A PRACTICAL NATIONAL MARKETED 
 
 ORGANIZATION AND RURAL-CREDITS 
 
 SYSTEM FOR THE UNITED STATES 
 
 ADDENDA TO A HEARING BEFORE 
 
 THE STATE DEPARTMENT 
 
 JUNE 21, 1915 
 
 
 \ 
 
 JAN 1 5 1938 
 
 V? 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 1915
 
 A PRACTICAL NATIONAL MARKETING ORGANIZATION AND 
 RURAL CREDITS SYSTEM FOR THE UNITED STATES. 
 
 ADDENDA TO A HEARING BEFORE THE STATE DEPARTMENT 
 
 JUNE 21, 1915. 
 
 [Presented to the Secretary of State, October 19, 1015, by Mr. David Lubin, 
 delegate of the United States, International Institute of Agriculture, Rome.] 
 
 Mr. David Lubin to the Secretary of State. 
 
 NEW YORK, K Y., October 19, 1915. 
 
 SIR : On June 21, 1915, there was a hearing before the State Depart- 
 ment on "a practical national marketing organization and rural 
 credits system for the United States." 
 
 I inclose herewith an additional statement on each of these sub- 
 jects, and respectfully request that they be received as an addenda to 
 the hearing above indicated. 
 
 I have, etc., DAVID LUBIN, 
 
 Delegate of the United States, 
 International Institute of Agriculture. 
 
 3
 
 I
 
 COOPERATIVE RURAL CREDITS FOR FARMERS 
 BY FARMERS. 
 
 THE LANDSCHAFT SYSTEM. 
 
 In a letter to Senator Fletcher, commenting on the rural-credits 
 situation, Mr. James Anderson, master of Portage Grange, Curtice, 
 Mich., has this to say on the Landschaft bonds : 
 
 It occurs to me that it will be hard to sell these bonds on the open market 
 for the reason that money lenders would hesitate to buy them because they 
 would not draw interest enough (3, 3^, 4 per cent). They could invest their 
 money in other securities that would bring them more profit. 
 
 As a rule, a statement may either be right or it may be wrong, 
 but in this instance Mr. Anderson seems to be partly right and partly 
 wrong at the same time. He is right so far as the money lenders, the 
 savings banks, are concerned. These pay their depositors 3, 3-J, or 4 
 per cent and make their profits by lending these deposits out at 
 higher rates, largely to farmers on mortgages. Such money lenders, 
 savings banks, could not afford to buy bonds at the same interest 
 as they pay their depositors. They could, therefore, have no use for 
 the Landschaft bonds. To this extent Mr. Anderson is right. 
 
 But if Mr. Anderson intends to convey the idea that "it will be 
 hard to sell these bonds on the open market," he is decidedly wrong, 
 as will be seen from the following. If the security behind the pro- 
 posed Landschaft bonds would render them as safe in the United 
 States as they are in Germany, there would then be no more diffi- 
 culty in selling them here on the open market, and on long time, 
 than there is in Germany. 
 
 Let us see if this can be made plain. Usually when "money 
 lenders " are spoken of we are under the impression that they consist 
 of wealthy capitalists or savings banks. But there is another kind 
 of money lender that we now wish to bring to view ; money lenders 
 who are so modest in their financial bearing that we hardly realize 
 that they are money lenders at all. In reality, and in the aggregate, 
 however, they hold a primary position among lenders, for they are 
 the money lenders to the savings banks. 
 
 WHO ARE THE REAL MONEY LENDERS? 
 
 Who, then, are these money lenders? Well, for instance, here is 
 Mr. Johnson, the blacksmith; he has, say, $830; over there is Miss 
 Brown, the servant girl, with $150; yonder is Miss Jones, the school- 
 teacher, she has $85; then comes Mr. Thompson, the carpenter, lie 
 has $210; and then we have Mrs. Smith, the widow, with her $1,500. 
 What are these people to do with their money? Are they to leave 
 it home in the trunk, or hide it in a stocking? That would be dan- 
 gerous, for it might be stolen. Are they to invest it in the open 
 market ? That would be too risky. Thus it follows that the logic of 
 
 5
 
 6 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 the situation drives thorn to the savings banks, and compels the 
 acceptance of the rate of interest tendered them. These people, in 
 depositing, are thus lending their money to (lie savings hanks, and 
 are, therefore, money lenders. Now a few of thc-e depositor, may be 
 insignificant factor.^ in a hank's capital, but supposing these few are 
 multiplied up to several 1 1-.. liquid -'. In that event they arc no longer 
 insignificant; they have become important. 
 
 Now, then, assuming that we have Lamlschaft. bonds of. say. $10, 
 $20, $50. and $100 denominations, at the same rate of interest that 
 the hanks pay; that these bonds are as safe as United States Govern- 
 ment bonds; that we give the people the choice of either lending 
 their money to the banks or investing it in these Landschaft bonds; 
 which of these two, then, would they prefer? Clearly these bonds. 
 Why? Because savings hanks sometimes fail, but a bond equal to a 
 United States Government bond could not fail. 
 
 Now, then, if it can be shown that a long-time Landschaft bond 
 can be made as safe as a United States Government bond, it would 
 show that Mr. Anderson was mistaken when he said "such bonds 
 would not sell in the open market." 
 
