flocks, upon their own hills, and to the voices
of the lark that cheers them at the plough, that they may open them in dust,
and smoke, and steam, to the perpetual whirl of spools and spindles, and the
grating of rasps and saws . . .

"It is the true policy of the Government to suffer the different pursuits
of society to take their own course, and not to give excessive bounties of en-
couragements to one over another. This, also, is the true spirit of the Consti-
tution. It has not, in my opinion conferred on the Government the power
of changing the occupations of the people of different states and sections, and
of enforcing them into other employments."

Question by Representative Livingston. — (Testimony of Le Grand Powers,
Chief of the Division of Agriculture, United States Census, Washington,
May 4, 1899, before the Industrial Commission.) If the farmers' products
meet the competition of the world in foreign markets, and the manufacturers'
products meet the same competition in foreign markets of the world, if the
Government undertakes to help one in any way ought it not to help the other,
both being situated in certain cases aUke?

Answer. — Certainly.

Question. — Has it done it?

Answer. — I do not know why it has not, because the tariff cuts absolutely
no figure. We have to-day, to catch certain of the voters, a nominal tariff on
certain agricultural products brought here from other countries. That tariff
may affect prices a httle on the border, just a trifle, but in the markets of the
United States, on all the farms of the United States, the prices are not affected
a hair's breadth.

Question (Bounty on Exports). — You do not think that would remedy it?

Answer. — ^No; you would have out of such a bounty no benefit at all to
the farmer. It would be the same as in Germany in the matter of the sugar
bounty. The English farmer, as the result of the German bounty, is able to
feed his hogs raw German sugar as one of the cheapest articles he can give
them; and he does that at the expense of the German taxpayer. The system
of bounties in Germany has simply raised the price of sugar to the consumers
in Germany, and thus lessens the amount that is consumed in Germany. If
Germany would take away all bounties on sugar the common people could
and would consume more sugar, and they would thus make a market for as
much sugar of their own in twenty years as they have built up by their export
duties. — Industrial Commission Report. Vol. X, pp. 176, 177.

CHAPTER XXV

FOREIGN COMPETITION

The question of foreign competition in agriculture is one which
looms on the immediate horizon of the future. Then somewhat
more remote than this question, but none the less real, is that
fundamental question of soil exhaustion and the future food supply.
The first of these questions, foreign competition, mil be briefly
considered in this chapter.

A Leaf from England's Notebook. — ^We can view with great
equanimity economic revolutions in other countries. Our detach-
ment and perspective enable us to see and interpret, in a disinter-
ested fashion, important transitions in agriculture which are forced
on our neighbors. But may not the same revolutions and transi-
tions happen to us? Since the logical outcome of foreign competi-
tion is change in our own agriculture, in certain particulars, it is
extremely interesting and suggestive to observe the experience of
England when foreign competition forced her to pass through a
period of agricultural revolution during the twenty-five years
following our own Civil War.

The opening up of the new lands of the United States, Canada,
Argentina, Australia, and elsewhere proved a disaster, for the
moment, to the English growers of wheat and live stock. Changes
were made which may correctly be termed an economic revolution
in English agriculture. Wheat was produced as the ''pioneer
crop" on the virgin soils of the new countries in such volume and
at so low a cost of production that the English farmer simply
could not compete. Ocean steamships furnished cheap and rapid
transportation. The invention of cheap refrigeration opened up
the British markets to the almost limitless supplies of beef and
mutton from distant lands. At the same time occurred a steady
fall in the price of wool, owing to the cheap supplies from the
British colonies. And on top of all these disturbances came a
succession of unfavorable seasons. These and other causes, all
working together, shook the very foundations of British agricul-
ture. The old order was changing; a new order was coming in.

The farmers who clung to the old order were ruined by the

409

410 FOREIGN COMPETITION

change. The farmers who saw the signs of the time and took
advantage of them were made prosperous by the transition. The
immediate effect of cheap bread and meat from abroad was to
benefit the cities and the laboring classes in the industries in
the cities. The prosperity of the working classes brought a
demand from them for foods in addition to bread and meats,
particularly articles of food which before had been looked on as
luxuries. These food articles included milk, cream, butter, vege-
tables, fruit, jams, preserves, poultry, eggs, etc. Thus the pros-
perity of the cities was in part passed on to the farmers. Certain
high-grade meats produced in England and Scotland were in greater
demand. There followed as a natural consequence of agricultural
revolution a great expansion in the growing of pure-bred live stock,
particularly dairy cattle. There came also a growth in raising
pure-bred beef cattle, partly to supply the home demand for prime
beef, and partly for export purposes to countries like Argentina,
where fancy prices were paid for pure-bred sires.

British farmers of the more progressive type recognized the
changes in the world about them, and hastened to take advantage
of them. Among the successful activities of the progressive farmers
may be named the following: sale of fresh milk, fruit industry
(including dried fruit, jam, preserved fruits, cider), flowers, bulbs,
market gardening (including broccoli, cabbage, celery, peas, rhu-
barb), eggs and poultry. Marketing and transportation problems
also received considerable attention, in order that a proper and
wide distribution of these crops could be secured.

The non-progressive farmers, feeling the pinch of the transition,
filled the newspapers with letters about the ''depression in agri-
culture," and wanted the government to ''do something" for the
farmer. Many of them asked for a protective tariff against this
"foreign competition." In short, the issue was the old familiar
one of Self-help versus State-aid. But self-help prevailed as the
policy to be pursued. And now the British farmer himself is glad
to buy his wheat from abroad, pa3dng for it with crops that yield
him a higher net return. In other words, he can get a bushel of
wheat from the prairies of western Canada with less labor than
he can produce a bushel of wheat on his British soil. Consequently
wheat-growing in England has been reduced to those areas having
distinct advantages in producing this cereal.

OUR FOREIGN TRADE; ITS CHANGES 411

Conditions Facing the United States. — In the production of
the staple ''bread-and-meat" crops — wheat, corn, hogs, beef cattle
— we face the competition of the newer and fast-developing coun-
tries of all the world. While there are many areas of this kind of
much significance, yet the following three are of the most imme-
diate and outstanding importance, namely, Canada, Argentina,
Russia. These bread-and-meat products compete in the markets
of the world. Rapid transportation has largely neutralized the
effects of distance. Prices respond according to these world-wide
conditions, in which the United States is clearly not an isolated
unit, but an integral part. The following diagram illustrates this
truth for the wheat crop. As we affect prices in these other
regions, so must they affect prices in our country. Hence it is
easily conceivable that in the course of agricultural evolution or
revolution we may at no distant date see the American consumers
eating bread and meat from foreign lands. Would this be a good
thing or a bad thing for the country? In the case of the English
transition, the farmer, on the whole, seems to be better off after
the change than before the change. The economic principle of
the so-called '^ comparative costs" should govern in any situation
of this kind. This principle may be illustrated in this way. If
the Canadian fanner can raise better and cheaper wheat than the
American farmer, while the American farmer, in his turn, can
raise better and cheaper corn than his Canadian cousin, then the
American farmer had better buy his wheat from Canada — paying
for it with corn, rather than keep on raising wheat for himself.
Each produces what he can produce best and cheapest. And
under a free interchange of products, each gets the maximum
return at the least cost. This illustrates how a cheap agricultural
product, imported from a foreign country, may not injure the
American farmer. The consumers who are not farmers — and they
constitute two-thirds of our population — are of course interested in
any som'ce of cheaper food supply which promises to be permanent.

Our Foreign Trade ; Its Changes ; Its Significance. — A glance
at a table of our exports and imports during a period of three
decades prior to the World War shows strikingly the change in our
foreign trade in agricultural products. We are ceasing to export
foodstuffs. We are beginning to import foodstuffs. The tremend-
ous increase in the volume of our exports is due to the growth of

412

FOREIGN COMPETITION

s

°2

At

^

/|

r

1

i<

hi

<

V.

^i

o
2

^^

^

A

■x

to

2

"^^

-7>

')

(N

5
22

<

\

/

;'

i

\

s?

\

1

<n

i

CO

:^

^

"'•^

_^ — ''

22

"*--^

"^

— .

CO

<2e

^^

^

\

'■^•x

'^N

^<-.

°>

>>

^

r

^

^.

'^,.-—

J

CO

^

r

■^

^

^^

==^^

^"

i ^

^

=^=^

(

^N

"^

v^

X

X

05

•

1

i

/

A

•>

r^

1

y
\

l\

\

r"

.^

U9

1-

>r

lO

*•

y

y

5^,

1^ ^ 5 ^ S} 0, 5 ^

I\

I

' i2

§

^

OUR COMPETITORS: ARGENTINA

413

The following brief table tells

manufactures in this country,
the story:

Exports of Foodstuffs and Manufactures from the United States, and Percentage
Which Each Group Forms of the Total; Changes in the Thirty-four Years
Before the World War.

Foodstuffs

Manufactures

Fiscal year

Value

Per cent

Value

Per cent

1880

$459,461,673
325,127,668
356,829,763
318,176,639
545,473,695
401,249,778
369,087,974
385,418,436
418,737,763
502,111,639
430,713,457

55.77
44.74
42.21
40.11
39.80
26.90
21.59
19.13
19.29
20.72
18.49

$121,818,298

150,256,178

178,982,042

205,057,865

484,846,275

611,425,574

766,981,245

907,519,841

1,020,417.687

1,185,104,309

1,102,132,210

14.78

1885

20.67

1890

21.18

1895

25.84

1900 . ...

35.37

1905

40.98

1910

44.85

1911

45.07

1912

47.02

1913

48.80

1914

47.17

The products of the factory greatly exceed the products of
the farm in our exports. For many years the United States
enjoyed the world's primacy as an exporter of cotton, breadstuffs,
and meats. We have now reached the point where imports of
packing house products normally exceed our exports. Likewise
the imports of live animals exceed the exports of live animals. In
breadstuffs our exports of flour have fallen to two-thirds their
former level, but the export of wheat is maintained in peace times
at about the same level, namely, about 100,000,000 bushels. In
cotton we still have about two-thirds of the world's export trade,
namely, about 8,000;000 bales.

The situation may be summarized as follows:

We are exporting bread and meat, but less than formerly.
We are importing foodstuffs, and more than formerly.
We are exporting manufactured goods, more and more. We
have become, in fact, an urban people.

So much for our status; what are the future prospects of Russia,
Canada, and Argentina? Some facts are submitted as to their
resources, which indicate in some measure their future promises.

Our Competitors: Argentina. — As a typical example of our
increasing competition from foreign countries, it is interesting to
note the situation in Argentina. Few Americans, as yet, realize
the significance of Argentina's actual and potential competition.
Argentina has the same climate as the United States, occupying
approximately the same position south of the equator as that of

414

FOREIGN COMPETITION

the United States north of the equator. Its area is two-fifths that
of the United States, but its population (eight and one-half million)
is only one-twelfth that of the United States. Less than one-fourth
of its productive land is under cultivation. Hence we see the

Fig. 81. — Ocean transportation, port of Buenos Aires.

Fk;. .S2. — Modern Ki:iin c'lcvatorb at Bu

room for expansion both in population and production. In 1891
Argentina exported only 17,500,000 bushels of grain; in 1913 the
exports amounted to 397,000,000 bushels, an increase of over two
thousand per cent. The average yield per acre of corn in Argentina
for the three years 1911, 1912, 1913 was 27,^ bushels, against

OUR COMPETITORS : ARGENTINA

415

27 bushels in the United States. The percentage of the wheat
crop of the United States exported was 17.5 per cent, while Argen-
tina exported 60.6 per cent. Of the oats produced in the United
States, only 1.1 per cent was available for export, while Argentina
had an average surplus of 82.4 per cent of the crop. In the pro-

FiG. 83. — Mill of Minnetic y Cia, of Cordoba, located at Rosario.

u

■

.

U.

1

1

'.: .jM

I

i

5^

In

' ^■■^■■*^^--

r

i %IVb|

■H^^

^m ^^' \

A

' ■IW**,

l^

-«iiB

^H Vi

■■■

Fig. 84. — Alfalfa grows luxuriantly in Argentina.

duction of flaxseed Argentina exceeds the United States by over
10,000,000 bushels, although an average of only • four one-
hundredths of 1 per cent is exported from the United States, while
81.8 per cent of the Argentina crop is available for export. The
average yields per acre of flaxseed are the same in both countries,
namely, lYi bushels (Figs. 81 to 87). -

The meat industry of Argentina shows greater strength even

416 FOREIGN COMPETITION

than the grain industry. ''The growth of the meat trade in the
Argentine RepubUc," says the United States Department of Agri-
culture, ''has been Httle short of remarkable and its importance
in the world's commerce is greatest in beef products." Argentina's

Fig. 85. — A modern method of shelling corn in Argentina.

mmm
Fig. 86. — Magnificent herd of cattle in the Tampa Central, Argentina.

exports of frozen beef began in 1884; of chilled beef in 1901. The
chilled beef trade has shown a rapid growth, reaching 2,989,805
quarters in 1913. This amount considerably exceeds the
351,748,333 pounds of fresh beef exported by the United States
in 1901, the year the Argentina chilled beef trade began and
which year marked the beginning of the decline in the United
States of exports of fresh beef.

OUR COMPETITORS: ARGENTINA

417

418

FOREIGN COMPETITION

The following table shows in detail the growth of Argentina's
beef trade.

Exports of Beef from Argentina

Year

Frozen beef

Chilled beef

1901

Quarters

479,372

735,715

877,342

1,018,072

1,533,745

1,580,589

1,403,835

1,579,163

1,615,888

1.434,078

1,693,494

2,086,780

1,102,938

Qiuirters

24,919

94,498

142,542

198,300

426,002

455,459

849,613

789,348

1,071,474

1,608,608

2,131,791

2,269,474

1902.

1903

1904

1905

1906

1907

1908

1909

1910

1911

1912

1913

2,989,805

In contrast with this table, the following table shows the steady
decline in United States beef exports.

Exports of Fresh Beef from the United States

Year

Quantity,
pounds

Year

Quantity,
pounds

1901

351,748,333
301,824,473
254,795.963
299,579,671
236,486.568
268,054,227
281,651.502

1908, .

201,154,105

1902

1909

122,952.671

1903

1910

75,729.666

1904

1911

42.510.731

1905

1912

15,264,320

1906

1913

7,362,388

1907

1914

6,394,404

Argentine chilled beef normally sells on the English market
within IJ/^ to 2 cents a pound of the price of English beef, and
Argentine frozen beef from 1^ to 23^ cents a pound lower than
Argentine chilled. The destination of nearly all of Argentina's
beef is England, although the United States is beginning to import
Argentine meat. In the twelve months prior to the World War
the United States imported 153,882,670 pounds of meat from
Argentina. Cattle growing in Argentine has proved to be a much
more certain enterprise than grain growing, hence the apparent
tendency to convert grain lands into alfalfa pastures. Cattle
breeding methods in Argentina are on a high plane, surpassing
those of the United States. In the United States it is the exception
to find a splendid herd of beef cattle handed down from father to
son, but in Argentina it is so common as to be almost the rule. In
fact, many establishments have been in the hands of the same
family for nearly a century. Furthermore, the custom is universal
of bujdng the best individual cattle and the best blood regardless

I

UNITED STATES AND CANADA

419

of price. An Argentine breeder in 1913 paid $34,400 for a Short-
horn bull, the highest price up to that time ever paid for a bull of
any breed. Although the Argentine herds have been brought to a
high standard, their owners are constantly in the market for
breeding animals to bring in fresh blood or to improve the quality
of the herds. This trade has heretofore gone almost entirely to
Great Britain, and it has been one of the most profitable outlets
which British breeders have had. The Commerce Reports of
May 15, 1916, contains this significant statement; ''The importa-
tion of fine cattle and sheep from England into Argentina is con-
tinuing in spite of the war. A shipment of shorthorn cattle from
Liverpool for Buenos Aires is announced in La Razon for April 14,
and another shipment is expected in May." The business and
social relations between British and Argentine breeders are close.
British judges nearly always officiate at the leading Argentine
shows, and there is no recollection thus far of a single in-
stance of a North American breeder having been asked to judge
at an Argentine show. Some authorities look for a positive
and beneficial effect on the United States beef cattle industry
in Argentina's probable demand for breeding animals from the
United States.

. United States and Canada. — The total area of Canada is one
and one-fourth times as large as the United States, but the popu-
lation (1911 census, 7,206,643) is only one-thirteenth as large. As
an exporter of wheat, oats, and flaxseed Canada has now become
one of the strongest countries in the world. Omitting the Yukon
and the Northwest territories, the nine organized provinces of
Canada contain a total land area of 977,585,513 acres, of which
109,948,988 acres, or 11.25 per cent, is now occupied as farm land.
The estimate of possible farm land in these nine provinces is
358,162,190 acres, or 36 per cent of the total area. In other
words, less than one-third the available land in these provinces
is under cultivation.

The following table shows Canada's producing power in the
years 1914 and 1915.

Yield and Value of Field Crops in Canada, 1914, 1915:

Pre-War Basis.

Wheat

Oats

Barjey

1915 yield

376,303,000.00 bu.
161,280,000.00 bu.

28.98 bu.

15.67 bu.
$312,569,400.00

520,103,000.00 bu.
313,078,000.00 bu.

45.76 bu.

31.12 bu.
$176,894,700.00

o3,331 300 00 bu

1914 yield

36,201,000.00 bu

1915 yield per acre

1914 yield per acre

1915 value of crop

.35.33 bu.
24.21 bu.
.$26,704,700.00

420

FOREIGN COMPETITION

Yield and Value of Field Crops in Canada, 1914, 1915. Pre-War Basis — Cont'd

1915 yield

1914 yield

1915 yield per acre.

1914 yield per acre.

1915 value of crop. .

Flaxseed

10,628,000.00 bu.

7,175,200.00 bu.

13.18 bu.

6.62 bu.

$15,965,000.00

Corn

14,368,000.00 bu.

13,924,000.00 bu.

56.72 bu.

54.39 bu.

$10,243,000.00

Russia. — Russia is generally referred to as the ''Great Un-
known" in the grain trade. A vast country, sparsely settled, a

Fig. 88. — Direct marketing scene at a Russian fair.

fertile soil, and primitive conditions in soil cultivation and crop
marketing, her real and potential crop surplus for export is a
disturbing factor in the world's markets. Only one-third of Euro-
pean Russia's productive land is under cultivation as yet! And
it is very poorly tilled ! And only one-twentieth of Asiatic Russia's
productive land is now under cultivation. It is impossible to
forecast the possibilities of increase in agricultural production for
such a country as this (Figs. 88 and 89). Education, scientific
agriculture, modern storage and transportation facilities, stabilized

RUSSIA

421

government, all these influences must contribute to increasing very
greatly Russia's annual crop yields.

The thoughtful student who aspires to be a real agricultural
statesman must consider world conditions in agriculture. Three
of our chief competitors in the world's agricultural commerce have
been named. Our real and potential competitors are many, and
can best be shown by means of a brief statistical table, showing

Fig. 89. — Transportation in Russia.

for each such country its total area, its productive land, and the

present ai ea of its cultivated land. Such a table is presented below :

Total Area and Agricultural Land in Various Countries.

Total area
acres

Productive land

Cultivated land

Country

Amount
acres

Per

cent

of
total

Amount
acres

Per
cent

of
total

United States

1,903,269,000

2,306,502,153

729,575,000

74,132,000

80,272,000

130,8.54,000

133,594,000

1,278,203,000

56,802,000

20,350,000

615,695,000
4,028,001,000

1,903.664,000
66,469,000

878,789,000
109,948,988
537,805,000

69,939,000

77,225,000

123,642,000

126,401,000

698,202,000

47,737,000

18,789,000

465,706,000
715,838,000

119,942,000
57,310,000

46.2

4.8
73,7

94,3
96.2
94.5
94.6
54.7
84.0
92.3

75.6
17.8

6.3
86.2

293,794,000
35,261,338
44,446,000

26,272,000
35,178,000
59,124,000
63,689,000
245,755,000
14,587,000
3,275,000

264,868.000
33,860,000

14,987,000
6,955,000

15.4

Canada. .

1 6

Argentina

Europe
Austria

6.1
35 4

Hungary. .

43 8

45 2

Germany

47 7

19 2

Great Britain

25 7

Ireland

16 1

Asia

43 0

's

Oceania
Australia

g

10 5

Total for 36 countries. .

15,071,209,000

4,591,691.000

30.5

1,313,832,000

8.7

Note. — By comparing the productive land (30.5) with the cultivated land (8.7) we
find that but 28.5 per cent of the usable land is now cultivated.

422 FOREIGN COMPETITION

QUESTIONS ON THE TEXT

1. Describe in full the transition in English agriculture in the period follow-

ing 1870. Same for Denmark (p. 423).

2. What suggestions, if any, for the United States, in the problems presented

and methods used in this period in England ?

3. Show what competitive conditions now face the United States.

4. Explain the principle of "comparative costs."

5. Show the changes in our foreign trade since 1880, and state their significance.

6. Discuss Argentina as a competitor: area; climate; population; crops; Hve

stock; exports.

7. In a similar way discuss Canada.

8. In a similar way discuss Russia.

9. The productive land of the world is what per cent of the total land acreage?

The cultivated land constitutes what per cent of the productive land?

QUESTIONS SUGGESTED BY THE TEXT

1. Prepare a chart or graph showing the world's cotton production, also

cotton production of United States, Egypt, and India.

2. Prepare a table showing wheat acreage and yields for a series of years in

the United States, Argentina, Canada, Russia, Australia, India, the
Balkan States, France.

3. What should be the policy of our government in using a protective tariff

on imports of foreign agricultural products, such as corn from Argen-
tina, hay from Canada, beans from Manchuria, citrus fruit from Spain
and Italy, etc.?

4. Debate. Resolved, that each country should devote itself to the produc-

tion of those commodities in which it has special advantages, and there
should be free interchange of all products.

REFERENCES

1. Finch, V. C, and Baker, O. E.: "Geography of the World's Agri-
culture, United States Department of Agriculture." Contribution from the
Office of Farm Management, Washington, 1917.

2. RuBiNOW, I. M.: "Russian Wheat and Wheat Flour in European
Markets." Bulletin 66, Bureau of Statistics, United States Department of
Agriculture, Washington, June, 1908.

3. Davis, Mack H.: "Flour and Wheat Trade in European Countries
and the Levant." Bureau of Manufactures, Department of Commerce and
Labor, Washington, 1909.

4. "Imports and Exports of Agricultural Products." Published annually
in Yearbook of Agriculture, Washington.