 It is now in order to show how long-time Landschaft bonds can be 
 made as safe as United States Government bonds. 
 
 This is indisputably shown by the fact that 50 and 75 year Land- 
 schaft bonds have held their own with Government bonds in Ger- 
 many during the past 152 years, and are holding their own to-day. 
 In fact, they are more than holding their own, for, according to the 
 testimony of Prof. Brodnitz, of the Halle University, these Land- 
 schaft bonds are even now holding their own in Germany in the face 
 of the great war going on. 
 
 Why is this the case ? For several reasons : 
 
 THE BOND, ITS SECURITY. 
 
 First. Because a Landschaft bond, say, for $100 has behind it the 
 security of the entire Landschaft; of property that may be worth 
 $5,000,000 or more. 
 
 Second. The title of the borrower's land must be unquestioned, as 
 unquestioned as a United States land warrant would be. 
 
 Third. The borrower, in signing his mortgage and receiving the 
 bond, has given the Landschaft directory the power of a judgment 
 in the event of a foreclosure. 
 
 Fourth. There are three several appraisements in which the qual- 
 ity of the land, its character and incidence, its mode of cultivation, 
 and its earning power are minutely entered into. 
 
 Fifth. The borrower cedes to the Landschaft directory the right 
 of maintaining the same status of its cultivation throughout the life 
 of the bond. 
 
 Sixth. The loan by the Landschaft is always made upon the aver- 
 age earning power of the land, never upon its speculative value. 
 
 Is it not. therefore, obviously clear that a bond on this basis, of 
 that kind, would be as safe as a Government bond ? 
 
 "* Well," says the objector, " all this may be good enough in Ger- 
 many, but it could never be expected to work here." 
 
 Why not, pray ?
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 7 
 
 " Because the statements from one to six show that it would be 
 unconstitutional; because Farmer Thompson would not care to lump 
 his property with Farmers Johnson, Brown, and Smith or be re- 
 sponsible for them; because it would be contrary to our legal pro- 
 cedure by depriving the individual of his rights in the courts; be- 
 cause it would be tyrannical and undemocratic, consequently opposed 
 to the traditions and mode of procedure of the American people." 
 
 But are these objections conclusive? 
 
 By no means, as will be seen when we take up the statements 
 seriatim. So let us begin with the first and see whether " Farmer 
 Thompson would be responsible for Farmers Johnson, Brown, and 
 Smith." 
 
 How, may we ask, is it in the case 01 a bond of, say, the Pennsyl- 
 vania Kailroad Co. ? Is one bond issued upon the security of one of 
 its sheds, another upon a freight car. and still another upon a fence? 
 Are not its bonds upon all the company's property ? 
 
 We must not forget that under the Landschaft all the loans are 
 made on half the value of the property, and this value is arrived at 
 from the average earning power of the same; there is, therefore, 
 margin enough in each member's equity to cover the responsibility 
 and solvency of each separately. It will thus be seen that farmer 
 Thompson need never be held to cover any deficiency that may occur 
 on the property of farmers Johnson, or Brown, or Smith. 
 
 BONDS WITH " IPS." 
 
 To issue long-time bonds on each piece of property separately 
 would, of course, jeopardize their sales, whether singly or collectively. 
 The injury would be caused by the many "ifs" that such a method 
 would bring forth, all of which would nullify the purpose of the 
 Landschaft. Such issuance would render these bonds speculative in 
 character, therefore of no determinate value or stability in the open 
 market. Such bonds could by no means be classed as on a par with 
 Government bonds. .^ .' 
 
 Now for the second statement, the question of title. We c,an all 
 understand that there is nothing to-day to prevent savings banks in 
 any State from lending money on individual farm mortgages. But 
 how would the matter stand if such savings banks were to issue long- 
 time bonds on these mortgages and, under the prestige of United 
 States law, under the quasi sanction of the Government, sell thou- 
 sands of these bonds of one State to people living in the various 
 States of the Union? What would then happen? Who, for in- 
 stance, would do the adjudicating in any questions of law or equity 
 that such bonds might give rise to? Who would adjudicate between 
 A (the farmer) and B (the savings bank), both in the same State, 
 and C (the bondholder) in any of the other States? Where and 
 how would the adjudicating be done? 
 
 Say a bond were offered on the mortgage of a certain farm in the 
 State of Virginia, would the prospective buyer of the bond, for in- 
 stance, in Oregon or Vermont, have no " ifs " present themselves to 
 his mind's eye in relation to all this, and in relation to the bond's 
 value and stability? There surely would be "ifs," pertinent, ma- 
 terial, and relevant ones, too. And all or any such " ifs " would 
 render the bond of speculative value, hence far removed from classi-
 
 8 PRACTICAL NATIONAL MARKETING ORGANIZATION 1 . 
 
 fication as on a pur with Government bonds. A bond uith an "if" 
 in the open market ran no more be considered as on a par with a 
 Government bond than a broken-down donkey can be classified as the 
 peer of a blooded hoi 
 
 A TAIL TO Til Kill K ITK. 
 
 It may be true that under prestige of Government sanction, under 
 quasi Government patronage, such bonds would at first find numer- 
 ous buyers. But the more numerous, the greater the ultimate griev- 
 ances that would be likely to full on the farmer and on the bond- 
 holder. Such bonds would quite likely be as mischievous as was 
 the paper money issued by State banks before the war. 
 