5. McKenna, Royal T.: "Annual and Average Production of and
International Trade in Important Agricultural Products by Countries."
Circular 31, Bureau of Statistics, United States Department of Agriculture,
Washington, July, 1912.

6. "United States Industrial Commission Report," 19 vols., Washington,
1898-1902, Vol. 10, p. cccxxxix, p. 176; Vol. 19, pp. 187-193.

7. Pratt, E. A.: "The Transition in Agriculture." London, 1909.

8. Yearbook Department of Agriculture : 1903 — Holmes, Geo. K. : "The
Nation's Farm Surplus." 1913 — Melvin, A. D.: "The South American Meat
Industry." 1914 — Melvin, A .D., Rommel, Geo. M.: "New Production in
the Argentina and its Effects upon the Industry in the United States." 381-391.
1914 — Joss, E. C: "Meat Production in Australia and New Zealand," 421-
439. 1915--DuvAL, Laurel: "Production and Handling of Grain in Argen-
tina." 281-299.

9. "Industrial Commission Report." Vol. 10, cccxxxix-cccliv.

10. Day, Clive: "History of Commerce" (New edition), 1914.

APPENDIX

423

11. Evans, C. H.: "Domestic Exports from United States to all Coun-
tries," 1789-1882, 1884.

12. Johnson, E. R.: "History of Domestic and Foreign Commerce of
the United States," 1915.

13. "Report of the Empire Cotton Growing Committee," London, 1920.

14. Smith, Rollin E.: "Argentina and the Grain Trade, Price Current
Grain Reporter," Chicago, May 7, 1919.

15. PicKELL, J. Ralph: "Agricultural Argentina," Chicago, n.d.

16. "American Dairy Competition — Argentina and Canada — a Serious
Question." The Market Reporter (U. S. Bureau of Markets), Vol. 1, No. 7,
Feb. 14, 1920, p. 1.

APPENDIX

Foreign Trade of the United States in Agricultural Products, 1852-1918. {Com-
piled from Re-ports of Foreign Commerce and Navigation of the United States.
All Values are Gold.)

Agricultural exports ^

Agricultural it

Year ending June 30

Domestic

Total

Percentage

of all

exports

Total

Percentage

of all

imports

Average :

1852-1856

$164,895,146
215,708,845
148,865,540
250,713,058
396,666,397
591,350,518

557,472,922
573,286,616
638,748,318
827,566,147
879,541,247
975,398,554

951,628,331
857,113,533
878,480,557
859,160,264
826,904,777

976,047,104

1,054,405,416

1.017,396,404

903,238,122

871,158,425

1,030,794,402
1,050,627,131
1,123,651,985
1,113,973,635
1,475,937,607
1,518,071,450
1,968,253,288
2,281,338,876

80.9
81.1
75.7
76.9

78.5
80.4

76.3
74.7
73.0
65.9
59.5
53.9

65.2
63.2
63.1
59.5
55.4

56.8
56.9
55.5
55.1
50.9

51.2
48.4
46.3
47.8
54.3
35.5
31.6
39.0

$77,847,158
121,018,143
122,221,547
179,774,000
263,155,573
266,383,702

311,707,564
366,950,109
398,332,043
376,549,697
487,881,038
634,570,734

391,931,051
413,744,557
456,199,325
461,434,851
553,851,214

554,175,242
626,836,808
539,690,121
638,612,692
687,509,115

680,204,932

783,457,471

815,300,510

924,247,116

910,786,289

1,189,704,830

1,404.972,108

1,614,219,764

29.1

1857-1861. . .

38.2

1862-1866

43.0

1867-1871

42.3

1872-1876

46.5

1877-1881

50.4

1882-1886

46.8

1887-1891

43.3

1892-1896

51.6

1897-1901

50.2

1902-1906

46.3

1907-1911

45.2

1901

47 6

1902

45.8

1903

44.5

1904

46.6

1905

49.6

1906

45.2

1907

43.7

1908

45.2

1909

48.7

1910

44 2

1911

44.5

1912

47.4

1913

45.0

1914

48 8

1915

54.4

1916

54.1

1917

52.8

1918 (preliminary)

54.8

1 Not including forest products.

The Transition in Agriculture in Denmark. — How it was Met. — (Without
the use of a protective tariff.) The following extract is from a pamphlet,
"A Short Outline of Danish Agriculture through the Last Generation," pre-
sented to British journalists on their visit to Denmark in August 1919, by the
Union of Danish Agriculture. Copenhagen, 1919.

424 FOREIGN COMPETITION

"The time from about 1880 until the outbreak of war in 1914 has for Danish agriculture
been a period of extraordinary and prosperous development.

"Before 1880 Danish agriculture was mainly producer and seller of corn; but when
America's surplus production of corn in the eighties reached Europe the corn prices fell
rapidly and the corn producing agriculture had to work under very difficult conditions,
particularly in Denmark where the chief part of the soil, especially in Jutland but also in

Farts of the islands, is of so poor a quality that it only yields comparatively small crops,
nstead of entering into a — from the outset hopeless — competition against the transatlantic
import of corn a happy fate led Danish agriculture in the quite opposite direction, and taking
advantage first of the supplies of cheap corn and later of oil cakes as raw material a produc-
tion of refined produces (products) of domestic animals was taken up — 'especially butter
and bacon — which gradually became the specialty of Danish agriculture. This production
spelt a thorough revolution of Danish agricultural economy and opened possibilities as
well for rural enterprises to which the soil was better adapted than to corn growing as for
the extensive outparceling of land to the small freeholds that have become a social blessing
to the whole country . . .

" When the farmers after 1880 at a continually increasing rate took up the production
of butter, bacon, and eggs, as the chief articles of export, this production was from the very
start adjusted so as to suit British consumers; and the English market was held mainly in
view from the very beginning also at the numerous new-established cooperative factories.
Every effort was made to produce the particular quality of butter and bacon required by the
great English army of consumers, and simultaneously every endeavor was made to ensure
a fixed quality common for the whole country all the year round and to ensure equal ship-
ments both summer and winter. The efforts were duly appreciated in England, and the
Danish agricultural products gained in the course of time a firm and secure footing on the
British Market."

CHAPTER XXVI

FOOD SUPPLY PROBLEM

During the past two hundred years the United States has
supphed foreign countries so lavishly with foodstuffs that the
problem of a future food supply at home was scarcely thought of.
But now that the tide is turning, now that we are importing some
corn and some meat, it is an opportune time to pause and take an
inventory of conditions as they are, and to endeavor to form an
estimate of conditions as they soon will be.

Food Problem. — The food supply problem is a dual problem —
(1) How much food is produced? (Fig. 90.) (2) How many people
are there to eat this food? We know that population is increasing.
We know that the food supply is increasing also. But the present
and the prospective ratio between the increase in population and
the increase in food supply is the vital question that concerns us.
Some of the most important literature of the world has been
devoted to a discussion of one or more aspects of this problem.
T. R. Malthus, the British clergyman, Liebig, the German agri-
cultural chemist, and Sir Wm. Crookes, the British scientist, to
name but three great thinkers, have all made notable contributions
to the world's knowledge of this problem. The most widely
known of these three is doubtless Malthus. Since he treats of the
problem from the population standpoint, his doctrine will first
receive attention.

The Malthusian Theory of Population. — Like a good many
Englishmen of the ''upper classes" of that day, Malthus was inter-
ested in '^ Plans of improving the poor." By battling with his critics
for some 27 years (from 1798 to 1825) he finally worked out his
conclusions that the trouble with the poor was their poverty;
that their poverty was due to low wages; that low wages were due
to the oversupply of labor, namely, to the oversupply of poor
people, and that consequently the one effective remedy was to
produce fewer laborers. This limitation of the supply of labor
would raise wages, leave more food for each laborer, and not
greatly inconvenience the "upper classes." "We must show the
poor," said Malthus, "that the withholding of the supplies of
labor is the only possible way of really raising its price, and that
they themselves being the possessors of this commodity have alone

425

426

FOOD SUPPLY PROBLEM

power to do this." The proposed systems of "equaUty" of his
day Malthus rejected as mere palterings with a serious problem.
The general effect of years of cheapness and abundance of food,
says Malthus, is to dispose a great many persons to marry. Coun-
tries are populous according to the quantity of human food which

Fig. 90. — Fresh and cured meats in a cold storage warehouse in Chicago.

they produce or can acquire; and happy according to the liberality
with which food is divided, the quantity which a day's labor will
produce. Corn countries are more populous than pasture countries,
and rice countries more populous than corn countries. This
happiness depends on the proportion which the population and
the food bear to each other.

But population, says Malthus, tends to increase beyond the
means of subsistence. Population is limited by the food supply.

THE MALTHtJSIAN THEORY OF POPULATION 427

Population when unchecked goes on doubhng itself every twenty-
five years — that is, it increases in a geometrical ratio. The food
supply, under circumstances the most favorable to human industry
could not possibly be made to increase, says Malthus, faster than
in an arithmetical ratio. That is, population increases as the
numbers 1, 2, 4, 8, 16, and so on, while the food supply increases
as the numbers 1, 2, 3, 4, 5. Thus at the end of 100 years the
population would tend to be more than 3 times the food supply.
The Malthusian theory of population consists of two parts — the
first part, just stated, of the geometric increases of population
when unchecked; the second part, of the ''checks on population."
The ultimate check is want of food. But the immediate checks are
two, namely, (1) preventive — that is, voluntary restraint; (2) posi-
tive— that is, vice and misery in every form which causes a short-
ening of human life. Vice and misery include unwholesome labor,
exposure, poverty, disease, war, plague, famine. Delay of mar-
riage, from prudential considerations, said Malthus, is the most
powerful check in modern Europe in keeping down the population
to the level of subsistence. A lower birth-rate would lead to a
lower death-rate, said Malthus, that is, to fewer and better chil-
dren. The apparent paradox that better wages would lead to
earlier marriage and more children and lower wages, Malthus met
by laying stress on a more general system of education and a higher
standard of living for the workers.

He stated that the population of the United States had doubled
every 25 years during the first 150 years, and he estimated a similar
rate of increase for the future as long as abundance of cheap food
lasted. This table compares his prediction with the facts.

Population of the United States.

Year

The Malthus

estimate in 1798

population

The U. S.
census reports

1790

3,929,214

7,858,428

15,716,856

31.433,712

62.867,424

3.929,214

1815

1840

17,069,453

1865

1890

62,622,250

The actual population of the United States in 1890, by the
federal census, was 62,622,250, or less than one-half of one per
cent under the estimate made by Malthus some ninetj^ years before.
Following the year 1890, however, for the first time the ''geo-
metrical increase" failed to occur. On the basis of doubUng every

428 FOOD SUPPLY PROBLEM

25 years, the population would have reached 125,734,848 in 1915.
The actual population in 1915 was about 100,000,000. Evidently
the Malthusian ''check" on population had begun to operate.

The Malthusian theory of population is undoubtedly correct.
The grimmer aspects of his theory are not so conspicuous to-day,
since famine, pestilence, war, vice and misery do not take such
heavy tolls as they once did in overpopulated countries. The
prudential checks, the "higher standards of living," are lowering
the birth-rate in many countries. The unknown factors now in
the problem of ascertaining the present and prospective ratio of
population to food supply include the following: declining birth-
rate; knowledge of birth control; declining death-rate; new knowl-
edge concerning human and animal nutrition; possibilities of
scientific agriculture. But somewhere in the background is the
ultimate limit of population — the food supply. It would doubtless
be a very simple biological feat to double the population of China
or Japan in 25 years, but, as Malthus says, it is doubtful if the
food produce of China and Japan could be doubled in any
number of years.