 No wonder, therefore, that the proposers of such rural-credits 
 measures demand, as a tail to their kite, that the Government buy or 
 guarantee such bonds, all with the end in view of more readily liud- 
 ing the way to open the purses of the general public. But there is no 
 danger. The Government is too rational, too wide awake to be 
 caught in any such trap. 
 
 "But," says the objector, "how about State bonds, municipal 
 bonds, or county road bonds, are they not issued in one State and 
 sold in other States?" 
 
 Yes. But there is a vast difference between the titles and the 
 validity status of this class of security and the thousand and one 
 questions affecting the title and the exigencies which go to make up 
 the value of a farm, or a part of that farm, or that of thousands of 
 other farms. 
 
 "But," continues the objector, "if we were to take up the Land- 
 schaft would that not necessitate either a constitutional amendment 
 or the adoption of a uniform title law in every State in the Union '. " 
 
 Not necessarily. The United States may, under the present Con- 
 stitution, have the right to pass a bill authorizing the Landschaft 
 under national charter, and under regulation and direction of the 
 Secretary of the Treasury. The Secretary of the Treasury could 
 then submit applications for such charters to the Attorney General 
 for his opinion as to whether the applicants could carry out the pro- 
 visions under the law. If there were no legal obstacles in the State 
 laws of the applicants, if the provisions as set forth in the charter 
 could be carried out, the charter would be granted. If such ob- 
 stacles did exist, however, the charter would be refused; refused 
 until the State had altered its laws so as to permit compliance with 
 the national law. Any State desiring the Landschaft would, of 
 course, willingly modify its laws to permit it. 
 
 In substance, since, under the Landschaft, there is to be permission 
 give to cooperative groups of farmers in one State to issue mortgages 
 to themselves and to convert these mortgages into bonds which are 
 to be sold in all the other States, and since these bonds are to be 
 mainly bought by working people and by widows and orphans, and 
 since the United States is asked to pass the laws permitting all this, 
 and since the United States is to act as the umpire between the or- 
 ganization of farmer borrowers on the one hand and the people 
 lenders on the other, it is therefore rendered an imperative neces- 
 sity that the United States be given the legal power to assume the 
 functions of this umpireship.
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 9 
 
 IN TIME OF STRESS. 
 
 And now for the third statement, where the farmer "in signing 
 his mortgage and receiving the bond has given the Landschaft the 
 power of a judgment in the event of a foreclosure." 
 
 This seems harsh and drastic. But is it ? Let us see : In the first 
 place, were the borrower, under the charter, allowed any recourse to 
 law, that recourse would operate prejudicially on the bond. The 
 bond would then no longer be without any "ifs;" on the contrary, it 
 would be subject to many " ifs," and, as has been shown, a bond with 
 an " if " has a speculative value, hence would no longer be as secure 
 as a Government bond, all of which, of course, would neutralize the 
 intent of the Landschaft. 
 
 But let us see whether the case is really as harsh and as drastic 
 as it seems to be. In the case of the Landschaft, the farmer in time 
 of stress would have his fellow members of the Landschaft take up 
 his case and act upon it. While they could not vary from the regu- 
 lations as laid down for them by their charter, they could, of course, 
 personally subscribe to aid such a farmer in his difficulty. This is 
 almost always the way such cases are handled where this system is 
 operated in Germany. It is only in very rare instances that fore- 
 closures occur under a Landschaft, and even then every dollar 
 realized through public sale of the foreclosed property above the 
 amount of the mortgage and unpaid interest must be handed over 
 to the borrower. But the same man, however, in the hands of the 
 money lender, even with all the recourse to law, in time of stress 
 meets, as we see, with but scant courtesy. And, as a rule, there is 
 precious little left for anyone after the property has passed through 
 the storm of the law courts. 
 
 It will thus be seen that instead of the Landschaft being "harsh 
 ynd drastic," it is nothing of the kind. It is rather the present system 
 that is harsh and drastic. 
 
 " ITS " ARE COSTLY LUXURIES. 
 
 Now let us proceed to statements fourth and fifth, wherein the 
 borrower is to give testimony as to facts relating to his land, and 
 where he cedes to the Landschaft, during the life of the mortgage, 
 the right of maintaining the same status of cultivation as that main- 
 tained previous to his becoming a member of that organization. 
 These two statements also seem "harsh and drastic." It will be 
 found upon analysis, however, that they are no more so than was 
 statement three, for unless this power were ceded to the Landschaft 
 there would be left room for many " ifs " in the bond, and, as has 
 been said before, the presence of an " if " would neutralize the intent 
 of the Landschaft. 
 
 In short, as everyone knows, there is no necessity for anyone to 
 canvass around piling up heaps of arguments to show why a $20 
 Treasury note is worth $20. No one needs to be convinced of that 
 fact, not even the illiterate of the immigrant. The same reasoning 
 will apply to a bond. If it is a Government bond there is no necessity 
 to argue the case, for everyone knows its value. The very same thing 
 applies to a land-mortgage bond. Whenever the people would have
 
 10 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 faith that a gi\en long-time mortgage bond is as safe as a Government 
 iMdid. tin-re would be no trouble in disposing of it in the open market 
 as readily as a (Jovernment bond. The Landschaft would thus en- 
 able the Farmer to borrow money in the open market from the public 
 nt the same rate, or for less than the savings banks now pay to their 
 depositors. Or, in other words, the farmers would then get their 
 money on long time at 3, 3-J, or 4 per cent. 
 
 And right here it will be in order to take up the statement of 
 Congressman Moss in his address before the Farmer*' National 
 Congress at Omaha. Congressman Moss is reported as saying: 
 
 I can see no objection to giving the Landschaft n trial by nny Stato in the 
 United States. I will even go so far as to express the wish that this may l>e done 
 * * *. It is perhaps the best form of organization of mortgage cn-dlt under 
 a pure cooperative plan. I do not believe that it can be authorized as ;>. national 
 institution. I do not understand either Mr. Lubin or Mr. Herrick to indorse and 
 recommend it in that sense. 
 
 I would respectfully suggest to Congressman Moss that he go over 
 my statements on the Landschaft (which I believe he will find on 
 file at the State Department and at the Department of Agriculture), 
 and he will see that I not alone did not " indorse and recommend " 
 this system as a "State" institution, but, on the contrary, that I 
 always opposed it as such. I opposed it because it could not be made 
 to work as a State institution. 
 
 UNQUESTIONED SECURITY. 
 
 Why not? Because no sensible buyers of bonds in, say, State X 
 would care to invest in long-time bonds on farm mortgages in, say, 
 State B under the limitations of State B's laws. Such bonds would 
 have a speculative value and the moment they became speculative 
 they would cease to bring a price above par, at par, or even anywhere 
 near par. Long-time bonds on farm-loan mortgages with fixed low 
 rates of interest may only maintain their value in the open market 
 whenever their security is unquestioned. 
 
 But is not farm land unquestioned security ? 
 
 Under present conditions, no, by no means, as may be seen from 
 the following: First of all, there are the thousand and one perplexing 
 and technical questions affecting the titles; there are the intricacies 
 and variations of the State laws in each of the States their inter- 
 pretations, decisions, and their precedents. Then come the questions 
 of local appraisement and questions of the standing of the appraisers, 
 their methods, and motives. Last, but by no means least in impor- 
 tance, come the questions of the probable decisions of 'the courts in, 
 say, State B between the proposed farmer borrowers in State B and 
 the bondholders in States X, Y. or Z. 
 
 Furthermore, Congressman Moss admits that the Landschaft is 
 "the best form of organization of mortgage credit under a pure 
 cooperative plan." I think that the facts in the case will warrant an 
 amendment to this statement. In fact, not merely an amendment, 
 but a substitution, as follows : " The Landschaft is the only form of 
 organization of mortgage credit under a pure cooperative plan." 
 Before proceeding further, I deem it in order to take up the words 
 "rural credits." What do these words mean? They simply mean 
 lending and borrowing money on farm mortgages, and since there
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 11 
 
 is lending and borrowing of money on farm mortgages to-day we, 
 therefore, have rural credits at the present time ; in fact, have had it 
 right along. We thus see that the question before us is not one of 
 merely " rural credits " without qualifications, but a question of " rural 
 credits " with qualifications. 
 
 A DECIDED DIFFERENCE. 
 
 Now, at the present time we have rural credits as follows: Unor- 
 ganized farmers borrow money on mortgages from organized money 
 lenders, the banks. The banks obtain the money from the people 
 at from 3 to 4 per cent, in the form of deposits, and lend it out 
 to the farmers at the highest rate of interest that it is possible to 
 obtain from them. That is the present system, and the same would 
 be the case with any and all of the ' ; rural credits " measures for banks 
 that have so far been introduced in Congress. The same would be 
 the case whether the Government purchased bonds, whether the 
 Government guaranteed the bonds, or, in short, under any plan so 
 long as the system meant " the bank." That the interest under such 
 banks would be low at the start would be no criterion as to what it 
 would be as time went along. We all know that profit-earning banks 
 are not benevolent institutions, and that they sometimes learn to 
 collect " all that the traffic will bear." 
 
 But how would the case be if we were to have the Landschaft? 
 
 There would then be a decided difference; there would then be 
 unions or groups of farmers, Landschaften. These farmer groups, 
 under charter of the national laws and under guidance and direction 
 of the Secretary of the Treasury, would accept the mortgages on 
 the farms of their own members ; its board of directors would convert 
 these mortgages into Landschaft bonds. Its bonds would then be 
 bought by the people, the very same people who now deposit with 
 the money lenders. 
 
 These Landschaft bonds would, under national law, under guid- 
 ance and control of the Secretary of the Treasury, afford such security 
 that the people who now deposit their money in savings banks at 
 from 3 to 4 per cent would be very willing to buy these bonds at the 
 same rate of interest. The farmers would thus, as groups of organ- 
 ized borrowers, be rendered independent of the banks. This is the 
 story and the whole story. 
 
 IT IS HIGH TIME. 
 