Soil Ejdiaustion Question. — The last paragraph referred to
China and Japan — the oldest agricultural districts in the world.
The records show that agriculture has been conducted in the same
fields here for at least four thousand years. The fact that this
soil is not yet exhausted has given a sense of false security to those
who live nearer the virgin soils of a new country. These countries
serve as a warning, if anything, of the dire calamity of soil exhaus-
tion. In Professor F. H. King's very excellent book on ''Farmers
of Forty Centuries" ^ he shows that the farmers of Japan and
China maintain their soil fertility only by applying to the soil
animal and vegetable waste matter of every possible kind. Not
only are canal bottoms dredged for the fertile canal mud, but the
straw from the grain, the leaves from the trees are all used in
making a compost to be applied to the tiny fields. The urine of
animals is saved, yes, even every bit of the human excrement
itself. For this reason the great cities do not have sewer systems,
all the night-soil being removed daily by farmers as food for their
plants. This means for the average Oriental farmer a life of unre-
mitting toil, and little hope of ever rising far above the danger line
of starvation. "If," says Dr. King, "the agricultural lands of the
United States are ever called upon to feed even 1,200 millions of

1 King, F. H. Farmers of Forty Centuries. Madison, Wisconsin, 1911.
Published by Mrs. F. H. King.

NITRATES QUESTION 429

people, a number proportionately less than one-half that being fed in
Japan to-day, very different practices from those we are now follow-
ing will have been adopted." But, he says, first must come the
conviction of the need of plant feeding and better soil management.
Soil Exhaustion and Wheat. — Since wheat is the source of the
"daily bread" of a large portion of civilized mankind, the wheat
supply question affords a concrete problem in soil exhaustion.
The matter can best be brought to the thoughtful reader's atten-
tion by citing a few passages from the Presidential address made
to the British association at Bristol in 1898 by Sir William Crookes,
O.M., F.R.S. The importance of the man and the importance
of the occasion combined to given the address great weight. Quot-
ing passages from the third edition of this address (published in
1917), we find the opinions of Sir William expressed in these words:

"My chief subject is of interest to the whole world — to every race — to
every human being. It is of urgent importance to-day, and it is a hfe-and-
death question, for generations to come. I mean the question of Food supply.
Many of my statements you may think of the alarmist order; certainly they
are depressing, but they are founded on stubborn facts. They show that
England and all civilized nations stand in deadly peril of not having enough
to eat. As mouths multiply, food resources dwindle. Land is a limited quan-
tity, and the land that will grow wheat is absolutely dependent on difficult
and capricious natural phenomena. I am constrained to show that our wheat
producing soil is totally unequal to the strain put upon it . . . Wheat is the
most sustaining food grain of the great Caucasian race, which includes the
peoples of Europe, United States, British America, the white inhabitants of
South Africa, Australasia, parts of South America, and the white population
of the European colonies. Of late years the individual consumption of wheat
has almost universally increased. In Scandinavia it has risen 100 per cent
in twenty-five years; in Austria-Hungary, 80 per cent; in France 70 per cent;
while in Belgium it has increased 50 per cent. Only in Russia and Italy, and
possibly Turkey, has the consumption of wheat declined. In 1871 the bread
eaters of the world numbered 371,000,000. In 1881 the number rose to
416,000,000; in 1891 to 472,000,000, and at the present time (1898) they
number 516,500,000 . . .

"It is now recognized that all crops require what is called a 'dominant'
manure. Some need nitrogen, some potash, others phosphates. Wheat pre-
eminently demands nitrogen, fixed in the form of ammonia or nitric acid ..."

Nitrates Question. — Sir William referred to experiments at
Rothamsted in the use of nitrate of soda in improving the yield of
wheat. A field was planted with wheat 13 consecutive years
without manure, yielding an average of 11.9 bushels to the acre.
For the next 13 years it was seeded with wheat, and dressed with
560 pounds of nitrate of soda per acre, other mineral constituents
also being present. The average yield for these years was 36.4
bushels per acre — an increase of 24.5 bushels. In other words,
each 22.86 pounds of nitrate of soda produced an increase of one
bushel of wheat.

430 FOOD SUPPLY PROBLEM

"Let us remember," said Sir William, ''that the plant creates
nothing; that there is nothing in bread which is not absorbed
from the soil, and unless the abstracted nitrogen is returned to
the soil its fertility must ultimately be exhausted."

What is Soil Fertility?— From 65 to 95 per cent of the soil,
by weight, is made up of finely disintegrated rock. The black
color is given to the soil by the humus, that is, the decayed vege-
table and animal matter — the so-called organic matter — of all
kinds. This matter usually ranges from 2 to 5 per cent. The soil
also contains a certain amount of water and of air. These ele-
ments, taken altogether, constitute the plant food. Much of
this plant food is not fit for use by the plants until it has been
acted on by an additional element in the soil, namely, the soil
bacteria. Presence of plant food and soil bacteria constitute
fertility. The human body, for instance, contains iron; but
the unhappy peison who lacks iron in his tissues cannot supply
the need by swallowing " raw " iron. He will probably eat
foods like celery, lettuce, carrots, etc., containing iron in a
digestible form. Thus also, with wheat for instance, which
cannot feed on raw nitrogen. Assume then, that a soil has
enough water, enough sunshine, enough warm temperatin-e to
insure plant growth, enough lime to prevent acidity, what are
the chief plant foods which are subtracted from the soil by con-
tinuous cropping? The three chief plant foods mined from the
soil by cropping are nitrogen, phosphorus and potash. According
to forty-nine analyses of soils in different parts of America, the
average acre of soil contained the following plant food:

Nitrogen 3,000 pounds

Phosphoric acid 4,000 pounds

Potash 16,000 pounds

Taking the average wheat crop of the United States as 13.8 bushels
per acre (as it was for the period 1899 to 1908), this wheat and this
straw removed each year from the soil about 14.5 pounds of nitro-
gen, 10.6 pounds of phosphoric acid, and 14 pounds of potash
per acre.

Similar calculations may be made for other crops, some taking
more, some less plant food from the soil. Continuous cropping,
without rotation and without putting anything back into the soil,
gives warning of soil depletion in the form of diminished yields.
And yet how little attention the average farmer in the newer parts
of the country gives to this warning. And herein lies one of the
chief evils of the American short-term tenancy system, for the

LIEBIG 431

tenant has no compunction in ''mining" the fertiUty of his land-
lord's land.

Liebig. — The German agricultural chemist, Liebig, called the
attention of the world to the historical and economic significance
of soil exhaustion. Existing methods of farming he called soil-
robbery, and claimed such methods would in time render the soil
completely and forever barren. The phosphorus and potash of
the soil, says Liebig, may be called the "capital" with which the
farmer carried on his agriculture. With every harvest some of
this ''capital" is drawn off; the bigger the harvest, the bigger the
drain on this "capital." A part of this " capital " is fed to his stock
and comes back in manure; a part is sold as grain, live stock, wool,
milk, cheese, wood, etc., in the cities, and only a little of this ever
gets back to the land. The soil, therefore, annually gets a little
poorer by this drain. Finally this "capital" is used up. It is
absolutely necessary to return to the soil as much as was taken
from it.

Liebig painted a gloomy picture by describing the past and
faded agricultural glories of Mesopotamia, Persia, Egypt, Greece,
Italy, Sicily, and Spain. Liebig's various critics, particularly
Conrad, claimed that the agricultural decline of these countries
was due to other causes than soil exhaustion, such as deforestation,
lack of irrigation, bad government, government price fixing, etc.^
Liebig claims that the soil determines the history of nations.
Conrad claims that the form of government — the political and
social regulations — have more influence on agriculture than on
trade and industry; have more influence than climate or the method
of treating the soil; so that agriculture reaches its greatest perfec-
tion not in those countries most favored by nature, but where
the governments are best.

When one considers the millions of tons of commercial fertilizers
now being used every year in our Eastern States and the scores
of pages of State laws to "regulate" this traffic, the reahty of the
problem of soil exhaustion becomes apparent, whatever the merits
of the Liebig-Conrad controversy. For soil fertility is like a bank
account — there is a limit to the amount that may be drawn out.

2 Conrad, J. Liebig's Ansicht von der Bodenerschopfung iind ihre ges-
chichtliche, statistische und nationalokonomische Begriindung Kritish gepriift.
Jena, 1864. Concerning Spain we read, " Das Aergste war aber unbedingt, dass
dem Bauer selbst der Preis bestimmt wiirde, zii welchem er sein Korn verkaufen
durfte, und dies geschah bereits seit der Regierung Alphons X und wurde erst
im vorigen Jahrhundert aufgehoben," p. 81. " Cette loi decourageait le fermier
et ajoutait encore a son apathie naturelle." Weiss II, 96.

432 POOD SUPPLY PROBLEM

Soil Destruction Question. — Far more serious than soil ex-
haustion is soil destruction. The three chief ways in which soil
destruction is brought about are over-cultivation, over-grazing
and deforestation. These lead to erosion by wind and water.
Deforestation has come about in various ways, such as destruc-
tion of the forest by farmers for the purpose of securing farms,
careless lumbering methods, and forest fires. Steep hillsides,
deforested by farmers or logging companies, often have their soil
all swept away by the washing of the rain. When President
Roosevelt launched his campaign for conservation he issued to
Congress — really to the country at large — an illustrated message
showing whole valleys in China, once populous with teeming
cities, now a dreadful desert, due to the complete destruction
of the soil. Torrential rains, at certain seasons, wash down the
hillsides, causing bowlders to fill the valleys. In the United
States there are doubtless millions of acres suffering to a lesser or
greater degree from the damages of deforestation. When the soil
is gone and the bare rock exposed, this land is doubtless rendered
barren forever.

The Soil and the Man on the Soil. — A study of the literature
dealing with soil exhaustion and soil improvement, and an obser-
vation of the methods used by successful farmers lead to the con-
clusion that the fundamental question is not the soil, but the man
on the soil. Some farms show a steady decline in fertility, until
a different person takes charge. Under new management a ''worn-
out" farm becomes again productive. And what is more signifi-
cant, under such management such a farm often proves to be a
case of ''increasiqg returns" on the investment.

For the purposes of illustrating in a concrete manner the sig-
nificance of the human factor in the ''soil-exhaustion" problem,
two examples will be given from "run-down" New York farms
which were rehabilitated by able management. The first example
is that known as the M. J. English farm in Broome County,
southern New York. The second is known as the T. E. Martin
farm, in Monroe County, northwestern New York. The informa-
tion concerning these farms is taken from two bulletins published
by the United States Department of Agriculture.^

3 Burritt, M. C, and Barron, John H., An Example of Successful Farm
Management in Southern New York. Bulletin No. 32, United States Depart-
ment of Agriculture. Burritt, M. C, A Successful New York Farm. Farmers'
Bulletin 454, United States Department of Agriculture.