 It is high time for the farmers of this country to master this story 
 thoroughly, as talk of any other kind of cooperative land-mortgage 
 credit is sheer nonsense. The cooperative is the Landschaft, so far 
 as farm mortgage credit is concerned. As soon as the American 
 farmers will understand this they will know what to ask for from 
 Congress, and they will be likely to get what they ask for. If they 
 do not understand it, they will be likely to reach out their hands for 
 something else, something that they really do not want and some- 
 thing that they should not have; in fact, something that is dangerous. 
 Some are screaming in the direction of anarchistic and socialistic de- 
 mands for Government money and Government guarantee, and- on 
 what? On lands that have crazy titles; on lands that the keenest
 
 12 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 exports in the country are required to determine on hair-sj 
 points; on lands that can he inflated in artificial value ad innnitum; 
 on lands where the titles are so various, abstract, abstruse; on lands 
 that support a larger number of lawyers on questions of \\hal the law 
 is and what the law \>n'(. perhaps double or treble in strength of 
 numbers to all of our standing Army, and yet the Government is to 
 hand out the public money for bonds on mortgages on this legal mess. 
 And in all this cry of Government purchase of bonds or guaranteeing 
 of the same was there an equal cry for the unification throughout the 
 United States of the laws on land titles? 
 
 Now the Landschaft is the first rational step in that direction, for 
 you can't have a Landschaft on muddley titles; the titles must be 
 made clean and healthy, as they are in Germany, and that will be a 
 irreat step toward lightening the abominable load upon the shoulders 
 of American agriculture, as frightfully uncomfortable and uncanny 
 to pack around as was the pack on Christian's back in the Pilgrims' 
 Progress. So let us have a beginning, let us have the Landschaft. 
 
 But in Germany, where the Landschaft is in operation, are there 
 not also mortgage banks? 
 
 Yes ; both are there, side by side, as it were. And both are needed 
 side by side. Why? Because under the Landschaft loans may only 
 be made on a valuation of the earning power of the land, not upon 
 its speculative value. Now it sometimes happens that certain lands, 
 especially those near growing cities, are held at much higher rates 
 than their earning power. Where the regulations of the Land- 
 schaft could only permit the acceptance of a mortgage of say $25 
 an acre on the productive value of the land, the bank may be willing 
 to lend double or treble or more per acre on its speculative value. 
 This is the reason why there is room for banks alongside the Land- 
 schaft. 
 
 AN OVERFLOW. 
 
 These banks in Germany serve, as it were, as an overflow for the 
 business which the Landschaft will not take. But banks of this kind 
 should not be permitted to convert their mortgages into bonds to be 
 sold on the open market. Such bonds, as has before been shown, 
 would be dangerous for the farmers and for the buyers of the bonds. 
 Such banks should merely do their money lending on mortgages 
 as they do it now with this difference: To-day such banks have no 
 competitors, but with the Landschaft in operation there would be 
 effective competition the Landschaft would be the competitor. 
 
 From all the foregoing it will be seen that there is but one practi- 
 cable mode of cooperative mortgage credit, and that mode is the 
 Landschaft. 
 
 Before dismissing the subject, however, there is still one phase 
 which has not yet been discussed. Assuming that the questions of 
 title under the Landschaft would be set right, would this in itself be 
 sufficient to convert the mortgage into a gilt-edged bond? Where is 
 the appraisement? How do we know that this and the other duties 
 of the Landschaft will be performed properly? The answer is the 
 following: First of all. there should be followed here about the same 
 routine that is followed in Germany. Secondly, the proposed modi- 
 fication, giving the national supervision to the Secretary of the
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 13 
 
 Treasury, with a national commission of, say, five under him. with 
 office room in Washington, in which will be depositories for the 
 mortgages of the various Landschafts, the blank bonds to be partly 
 filled out by this national commission and sent to the Landschafts iri 
 return for their mortgages, all of which will key up and check the 
 routine. 
 
 PUBLIC HEARINGS. 
 
 As to the appraisementSj after the regular appraising values have 
 been gone through with they are to be listed and copies hung up in 
 the front of public buildings, the courthouse, post office, etc., with a 
 printed notice underneath to the effect that public hearings on the 
 appraisements will be held at the county courthouse at a stated time 
 and the public are invited to attend. At these hearings it can be ex- 
 pected that the attorney for the widows' and orphans' funds, the 
 agents of the life insurance companies, and others would give in their 
 testimony, giving their version of each and all of the appraisements. 
 
 A report of this hearing is to be sent on to the subtreasury commis- 
 sion, on the strength of which they would give the Landschafts their 
 rating or standing, the same as is done by Dun's and. by Bradstreet's 
 Mercantile Agencies. A rating of "A-A-1 " would probably sell the 
 bonds a number of points above par; if the rating were lower, the 
 bonds would probably be some below par; if still lower, they prob- 
 ably Avould not sell at all; there would then be something wrong 
 somewhere, either with the Landschaft or the testimony of the wit- 
 nesses at the hearing. A rehearing would probably set the matter 
 straight for all concerned. 
 
 The farmers of America have now an opportunity to get a good, 
 sound, rational rural-credits system. They owe it as a duty to them- 
 selves, a duty to their children, and a duty to the American people to 
 consider this matter seriously and thoroughly ; to act as intelligently 
 toward carrying it as if the Landschaft were a banker's or a mer- 
 chant's proposal with the bankers and merchants behind it... Let 
 the American farmers understand that they are now on trial. . 
 
 With the President in favor of a sound rural-credit system, with 
 the three national political parties pledged on the same line, there 
 seems nothing in the way. So there is nothing else for the farmer 
 to do but to " right about face " and go to work.
 