TWO REHABILITATED FARMS 433

The M. J. English Farm. — The English farm is in the typical
hill region of southern New York, and was in a condition of '^ dimin-
ishing returns" when this owner took possession. Enghsh bought
this 162-acre farm in 1897, for $16,000, one-half in cash, one-half
on mortgage. He had had no previous farm experience. The
farm was in very poor condition. English's program, laid down at
the outset, included (1) improvement of the dairy herd, (2) diversi-
fication, (3) crop rotation to improve the soil. The "scientific
management" of this farm, which resulted finally in building up
the worn-out soil and in increasing the owner's net income, con-
sisted largely in the following steps:

Crop rotation was introduced, plus the application of lime and
commercial' fertilizer, plus some drainage. The rotation included
clover. The soil was put in good tilth by proper cultivation. Part
of this farm — about 72 acres— is hill land, and was worth less than
$20 an acre when bought by English. His systematic treatment of
this piece for five years made it worth at least $100 an acre at an
expense of less than $30 an acre. Speaking of this hill land, the
author of the bulletin says, "An income of $30.76 per acre for
each of the five years is not a bad record for abandoned land."

The T. E. Martin Farm. — ^The Martin farm is another New
York farm which illustrates the relationship between scientific
management and increasing returns in agriculture. This farm is
in the northwestern part of New York State, and was in very poor
condition when bought by young Martin, a fanner. There was a
mortgage, poor fences, poor drainage, and more or less run-out
land. The farm, 57 acres, was bought in 1892 for $5,000. It was
necessary to give a mortgage of $3,000 upon the place at the time.
To make this debt more bm-densome, there followed a period of
low prices from 1892 to 1900. Potatoes sold as low as 8 cents a
bushel, wheat 48 cents a bushel, rye 32 cents a bushel, eggs 10 cents
a dozen, butter 13 cents a pound, and lard 6 cents a pound. These
figures are all taken from the owner's books.

The scientific management of this farm included these steps:

(1) Rotation, so that the fertility of the soil was not only
maintained but increased. Wlieat, clover, and timothy, corn,
potatoes, buckwheat — these crops represented the usual rotation
scheme. In time the farm was cleared of stumps and fences, and
the whole thrown into three large fields where a three-year rotation
was regularly and systematically followed.

(2) Drainage. Much of the soil was sour and ,even boggy.
Over ten miles of drain-tile were laid during 18 years at a cost of

28

434

FOOD SUPPLY PROBLEM

$2500. In other words, the drainage system represented a cost
of $44 an acre.

(3) Fertihzers. Nitrogen, phosphoric acid and potash were
supphed to the land in the form of commercial fertilizer. The
quantity of commercial fertilizer used was reduced each year as
the improvement of the farm fertiUty made its use less necessary.

Some results of the scientific methods used are shown in the
wheat yields, which were as follows:

Year
6-year average

1899

8.1 bu.
18.8
18.0
34.0
40.0
19.0

1900

1901

1902

1903

1904

Yield per
acre

23.0

Year

1905

1906

1907

1908

1909

1910

6-year average. .

Yield per
acre

24.7 bu.

22.7

24.3

18.3

45.0

34.0

28.2

The potato yield showed an even more striking gain for the
later years. The average potato yield for the first 9-year period
was 132 bushels per acre; for the next 9-year period, 282 bushels
per acre.

The Farm Income. — The increase in the farm income is as
impressive as the increase in crop yields. The average annual
receipts, for the first nine years, were $1094.40; the average income
for the next nine years was $2786.33, an increase of 155 per cent.
And while the income increased 155 per cent, the expenses in-
creased but 102 per cent, thus exhibiting a striking case of in-
creasing returns in agriculture. The author of the bulletin states,
on this point :

" The profitableness of this farm may be measured in another way. The
owner began with a debt of $3,000 and several hundred dollars on the equip-
ment. All indebtedness had been paid. In addition, a tile drainage system
costing $2500 has been put into operation on the farm. The farm, shop, and
house equipments have been increased to the maximum of efficiency. These
and other improvements have doubled the value of the farm and have left a
considerable cash balance in the bank. All this must be credited to 18 years
of good farming which may be called fairly successful financial management."

Conclusions. — If one-half the farmers would employ the suc-
cessful methods now used by the few best farmers, there would be
no soil exhaustion problem for many years to come. If all farmers
were to use the skill and science now used by a few farmers, there
would be no soil exhaustion problem for many generations.

REFERENCES 435

QUESTIONS ON THE TEXT

1. Show that the food supply problem is a dual problem.

2. State the Malthusian ideas concerning poverty and poor relief. State the

Malthusian theory of population (increases and checks).

3. What, according to Malthus, is the most powerful check on population

in Europe?

4. Give Malthus's statement concerning United States population.

5. Criticize this statement of Malthus.

6. Is or is not the Malthusian theory of population correct?

7. What are the unknown factors to-day in population increases?

8. How many years have the fields of Japan and China been cultivated?

9. How is soil fertihty maintained in these older regions?

10. State briefly the impending danger of a world wheat shortage, as announced

by Sir William Crookes.

11. What is meant by soil fertility?

12. What are the three chief plant foods subtracted from the soil by cropping?

13. The average acre of soil in America contains how many pounds of each

of these three?

14. An average wheat crop removes how many pounds of each of these three

per acre?

15. State briefly the claims made by Liebig as to the meaning and danger

of soil exhaustion.

16. How did the critics, especially Conrad, answer Liebig?

17. Where, according to Conrad, does agriculture reach its greatest perfection?

18. Summarize the conclusions on the soil exhaustion question.

19. What is meant by the Soil Destruction question? How are soils destroyed?

20. How serious is the question of soil destruction in the United States?

21. Which is the more fundamental problem, the soil or the man on the soil?

Why?

22. Give an account of the Enghsh farm, showing how increasing returns

were secured.

23. Give an account of the Martin farm, showing how the soil fertility prob-

lem was solved. Account for the increasing returns on this farm.

24. Summarize final conclusions as to soil exhaustion problem.

QUESTIONS SUGGESTED BY THE TEXT

1. Give the "Trench System" of restoring soil fertihty as practised at

Allahabad, India.

2. Describe the methods in use in Japan, Korea, and China for maintaining

soil fertihty.

3. Give the principal sources of commercial nitrogen; phosphorus; potash.

4. What is the outlook for the future supply of these three forms of plant food?

5. Cite examples that have come to your notice of "worn-out" land being

restored to fertile condition by scientific farming.

6. Cite examples of fertile lands that have been reduced to "waste lands"

by bad methods of treatment.

REFERENCES

1. Malthus, Rev. T. R.: "An Essay on the Principle of Population,"
7th edition. London, 1872.

2. King, F. H.: "Physics of Agriculture."

3. : "The Soil."

4. : "Farmers of Forty Centuries." Madison, Wisconsin, 1911.

5. Roberts, I. P.: "The Fertility of the Land." 1898.

6. LiPMAN, J. G.: "Bacteriology in Relation to Country Life." 1908.

436 FOOD SUPPLY PROBLEM

7. Warren, G. F.: ''Elements of Agriculture." 13th edition, New York,
1913.

8. Crookes, Sir William: "The Wheat Problem — Based on Remarks
Made in the Presidential Address to the British Association at Bristol in 1898."
Revised. New York, 1900. Same, 3d Edition, with additional chapter. Lon-
don and New York, 1917.

9. LiEBiG, Justus: "Die Organische Chemie in ihrer Anwendung auf
Agrikultur, Chemie, und Physiologic," 1840.

10. : "Die Chemische Prozess der Ernahning der Vegetabilien."

1862.

11. : "Die Naturgesetze des Feldbaus, 1862.

12. : "Agricultural Chemistry."

13. Conrad, J. Liebig's: "Ansicht von der Bodenerschopfung und ihre
Geschichtliche. Statistische und Nationalokonomische Begrlindung Kritisch
Gepriift." Jena, 1864.

14. Lyon, Fippin and Buckman: "Soils, Their Properties and Manage-
ment." New York, 1915.

15. Parker: "Field Management and Crop Rotation." St. Paul.

16. Russell and Hastings: "Agricultural Bacteriology." Madison,
1915.

17. Stoddart, C. W.: "Chemistry of Agriculture." Philadelphia, 1915.

18. "Rothamsted Memoirs."

19. Bulletins: 1. "The Maintenance of Soil Fertility." A Quarter Cen-
tury's Work with Manure and Fertilizers. Ohio Agricultural Experiment
Station, Wooster, April, 1919, Bulletin 336. 2. "Commercial Fertilizers."
United States Department of Agriculture Farmers' Bulletin 222. 3. "Lime
and Clover." United States Department of Agriculture, Farmers Bulletin 237.
4, "Leguminous Crops for Green-manuring." United States Department of
Agriculture, Farmers' Bulletin 278. 5. "Renovation of Worn-Out Soils."
United States Department of Agriculture. Farmers' Bulletin 245. 6. "Bulle-
tins and Pamphlets issued (free) by Soil Improvement Committee of the
National Fertilizer Association, Postal Telegraph Bulletin," Chicago, 111.
7, "Bulletins of International Harvester Company of Chicago'] (Agricultural
Extension Department). A large number of bulletins pertaining to soils.

20. Yearbook — Department of Agriculture: 1912 — Cameron, Frank K.
"Possible Source of Potash in the U. S.," 523-537. 1913— Davis, R. O. E.
"Economic Waste from Soil Erosion." 207-220. 1916— Dana, Samuel T.
"Farm, Forests and Erosion." 107-135. 1917— Stine, O. C: "The World's
Supply of Wheat," 461-481.

21. Spain — "Problem of Provisioning and the Policy with Regard to the
Food Supply." International Review of Agricultural Economics, July, 1918,
585-603.

22. Hopkins, Cyril G.: "Effect of Soil Depletion and Soil Enrichment
on Loan Values of Farms." Address delivered at Ninth Annual meeting of
Life Insurance Presidents, New York, Dec. 10, 1915. (Betterment of Life
Insurance Series.)

INDEX

Abattoirs, municipal, 388
Acre considered standard unit, 251
Act, Adams (1906), 323
Hatch (1887), 323
Hepburn, 356
Morrill (1862), 323
Smith-Lever (1914), 323

Federal funds available
under, 336
vocational education of 1917, 324
Adams, A. B., on Perishable Farm

Product Risks, 147
Adams, H. B., History of Cooperation

in the United States, 173
Agricultural advertising to create
demand, 246
colleges, State, Federal appropri-
ations, 325
conditions. Congressional inves-
tigation of (1898), 27
facing the United States, 411
in England and United

States similar, 97
in Great Britain and Ire-
land, 34
of Canada, similar to that
of United States, 13
depression, causes and remedies,

26,27
education, five Federal laws deal-
ing with, 322
employment agencies, private,

104
exports, value of, 5
industry, unorganized, 12, 13
labor, chapter on, 96

seasonal nature of, 98
transportation and distri-
bution problem, 106
unorganized movement, 104
land, area of, in various coun-
tries, 421
of United States, 7
machinery, improved, benefits of,
116
and the trust question,

chapter on, 115
industry more "capitalis-
tic," 115
press and scientific farming, 282
chapter on, 279

Agricultural, press of United States,
list of, 283
pubhcations on, 283
prices and law of supply and
demand, 225
and valorization, chapter on,

225
higher in spring than in fall,

225
pubhcations on, 243
problems and the mail order

house, 156
production, statistics, 23
products, dechne in price of, 41
foreign trade of United

States in, 423
increasing consumption of,
49
progress, per cent of increase,

1870-1910, 6
Publishers' Association, 282
transportation, 188

publications on, 204
unrest, 61

wages, reports on, 113
Agriculture, anarchy of, chapter on,
15
evidenced by overproduc-
tion, 21
and labor, present theory of pro-
tection of, 405
Canadian Council of, 306
capital invested in, 5
capitalistic, 175
census reports (U. S.), 14
chart showing rank as an indus-

tiy,.2. , . r ■■

commissioner of, m Louisiana,

135
cooperation in, 158
Department of. United States,

history of, 315
direct aid to, in Kansas, 313
effects of pests and diseases on, 19
English, economic revolution in,

409, 410
failure to coordinate supply and

demand in field of, 15
Federal Government aid to, 315
flourishes where government is

best, 431

437

438

INDEX

Agriculture, foreign competition in,
chapter on, 409
^neral State aid, 314
m Denmark, transition in, 423
industrial concentration, eco-
nomic differences be-
tween, 10
revolution in, 115
International Institute of

(Rome), 74-76, 113
leaf from England's notebook

on, 409
manufacturing, commerce, chap-
ter on, 1
New England, 401, 402
New York Agricultural Society

discussion on, 53
persons engaged in, proportion

of, shows a decline, 3
place of, in modem industrial

society, 14
primacy of, lost due to economic

evolution of our country, 1
profitable, meaning of, 30
pubhcations on, cited, 112, 113
rank of, among our industries, 1
statistics on, 1-3
transition in, 28
unorganized industry, 15
value of product, 5
Yearbook, Department of, ar-
ticles on farming, 14
Aid, Federal, other forms of, 326

State, success of, 326
Alfalfa in Argentina, 415
Almonds, California, distribution, 147
American Federation of Labor, 305

Society of Equitjr, 311
Americans employed in cotton mills,

401
Anderson, B. M., Grain Speculation,

276
Animal industry, bureau of, 317
Animals, maladies affecting, 1915
report on, by Secretary of Agricul-
ture, 23
Arable land in United States, 14
Argentina grain producer's need, 363
Armour, J. O., The Packers, 224, 389
Atkeson, T. C, History of the Grange,
309

on marketing, 311
AustraUa, a country of large hold-
ings, 38

"Back to the land" movement, chap-
ter on, 31
Bailey, L. H., Testimony, 27

"Banker-Farmer," the, 159
Banks, joint stock land, 182
Bargaining, collective, 153, 231, 241,

308
Barley, cost of producing, per acre,
260
price ranges, 278
Barron, John H., 432
Beans, loaded improperly, 193
Beef exports from the United States,
418
industry, report on, 379
trade, Argentina's, 418
Benjamin, E. W., cited, 155
"Big Busmess," 228
Big farm versus small farm, question

of, 31
"Big Six," 379

extent of control by, 380
Binders, improvements in, 120

quahty and price of, 120
Biological survey, bureau of, 320
Black, J. D., cited, 77
Bonanza farming, 43-45
Bonds, United States, fluctuations in,

278
Books (see Literature)
Brand, C. J., of the Bureau of Mar-
kets, 21
Bucket shop fight, 352, 354, 355
Budge, Wm., quoted, 44
Bureau of Corporations, report on

lumber industry, 10, 11
Burritt, M. C, on county fann
bureau, 332, 335
on successful farming, 432
Butter, cold storage record, 216
statistics on, 144
Wisconsin, marketing of, 145

Caffey, F. G., History of U. S. Depart-
ment of Agriculture, 327

California Fruit Growers' Exchange,
report of, 41-43

Camp, Wm. R., and the Credit
Union, 171

Canada, agricultural condition sim-
ilar to that of United States, 13

Canadian Council of Agriculture,
305-307
achievements of, 306
aims of, 306

Cance, A. C, Immigrant Rural Com-
munities, 109, 110, 112

Capitahsm and agriculture, 55

Capitalistic agriculture, 175

Carver, T. H., cited, 76

Cash renters, 64

INDEX

439

Cattle, cost of producing, does not
determine selling price, 244
herd of, in Argentina, 416
Chantland, W. T., Valorization of

Coffee, 244
Cheese, a staple food, 50
Chemistry, bureau of, 318
China and Japan oldest agricultural

districts, 428
Chinese and Japanese farmers, 254
City, drift to the, 106
labor for farms, 109
population, increase in, 108
versus country, 91
Class organization, 285
Classes, two social, 264
Closer settlement legislation of Aus-

traha, 39
Cold storage, chapter on, 214

effect of, on prices, 221
extent and use of, 217
government regulation of,

222
in Russia, 218, 219
influence of, on health, 219
inventions, 214
pork, fresh, in, 220
pubhcations on, 224
record of butter, 216

of eggs, 215
suggested improvements, 223
warehouses, 217

direct refrigeration sys-
tem of, 220
pubhc, view in, 218
Collective bargaining, 153, 308
as price fixing, 241
by almond growers, 232
by walnut growers, 231
Commerce, history of, 14
Competition question, the, 49
Competitors, our (Argentina), 413-

419
Conclusions on farming, 92
Conference, Winnipeg retailers', 150
Conrad, 431

Consumer's dollar, division of, 144
Consumption -overproduction prob-
lem, 42
Control, concentration of, in banking,
railroading and manufac-
turing, 12
in lumber industry, 10
in other industries, 11
Cooperation among farmers, pubh-
cations on, 173
and production, 169
economic significance of, 171

Cooperation, effect of, 36
essentials in, 172
farmers', largest example among,

165-168
in agriculture, chapter on, 158
in broader sense, 158
in buying, 170
in Kentucky, example of, 162,

163
in narrow sense, 160
in selling, 169
interest of granges in, 298
of railroads with farmers, 159
purpose of, 161
some causes of failure of, 164
successful, an example of, 162
Cooperative credit, 170

in America, beginning of,
177
elevator, farmers', 164
hail insurance, 208-210
insurance, 170

movement, success of, 168, 169
packing houses, 387
Com, extreme prices of, 247

cost of producing, per acre, 259
method of shelling in Argentina,
416
Cornering the markets, 263
Comers in grain, 348
Corporation farming, 66, 78
Corporations, Garfield report on, 379
Cost accounting, other, 252
problems in, 255-257
signs of progress, 255
of production and farm account-
ing, books on, 258, 259
chapter on, 250
importance of, 257
of corn, barley, oats and
wheat, 259-261
Costs of crop production, 251
Cotton and wheat, crop fluctuations,
16
dealings in, risky for producer,
middleman, speculator or spin-
ner, 19
exchanges, report of Bureau of

Corporations on, 19
production and farm value of, 8
Coulter, J. L., on farm laborers. 111,
112
Cooperation Among Farm-
ers, 173
Organization Among Farm-
ers, 310 -
Country elevator, storage and hedg-
ing problems, 344

440

INDEX

Country life, 94

newspapers, weekly, 282
real-estate transaction, a typical,
25,26
County agent and the farmer, 331
and marketing, 334
and the middleman, 334
chapter on, 329
definition of, 329
difficulties ahead of, 333
financing of, 332
functions of, 330
movement, 329
agents and club work, 333
Credit, cheap, significance of, 182,
138
cooperative^ 170

beginnmg of in America,
177
farm, chapter on, 174
land, 180

long and short time, 177
new view of, 174
union, the, 178

North Carolina, 178
unions, criticism of, 179

North Carolina, financial
statement of, 187
Crerar, President T. A., of the United

Grain Growers, 168
Crookes, W., Wheat Problems, 339,

435
Crop estimates, bureau of, 321, 324
prices, 20
yields, 20

and prices, relation between,
20
Crops and Uve stock, table of increase
or decrease, 1870-1910, 17
costs of producing, 250
farm, factors of uncertainty, 17

values of five leading, 339
field, annual hours of labor per
acre, 261
cost per acre, 253
grain, items of cost for, 253, 254
miscellaneous factors of produc-
tion cost, 254
Cucumbers, loaded improperly, 193
Cyclopedia of Agriculture, 155

Dairy products, 132
Danish migration to United States,
high per cent of, 52

agricultural transition, 423

cooperation, 36

"peasant proprietors," 36
Debt, 174

Desjardins, Alphonse, founder of
American rural credit, 177

Dillon, John, of New York, 136

Diseases, farm crop, 18

Dockage a weed problem, 360

question in relation to grain, 360

Domeratzky, European Tariff Policies
After the World War, 408

Drayton, C. O., Farmers Must Be
Cooperators, 310

Drift to the city, 106

Dye, F., quoted, 45

Economic reforms, how to secure, 307

significance of cooperation, 171
Economics, elementary, materials for

the study of, 30
Education and health, 91
Eggs, cold storage record of, 215

from farmer to consumer, 145

shipping by parcel post, 141
Elevators, evolution of terminal, 356

evolution of farmers', 357-359
Ely, R. T., cited, 74
Emery on stock and produce ex-
changes, 20

cited, 266, 277
English, M. J., farm, 433
Entomology, bureau of, 320
Equity Union, 311
Eschenburg and Dalton, 359
Essentials in cooperation, 172
Evolution of terminal elevator — rail-
road monopoly, 356, 357
Exchanges, organized, services of
speculation on, 272

speculation on the organized, 270
Express and parcel post compared,
197

business, 195

rural motor, 199

Family-size. farm, 46, 47
Farm accounting, 255

cost of production and, 250

example from England, 261

big, versus small farm, question

of, 31
bonanza, of West and North-
west, 43
bureau, the county, 105
defined, 330
growth of the, 332
movement, books on, 335
Bureaus, American Federation of,

289
contributions, 90
.credit, chapter on, 174

INDEX

441

Farm crop insects and diseases, 18
crops, factors of uncertainty, 17
employment, irregular, 105
expenses, 88
family size, 46, 47
house conveniences, 91
household labor on the decline,

103
income, 89, 434
Journal, 281

labor exchange, national, 105
Federal government and,

105
immigration and, 109
problems in England, 96
question, several aspects of,

96
supply of, 194
wage in England, 96
wages of, on the increase
100
laborer, life of, 110
land, future ownership of, 13
of United States and Canada,

419
rise in selling price of, 27
large, views of, 48
lease tenure, 62

machinery, American, in Siberia,
124
annual depreciation on, 252
labor-saving, 108
purchase of, 117
management, office of, 321
mortgages increasing, 69
organizations, federation of, 287
owners, age of, 64
paper, best type of, 279
point of view of, 279
the speciahzed, 282
two pohcies in editing, 284
worst type of, 280
papers, other types of, 281
prices, trend of, chart, 226
problem in the United States,

40
produce, perishable, shipping by

parcel post, 142
product receipts, 88
products, cost of production and
price, 233
marketing of, 145
standardizing and advertis-
ing of, 43
property, value of, for years

1850-1910, 3
tenancy, declaration on, 81
in Canada, per cent, 81

Farm tenancy, in Missouri, 65
in Wisconsin, 65
Wallace, H., on, 81
wages, statistics, 101
work, by women, decline since
1871, 101
in Germany, 38
of foreign birth, 102
Farms, average size of in United
States, 51
operated by tenants increase
faster than those operated by
owners, 4
per cent mortgaged, 79

operated by tenants, 80
size of, 67
small, in France, 33
two rehabilitated, 433
Farmer, American, other occupations
of, 107
and railroad, the, 191
and the terminal market, 347
direct State aid for, 312
economic condition of, chapter

on, 83
German, living conditions of, 37

customs of, 36
in business, 311
other attractions for, 92
prosperous Icelandic, in North