 THE NATIONAL MARKETING ORGANIZATION 
 
 WHO SHALL PIONEER THE WAT ? 
 
 Mr. H. Blodgett, of Clayton, Wash., in a letter to Senator Fletcher, 
 says: 
 
 Beyond a doubt rural credits and marketing would be of the greatest Interest 
 to the farmer, but beyond a doubt these measures would be killed by the 
 " powers that be " unless you, and they that have the power, " get busy." 
 
 Mr. Blodgett is right, but only to a very limited extent that is, 
 if he limits the " getting busy " to Senator Fletcher and to his col- 
 leagues in Congress. Such limitations may be sufficient in countries 
 ruled by autocratic power, countries where government sways and 
 directs the people. The United States, however, is not an autocracy, 
 it is a democracy a country where the people tell the Government 
 what they want done. 
 
 If, for instance, monetary legislation, commercial legislation, or 
 legislation on labor are wanted, it is the financiers, the merchants, or 
 the workingmen that " get busy," and if there is to be legislation on 
 agriculture it is the farmers who will have to "get busy." Such 
 being the case, Mr. Blodgett would have been nearer the mark had he 
 given his " get busy " advice to the American farmers instead of 
 limiting it to Senator Fletcher and to his colleagues in Congress. 
 
 And now, it may be asked, since the proposal before us on rural 
 credits and on marketing are adaptations of systems in operation in 
 Germany, how does it happen that the German farmers in pioneering 
 the way were so much brighter than the American farmers? 
 
 The fact is, that the German farmers, originally, were not brighter 
 than the American farmers; in fact, they were not nearly as bright. 
 It is only now when they are operating under their effective economic 
 systems that the German farmers have become bright, as bright as 
 the American farmers, and very much brighter. In fact, they have 
 become the brightest farmers in all the world, and because this hap- 
 pens to be the case, let it be noted, it has rendered Germany the 
 strongest among the great powers of the world. 
 
 But we have not yet been told how the potential brightness of the 
 German farmers became materialized into actual brightness. Was 
 it then the German farmers who invented and devised these effective 
 economic systems and obtained their legislative enactment? 
 14
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 15 
 
 WHO PIONEERED THE WAT? 
 
 No, it was not. They were devised and given legislative enactment 
 by the Government. Why by the Government? Because it is a 
 well known fact that farmers, as a result of their environment, are 
 too conservative to devise systems or to pioneer the way for the 
 adoption of changes in mode or method. The farmers the world 
 over are the last to make changes in their style of garments, their 
 mode of speech, or their opinions. No, the German farmers devised 
 no such systems, nor did they pioneer the way for their adoption. 
 
 They were devised and adopted for them by the power and far- 
 seeing wisdom of their autocratic Government. The rulers of Ger- 
 many foresaw the tendency which the rising tide of socialism prom- 
 ised to lead up to; the socialism which 'was confined mainly to the 
 urban population to its cities; the socialism that threatened the 
 destruction of their political status quo. The Government, there- 
 fore, sought a method for the control or eradication of this socialism, 
 and it believed that that method could be found in the strengthening 
 of its conservative element its farming population. 
 
 Under the belief that with the reinforcement of sufficient strength 
 the conservative farmers would prove more than a match for the 
 control of the socialist radical of the cities, the ruling power of 
 Germany devised and enacted into law the economic systems of rural 
 credits and marketing now operating there. Experience has since 
 proven that the rulers of Germany were in the right ; for notr alone 
 does the present advantageous economic status of the German farmer, 
 under these systems, hold in check the socialism and radicalism of the 
 German cities, but it has also so strengthened Germany as to render 
 her almost invulnerable and invincible. 
 
 The economic and political advantages of the German systems of 
 rural credits and marketing are so evident as to justify the prompt 
 and well-directed efforts of the American farmers for their realiza- 
 tion. 
 
 PARADOXICAL ? 
 
 But is there not a break in the logic of these statements? We are 
 told that these systems were devised and put into operation by gov- 
 ernments; that farmers are too conservative to devise effective eco- 
 nomic systems or pioneer them in these stages for their enactment. 
 But we have also been told that the farmers rather than the legis- 
 lators will have to devise them and pioneer the way, " get busy " for 
 their adoption. So, then, we seem to travel in a vicious circle of con- 
 traries. The Government can act but should not or will not; the 
 farmers can not but should. 
 
 The designation "vicious circle of contraries" holds good if we 
 are to judge from the economic history of nations. It is these
 
 16 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 "contraries" which have l>een, and doubtless will continue to be, the 
 melancholy cause of the disintegration of nations. For, be it ob- 
 served, the two chief forces constituting the nation are the progres- 
 sive and the conservative forces tin- first, the urbans, the city 
 people; the j-eeoiul. the farmers, the people of the country. 
 
 Whenever and wherever these two forces in a nation are about 
 equally matched in political power and where this power is equally 
 exerted, there is then and there the greatest amount of national 
 strength. The undue strengthening of the one at the expense of the 
 other must ultimately weaken both, as this tends to weaken the 
 nation. As the undue transfer of political power is mainly effected 
 by the persistent operation of inequities in the economic status be- 
 tween the city and the country, it may be of interest to ascertain the 
 cause which makes for inequity between the two. 
 