Dakota, 93
State aid for the, 312
Farmers and the I. W. W., 100
better business for, 7
Chinese and Japanese, 254, 428
cooperation among, largest ex-
ample of, 165-168
number and supply of, 104
of Alabama, 44
of forty centuries, 428
pohtical organizations of, 301

economic background
of, 302
shifting of, 81
Farmers' capital, 88

cooperative insurance companies,
205
trucks, 200
economic income too low, 92
Educational and Cooperative

Union of America, 311
elevator movement, immediate
effect of, 359
weakness of, 359
elevators copy "regulars," 359

in Canada, 359
grain elevators in United States,
301

442

INDEX

Farmers' income, 83, 95

compared with city incomes,

90
Federal government report

on, 83, 84
other estimates, 87
"survey" method of deter-
mining, 87
institutes, 315
labor income calculated, 89
living, what the farm contributes

to, 95
middleman, the, 152
mutual insurance companies,

205
national headquarters, 287-289

organizations, 311
organizations, benefits from, 285
chapter on, 285
difficulty of classifying, 286
local, 300
national, 290
pohtical background of,

303
problems to face, 307
publications on, 309, 310
parties in the past, 303
Farming, bonanza, 43-45
effects of, 44
conclusions on, 92
conditions in foreign countries,

pubHcations on, 52
by corporations, 66
does it pay? 83
example of successful, 84-86
financial profitableness of, 332
future of, 52
in China and Japan, 428
industry in New Zealand, 40
methods, successful, 434
practices, best, popularized, 86
publications on, 52
report of Roosevelt Country

Life Commission on, 7-10
versus land speculation, chapter
on, 24
Federal Farm Loan Act, 180-182
Land Banks, the twelve, 186
Money Trust Investigation, 11
Reserve System and agriculture,

183
Trade Commission, report on
packing industry, 382
Fertihzer, saving of, in Germany, 38
Field crops in Canada, 419
Filley, H. C, cited, 154
Fire patrol, 319

Flour and wheat prices from farmer

to consumer, 143
Food problem, 425

supply problem, chapter on, 425

publications on, 435
supplies, government control of
in Germany during World
War, 244-246
Foods, seasonal production of, 214
Foodstuffs and manufactures, value

of, 413
Foreign competition in agriculture,
chapter on, 409
pubHcations on, 422, 423
trade, its changes, its signifi-
cance, 411
Forest service, 318

Forestry and landscape gardening, 194
Forgan, David R., Grain Financing,

363
France cited regarding small farms, 33
Frear, D. W., on marketing small

fruits and vegetables, 147
Free trade in land, 69
principle, 404
Fruits, citrus, statistics, 146

Gallatin's memorial, 403
Galpin, C. J., cited, 74
GambHng, 275

Webster's definition of, 266
Gaston, H., Nonpartisan League, 310
George, Henry, on Progress and Pov-
erty, 30
German farmer, customs of, 36
Gleaners, 311

Goldenweiser, E. A., The Farmer's In-
come, 95
Government regulation of cold stor-
age, 222
Grain, cash, 348

crops, distribution of cost per
acre, 253-254
statistics of movement of, 23
elevator manager, 343

problems, 342
elevators, Buenos Aires, 414
exchange, Chicago Board of
Trade, 346
evolution of the organized,
347
exchanges, trading on, 349, 350
futures, 348
market, manipulation of the, 350

a wide, 350
markets in Argentina, 337
mixing in elevators, 345
price fluctuations of, 271

INDEX

443

Grain, "to arrive," 348
trade and Russia, 420
chapter on, 337
competition in, 340
competitive nature of, 339
international nature of, 337
past organization of the, 347
present organization of, 341
pubhcations on, 361-363
relation of future trading to
financing, 363
Grains, cost of growing, 252
Grange, the, 291

achievements of, 299
as an institution, 292
decUne of the, 295
economic program of, 296
first local, 292
history of. 309

interest of, in cooperation, 298
low prices and the, 299
purpose of, 293
rapid growth of, 294
renewed growth of, 296
States, 291
Gray, C. E., Keeping of Butter, 224
Greeley, M. F., quoted, 45, 115
Green bug, 18

Haggard, H. Rider, on the poor and

the land, 74
Hall, Carohne A., and the Grange, 292
Hanulton's errors, 404
Hammond, Harry, quoted, 44
Harvester Company, case against, 125
case for the, 122-125
case for or against, 122
trust, 118

earnings, 122
exclusive contract, 119
history of, 118
investment and capitaUza-

tion, 119
prices, at home and abroad,

121
repairs procured from, 121
Hasbach, W., English Agricultural

Laborer, 113
Health, influence of cold storage

on, 219
Hedrick, W. O., cited, 156
Herrick, M. T., How to Finance the

Farmer, 179, 185
Herron, L. H., The Farmers' Union,

310
Hibbard, B. H., cited, 76, 156
Hill, James J., For Pure-bred Sires, 159
Hoagland, H. E., quoted, 109
Hoard, W. D., editor, 281

Hockaday, R. W., on marketing, 21

Holland cited on peasant proprietor-
ship, 35

Home bureaus, 333

economics, office of, 321

Hopkins, C. G., Soil Depletion and
Soil Enrichment, 436

Howard, J. R. , President of American
Farm Bureau Federation, 290

Hudson Bay Company as speculators,
277

Huebner, Grover, cited, 154

Hughes, H. J., on the hired man, 105
on editorial poficy, 284

Hunt, Dean T. F., quoted, 175

Hyder, J., Land NationaUzation, 407

Immigration and farm labor, 109
Income from unpaid labor, 89
Increment, measured, 30
Independent Harvester Company —

126-128
Industrial evolution of the United

States, 14
Insects, farm crop pests, 18
Insurance, chapter on, 205
cooperative, 170
farmers' mutual hail, statistics,

212
hail, present tendency, 211
mutual hail, 208-210
North Dakota State hail, 207, 208
pubhcations on, 213
Saskatchewan State hail, 206
International Institute of Agricul-
ture, Rome, publications on agri-
cultural economics, 52, 74, 113,
173, 185, 204, 328
Interurban electric lines, 197
Itahan, cotton tenant: in Mississippi

delta, 110
I. W. W., 61, 100

Jackson, T. C, on farm accounting,
261

Jam production in England, 50

Jefferson's views, 31

Jenkins, W. C, Truth About Cold
Storage, 224

Jessness and Kerr, Cooperative Pur-
chasing and Marketing, 173

Johnson, O. R., on big or fittle
farms, 52

Kelley, O. H., founds of the Grange,

292
Kennedy, Joseph, quoted, 93
King, F. H., Physics of Agriculture,

435

444

INDEX

Kirkland, J., Wheat, Flour and Bread

War Prices, 363
Knapp, Bradford, quoted, 86

Seaman A., 329
Knights of Labor, 304

Labor population, floating, crime a

by-product of, 99
Laing, on Continen,tal peasant pro-
prietor, 32
on Norway farmers, 32
Lake transportation, 197
Land certification, 71

commercial value versus market
value, 28
Land credit, 180
free trade in, 69
overcapitalized, 24

bad thing for farmers, 29
ownership, tenure, and taxation

of, 30
question, report of Commission on
Industrial Relations on, 59, 60
tenure, chapter on, 53

interpretation of tendencies
of, 54
title system of recording, 71
trading problem, 72
value, relation of tenancy to, 82
Leadership for the farmer, 308
Legal and economic questions on

monopolies, 377, 378
Leiserson, W. M., on farm labor, 112
Liebig, J., 431

on agriculture and organic chem-
istry, 435
on wheat conditions, 339
Liebig-Conrad controversy, 431
Life insurance companies, 183
Limitation of output, 308
Lipman, J. G., Bacteriology in Rela-
tion to Country Life, 435
Literature on agricultural labor,
112-114
machinery and the trust

question, 129
press, 283
prices, 243
agriculture, 23, 52

issued by United States
Department of Agricul-
ture, 328
manufacturing, commerce,
14
cooperation among farmers, 173
cost of production and farm

accounting, 258
economic condition of the farmer,
95

Literature, farm bureau movement,
335
farmers' organizations, 309, 310
farming. 52

and land speculation, 30
food supply, 435, 436
foreign agricultural competition,

422,423
grain exchanges, 361-363
insurance, 213
land tenure, 74-78
live-stock and meat industry,

389, 390
marketing and the middleman,
154-156
farm products, 154-156
milk marketing, 155, 156
rural credit, 185
speculation, 276, 277
State aid, 327, 328
taxation problems, 407, 408
transportation, 204
Liverance, W. B., quoted, 157
Livermore, K. C, of Cornell, 88
Live stock and crops, table of increase
or decrease, 1870-1910, 17
and meat industry, 365

pubUcations o n ,
389, 390
competition, foreign, 371
countries, 367
decrease in number of, 367
factors making against an in-
crease of, 369
for an increase of, 368
fluctuation, 16
foreign competition in, 370
future of, 367
in Australia, 371
in South Africa, 371
in South America, 371
industry, westward movement of,

366
production, 365
shifts in, 366
situation, 365

supplies and prices, stabiHzing,
390-392
Lloyd, O. G., on farm ownership, 64
Long and short time credit, 177
Losses in soil fertility, 254
Lowell, Hoit & Company, Grain^ 359
Lowell, S. J., of State and National

Grange, 293

Lubin, David, of the International

Institute of Agriculture, Rome, 204

Lumber industry. Report of the

Bureau of Corporations on, 10, 11

Luxuries, definition of, 41

INDEX

445

Machinery, labor-saving, 108
Macklin, T. H., cited, 156
Magill, R., on wheat prices, 232
Mail order house and agricultural

problems, 156
Maladies of farm animals, 23
Malthus, T. R., Principle of Popula-
tion, 435
Market, cornering the, 273

director. State, functions of a, 134
Marketing activities. State, 131

and the middleman, chapter

on, 130
costs, 152

money, 151
direct, 152
in Idaho, 132
law of California, 132
oflScials, national association of,

140
parcel post, 140
peach crop, 21
problems in Texas, 139
of Washington, 139
pubhcations on, 154-156
scene at Russian fair, 420
seasonal, 21

State field agents in, 139
work in New York, 136
in North Carolina, 137
Markets, Bureau of, 140, 321
in Ohio, 138
in Pennsylvania, 138
cornering the, 263
department of, in Michigan, 136
Martin, T. E., Farm, 433
Mathis, Mrs. G. H., Farmer Leader,

158
McKenzie, M., on transportation of
Uve stock, 189
Live-stock Trade in South Am-
erica, 371
McKenzie, R., of Winnipeg, 305
McNiel, John, Farm, 67
Mead, El wood, cited, 77, 78
Meat a dear food, 366
inspection. 317
margins oi profit, 143
packers, largest, 373
packing industry, 372
plants, 371
Meats fresh and cured, 426
Michell,H.,The Grange in Canada,310
Middleman, cost of, 142
elimination of, 153, 157
marketing and the, chapter on,

130
problem, probable solution of, 149
services of the, 148

Middleman, speculative, function per-
formed by, 269
Milk, ideal food, 50

marketing, books on, 155, 156
Mill, John Stuart, on peasant pro-
prietors, 34
Misused terms — hoarding, 262
Mitchell, W. C, History of Prices

During the War, 244
Morgan, J. P. & Co., Bankers, 12
Morman, J. B., Principles of Rural

Credit, 185
Mortgage and tenancy problems, 65
Mortgages, farm, increasing, 69
Mowers, improvements in, 120
Mowing machines, American, in