 What, then, is this cause? 
 
 The farmers seem to think that the cause is " Wall Street," and 
 they hope some way, some duy, to eliminate the inequity. Just how 
 they do not know, but in the absence of a plan they seem to derive 
 some sort of satisfaction from denunciations of anything and every- 
 thing' 1 Wall Street/' 
 
 But is this answer the answer ? 
 
 CHANGES IN ECONOMIC METHODS. 
 
 r>y no means. Wall Street is not the cause at all; it is rather one 
 of th$,effects. It seems to me that the party at fault is the farmer 
 himself in his inertia. Not alone is this true of the farmers of this 
 country, but it is true of all the farmers of all the other countries and 
 in alii the ages. Let us see if the fault is not to be traced to this 
 ' thatjfthe farmers, as a result of their environment, are too con- 
 servatiye to devise effective economic systems or pioneer them in the 
 stage&ior their enactment." 
 
 ' Well," says the farmer, " do you expect me to sit down and think 
 out systems? Don't you think I have something else to do?" 
 
 And there you are ! That is just about what the farmers every- 
 where all have said and what they may be expected to say for per- 
 haps centuries to come, and that is the reason why nations come, live 
 awhile, and then die. 
 
 It is high time for such farmers to look about them and see what 
 changes in economic methods have taken place since the last half of 
 the nineteenth century. There is the telephone and the telegraph. 
 In the sale of his annual 10-billion-dollar production how much use 
 does the farmer make of them in comparison with other merchants 
 who sell an equal amount of goods? 
 
 "What are you talking about!" exclaims the farmer. "Do you 
 take me for a merchant?"
 
 PEACTICAL NATIONAL MAEKETING ORGANIZATION. 17 
 
 Well, if you are not sufficient of a merchant to sell your production 
 then you must rest satisfied if others do the selling for you and, of 
 course, in their own way. 
 
 But to return for a moment to the telephone and telegraph, to 
 the modern inventions for the transaction of business. There are 
 the stenographer, the typewriter, the card index, the board of trade, 
 the chamber of commerce, the clearing house, the mercantile agency, 
 and the thousand and one other devices and methods for the economic 
 transaction of modern business. Do the farmers use these to the 
 extent that other business men do? But above all, does the farmer 
 realize that since these inventions came along there has been a com- 
 plete change in the method of employing capital and in the method 
 of employing mental energy? Beforetime business was transacted 
 by individuals or firms, but in our day business is transacted through 
 corporations, many of them with business ramifications as wide as 
 this country and some of them to a wider extent some world-wide. 
 
 A COMMERCIAL CUL-DE-SAC. 
 
 With what mechanism does the farmer commercially speak, com- 
 mercially hear, commercially go, and commercially see? Only with 
 the organs of his own body, consequently the farmer is, as it were, 
 a commercial cul-de-sac. He is commercially dumb, commercially 
 deaf, commercially lame, and commercially blind. 
 
 " Well," says the farmer, " I will prefer all this to blindly rushing 
 into some wild socialistic scheme. I do not wish to give up my inde- 
 pendence by lumping my property into some rattletrap cooperation 
 or corporation." 
 
 The farmer that would make such a statement would clearly be 
 uninformed, for neither under the Landschaft method of rural credits 
 or under the Landwirtschaftsrat system of marketing would it be 
 necessary for him to give up one iota of his independence or to " lump 
 his property into some rattletrap cooperation or corporation." nor 
 can either of the two proposals be classed as " wild socialistic schemes." 
 Under the Landschaft rural-credit systems he gives, say, $20,000 
 worth of property, properly appraised, for a $10,000 bond, and so 
 do all his neighbors. While the bond of a Landschaft is not given 
 on any special piece of property of that Landschaft, each bond issued 
 may only be upon the limit of the mortgage as permitted by the 
 Landschaft. It therefore follows that each farmer under the Land- 
 schaft law is in reality only responsible for his own indebtedness. 
 This has proven to be the case in Germany, where the Landschaft 
 has been in operation during the past 152 years. As for the market- 
 ing or distributing system, that is in nowise a corporation. It is 
 simply an organized semiofficial nation-wide bureau, which embraces 
 12672 15 2
 
 18 PRACTICAL NATIONAL MAKK! I INC OKliA XI/ATION. 
 
 the- services for agriculture (hat commerce receives through its boards 
 of trade, chambers of commerce. clearing houses, etc. 
 
 In other words, where (lie farmer now sees with his own two eyes, 
 he will have added to his commercial vision (he commercial sight 
 of millions of his eoworkers. If we were to strip merchants and 
 financial men of this kind of knowledge, we would make commerce 
 and finance as incoherent, as disjointed, as illogical, and as uncertain 
 as is the commerce of agriculture to-day in the hands of the American 
 farmers. The business and commercial world would not tolerate 
 for a moment the abrogation of their sources of wide range com- 
 mercial knowledge and its resultant activities, and it can be safely 
 said that once adopted neither would the American farmer abrogate 
 it. And the first step toward the materialization of the proposals 
 before us is the awakening of the American farmers from their dor- 
 mancy. They must rise, gather themselves together, put on the har- 
 ness, and exert their power by pulling the car of progress forward 
 whether uphill or downhill ever forward. If they pull hard enough, 
 and each one does his share, they are sure to reach the goal. 
 