Italy, 124
Myrick, H., How to Cooperate, 155

National Agricultural Organization
Society, 171
Farmers League, 303
Nitrates question, 429
Nonpartisan League, 302, 303
Norway has best social and economic

conditions, 32
Nourse, E. G., cited, 14, 155
Nystrom on economics of retailing,

149, 150, 155

Oats, cost of producing, per acre, 260

extreme prices of, 248, 249
Ocean transportation, 201

and the World War, 202
Organization, strong, example of, 286
Osman on Hepburn Act, 356
Output, limitation of, 308
Overcapitahzed land, 24

a bad thing for farmers, 29
Owner farming, view of, 57

Packer, first plant of a large, 373
large, first plant of, 373

plant of, sixty years later,
374
Packers and price question, 381

Big Five, dissolution of the, 387
combination among, 384
Federal Trade Commission re-
port on (1918), 382
magnitude of business, 382
potential competition, 380
profits of, 381

real evil of, and the remedy, 385
reply of, to Federal Trade Com-
mission Report, 385
responsible government for the,

386
side lines of, 377

446

INDEX

Packers, transportation and distribu-
tion by, 376
Packing house, by-products, utiliza-
tion of, 376
Government inspection in,

378
situation, evils of, remedies
for, 384
houses, cooperative, 387

inspection and grading in,
377
Pahner, D. B., on educating the con-
sumer, 149
Parcel post and express compared, 196
marketing, 140
shipping eggs by, 141

perishable farm produce
by, 142
Parker, Field Management and Crop

Rotation, 436
Peaches, Cahfornia, collective mar-
keting of, 146
Pearson, R. A., Agricultural Organiza-
tions in Europe, 310
Peasant proprietor in Holland, 35
' proprietors, 34

in Denmark, 36
proprietorship in Norway cited,
32
on the Continent, 32
Peffer, Senator, Report of, on Agri-

cultm-al Depression, 26, 27
Perishabihty, risks from, 147
Pests and diseases, effects on agri-
culture, 19
"Phantom grain" question, 351
Pickell, J. R., Agricultural Argentina,

363, 423
Pierson, C. W., Rise and Fall of the

Grange movement, 310
Pit scalpers, 351
Plant industry, bureau of, 318
Plunkett, Sir Horace, on rural life

Sroblems, 7
tical reforms, how to secure, 307
Poole, R. R., quoted, 44
Pope, J. E., cited, 226
Population, city, increase over coun-
try, 51
Malthusian theory of, 425
Popuhst Party, 304
Pork, fresh, in cold storage, 220
Porter, W. R., on farm labor, 106
Potato marketing, 132

production, fluctuations, 16
Potatoes, government inspection of,
323
improperly packed, 194
marketing of, discussions on, 145

Powell, G. H., on citrus fruit selling,
42
consumer's dollar, 146
Powers, LeGrand, on decline in price
of agricultural products, 41,
quoted, 45, 106, 108, 408
Pratt, E. A., on small holders, 28, 36, 74
Press, Agricultural, and Scientific

Faiming, 282
Price and value, 239
equilibrium, 229
fau-, 229

conclusions on, 240
fixing, 229

collective bargaining of, 241
in practice, 230
fluctuation, risks in, 147
fluctuations, 24&-249, 271
theory, 227
Price, T., on the good and wise cor-
poration, 67
Prices, effect of cold storage on, 221
extreme, of wheat, corn and

oats, 246-249
just, 228, 229
Problem of land trading, as Vermont

sees it, 72
Production, cost of, importance of,

257
Prom, Brynjolf, quoted, 44
Prosperity, farmer's, variable factors

in, 20
Protection, Hamilton on, 399, 400
of agriculture, theory of, 405
Protective pohcy in 1816, 399
tariff, 397
and conditions in 1789, 398
policy, introductory state-
ment, 397, 398
theory and practice, 398
workings in New England,
398
Publications (see Literature)
Public roads, bureau of, 321

Quaintance, H. W., Influence of Farm
Machinery on Production and
Labor, 108, 129

Question, soil exhaustion, 428

Railroad forestry management, 194

marketing service, 193
Railroads, 188

and agricultural education, 192

and the farmer, 191

discontent against, 189-191

evils of, 188

securing new settlers, 192
Railway finance, 191

INDEX

447

Raisins, California, distribution, 147
Real estate exchanges, 73
Reaper, first successful (1831), 116
model of 1847, 121
model of 1858, 121
modern self-binder and, 122
References (see Literature)
Refrigeration in Moscow, 219
Refsell, V. N., Farmers' Elevator

Movement, 363
Rent contract of tenants, 61
Report of Bureau of Corporations on
Lumber Industry, 14
Industrial Commission, 14
Resources, natural, exploitation and

conservation of, 7
Retailing, Nystromoneconomicsof, 150

system, an ideal, 150
Rhodes, J. F., Taxation Problems, 408
Road construction, 322
Roads, good, 198

valuable to farmer, 201
Roberts, LP., FertiHty of Land, 435
Rogers, T., Agricultural Prices in

England, 244
Roosevelt Country Life Commission,

Report on Farming, 7-10
Roosevelt, President, Reforms in

Grain Trade, 356
Rubinow, I. M., Russian Wheat and

Flour, 422
Rural credit in Europe, studied by
United States, 176
credits, pubUcations on, 185, 186
districts of England, low wages

in, 97
motor express, 199
population, decrease of, for
decade 1900-1910, 114
of Middle West, loss in,
shown, 107
RusseU and Hastings, Agricultural
Bacteriology, 436

Sager, Hiram, American Grain Mer-
chant, 357, 358

Saskatchewan Cooperative Elevator
Company, 168

Scholtz, W. C, of Idaho, 132

Seasonal production of foods, 214

Sedgwick, Prof. Wm. T., quoted on
cold storage, 221

Service, selUng is a, 149

Shade, Charles, quoted, 84

Share croppers, 64
renters, 64

Silk culture, 312

Simons, A. M., on capitahsm and
agriculture, 55

Single tax, 393

apphed to city and farm

land, 396, 397
argument for, 394-396
definition of, 393
incidence of, 393
question at issue, 396
Size of farms, 67

Slaughtering, division of labor of, 375
Small holdings, an objection to, 36
Smith, C. L., Dakota Farmer, 25
Social or individual viewpoint con-
sidered, 45
Soil and the man, 432

destruction question, 432
exhaustion and wheat, 429

cause of decline of nations,
431
fertility, 430

losses in, 254
Soils, bureau of, 320
Speculation and price fluctuations,
352
and pubhc interest, 273-275
chapter on, 262
definitions of, 265
its evils, 273
its services, 268
pubhcations on, 276, 277
two kinds of, 267
Speculator, food, three functions of,
270
second function of the, 269
Speculators and "the Charter of New

England— 1620," 277
Spillman, W. J., quoted, 46, 56
Stabilizing prices, 392
Standardizing and advertising of

products, 43
State aid for the farmer, chapter
on, 312
in sugar beet culture, 312
pubhcations on, 327, 328
department of agriculture and

the police power, 315
market director, functions of, 134
State marketing activities, 131
States relation service, 320
Stelzle, Charles, quoted, 53
Stockyard, Chicago (1861), 372

fifty years later, 372
Strawberry marketing, 162

Taft, President, on rural credit, 176
Tarbell, I. M., Tariff in Our Times, 407
Tariff, Gallatin's memorial on, 403
labor and capital, 403
Le Grand Powers on, 408
protective, and profits, 404

448

INDEX

Tariff, protective, effect on farmer's
crop prices, 406
Walker on, 403
Tax, single, 393

Taxation problems, chapter on, 393
Daniel Webster on, 408
publications on, 407, 408
Taylor, H. C. cited, 156

on price-fixing, 231
Telephone, farmers' cooperative, 170
Tenancy and mortgage problems, 55
farm. Federal government report
on, 62, 63
pubhcations on, 76-78
farmmg on increase in United

States, 55
relation of, to land value, 82
statistics, 55
Tenant class a menace, discussion on,
60,61
farmer, rent contracts of, 61
farming in the cotton belt, 64
report on evils of, 57-59
view of, 56
Tendency of large farmers to absorb

small farmer, 67
Terminal warehouses, 357
Thomson, E. H., Farm Bookkeeping,

259
Threshing outfit in Argentina, 417
Tobacco consumption, 50

distribution statistics, 146
production, fluctuations, 16
Tornado, view of, 316
Torrens system of recording titles, 71
Tousley, EJ. M., on cooperation, 127
Trade acceptance, 184
Trading, cash and future, 263

cost of future, 352
Transportation, chapter on, 188
farmers' cooperative truck, 200
Great Lake, 197
in Russia, by wagon, 199
motor truck, 200
ocean, 201
pubhcations on, 204
river and canal, 197
Tucker, G. M., American Agricultural

Periodicals, 283
United Grain Growers, 165-168
United States a beef exporter, 371

studies rural credit in

Europe, 176
"Weekly News Letter to
Crop Correspondents," 30

Valgren, V. N., Farmers' Mutual Fire

Insurance Company, 213
Valorization, agricultural prices and,

225

Valorization, effects of, 236

in Brazil, 233-239
Value and price, 239

relation of, to cost of production
and demand, 240
Vogt, P. L., on farmer's income, 87
von Engelken, F. T. H., quoted, 36
von Tungeln, cited, 95
Vrooman, Carl, on farm problems, 21

Walker's Report, on the tariff, 403
Wallace, Henry, on farm tenancy, 81

editor, 281
Warren, G. F., " Survey," 88

on price-fixing, 229, 243, 244
Washington, George, A Successful

Farmer, 94
Weather Bureau, 317
Webster, Daniel, on the tariff, 402,

408
Weinstock, Harris, of Cahfomia, 133
Weld, L.D.H., live-stock and market-
ing questions, 145, 154, 389
Wheat conditions, future, forcasts on,
339
and cotton, crop fluctuations, 16
and flour prices from farmer^to

consumer, 143
average annual prices, 412
crop-producer to consumer, 143
extreme prices of, 246, 247
harvest, where and when every

month, 338
pit, views of, 353
price of, 232
soil exhaustion and, 429
spring, cost of producing, per

acre, 261
winter, cost of producing, per

acre, 260
yields, results of scientific
methods, 434
Whittaker, Sir Thomas, on owner-
ship, tenure and taxation of land,
30, 407
Wilcox, E. v.. Department of Agri-
culture Plan for Handhng Farm
Labor Problem, 112
Wiley, H. W., on tobacco statistics, 50
Wilson, Henry D., of Louisiana, 135
Wilson, President, on self-help, 285
Wilson- Wallace Report, 34
Woman's land army, 103
Women and war work, 103
Wright, C. D., Industrial Evolution of
the United States, 14

Young, A., on English farming, 94
Travels in France, 33

UNIVERsixir OE

r* A-r *». .

RETURN TO the circulation desl< of any
University of California Library
^ or to the

" , NORTHERN REGIONAL LIBRARY FACILITY
BIdg. 400, Richmond Field Station
University of California
Richmond, CA 94804-4698

ALL BOOKS MAY BE RECALLED AFTER 7 DAYS

• 2-month loans may be renewed by calling
(510)642-6753

• 1 -year loans may be recharged by bringing
books to NRLF

• Renewals and recharges may be made 4
days prior to due date.

1

DUE AS STAMPED BELOW

1

DEC 2 2 1999

^

If If n 9 7nn7 1

JUL Vl ^ t.uucL

\i

21 in

■

12,000(11/95)

ru 26613

y

UNIVERSITY OF CALIFORNIA LIBRARY