 "Must"! Why "must"? 
 
 ARISTOCRACY ? DEMOCRACY ? 
 
 Because unless the farmers change their economic conditions by 
 means of sound and sensible methods they must expect others to step 
 in and manage their affairs for them. This after a fashion is being 
 done now and has been done right along. And as it continues it is 
 quite likely to develop and accentuate present grievances. But in 
 what must it all end? It must end in converting this American 
 democracy into a full-fledged autocracy as surely as the present de- 
 mocratized power of Germany's farmers must in the end convert the 
 German autocracy into a full-fledged democracy. 
 
 " Eternal vigilance is the price of liberty." And, pray, what does 
 that mean? Does "vigilance" mean that the citizen is to be on the 
 constant lookout for foreign dreadnaughts and submarines? No; 
 that is the function of the Secretary of the Navy. Does liberty 
 mean the right to shout " Scoundrel " or " Villain" at any and all in 
 public life ? No ; that is license. Liberty means freedom free equi- 
 table action and free equitable reaction within the body politic, espe- 
 cially so in the economic life of the people. 
 
 What now may be said of the " vigilance " of the farmers ? How 
 is it made manifest in the field of economics? Shall it merely be 
 limited to shouting " Wall Street "? Shall it not rather be in effective 
 economic work? It certainly should, but hardly on the lines limited 
 by Mr. Blodgett's suggestion.
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 19 
 
 Each farmer not Mr. Blodgett alone should make it his business 
 to start the ball rolling by sending on petitions and letters to Mem- 
 bers of both Houses of Congress, and there should be thousands upon 
 thousands of such petitions and letters from every section of the 
 United States demanding, first, the passage of House joint resolu- 
 tion No. 344 for the national marketing organization, and, second, the 
 adoption of the Landschaft system of rural credits. 
 
 Sending on petitions and letters to Congress, however, is only a 
 beginning. The farmers, though, of course, perennially busy, need 
 not expect " Wall Street " to do this work for them. They must do 
 it themselves. It is true that in Germany this work was done for the 
 farmer by his autocratic Government. But in this country, in this 
 democracy, the American farmers will have to take the leading stand 
 themselves if this work is to be done at all. And, be it understood, 
 the duty to proceed should not merely be prompted by the desire 
 for economic betterment, but also by the higher one of political 
 betterment. 
 
 THE BALANCE OF POWER. 
 
 Political betterment? How so? 
 
 Because, as has been shown, the perpetuity of this Nation, the per- 
 petuity of aii} r nation, is dependent upon the balance of power be- 
 tween the two integrant elements composing it the progressive 
 element of its cities on the one hand and its conservative element of 
 the country on the other. Hence, it is clear that if the Nation is to 
 persist, is to prosper, there must be a conservation of the Nation's 
 conservative, the farmer. The farmer must, once for all, take his 
 place in the Nation as a commercial entity and rank as a commercial 
 peer alongside the business man of the commercial cities. This, and 
 this alone, will bring about that economic equilibrium so essential to 
 the life of a progressive nation. 
 
 This, and this alone, will make the American people the great and 
 mighty Nation that the founders of this Republic intended it to be, 
 the great and mighty Nation whose mission it should be to give politi- 
 cal light and political healing to all the world. This is the mission 
 that is to give political utterance to the politically dumb; to give 
 political hearing to the politically deaf; to remove the political 
 crutches from the politically lame; and to give political sight to the 
 politically blind this the world over and for all time. 
 
 And this mission, the mission of the American Republic, may by 
 no means be designated as purely secular ; it is in reality sacred. It 
 should be part of the religion of every American farmer., of every 
 American citizen. It stands for the constant striving for nation-wide 
 equity in exchange, equity that shall make for national and individ- 
 ual righteousness between man and man, -the righteousness that in-
 
 20 rilACTICAI. XAIIONAI. M A I; K I. I I N < , <>!'.( \.\ MXATION. 
 
 spired the utterances of those great tribunes of the people, the 
 |>r<>l>lu-ts of old. And is it not vividly indi<-;'tcd in the revered \\onU. 
 " Thy will he done in earth us it is in heaven"? 
 
 Once let the American fanner start out on this work in earnest. 
 and it can be safely predicted that he will presently have eoworl. 
 not merely his fellow fanners, but from among the potent forces of 
 the cities. 
 
 His eil'orts will likely be supplemented by those of the great rail- 
 road corporations, who are beginning to see that railroad values 
 may only be promoted and stabilized to the extent of the earning 
 power on each side of their railway tracks. 
 
 It can be expected that he would be seconded by the great capi- 
 talists, whose chief desire it is that their securities, bonds, and 
 properties be stabilized at the higher value. 
 
 He will undoubtedly be aided by the workingmen, who will see in 
 the prosperity of agriculture a guarantee for higher wages and 
 shorter hours, and an increase in the purchasing power of every 
 dollar he may earn. 
 
 He will be sure to be aided by the growing political power and 
 influence of the women of this country, who will not be slow to see 
 that the prosperity of the farmers of the nation means the prosperity 
 of the family. 
 
 It may safely be predicted that he will be aided in this effort by 
 all right-minded, patriotic citizens, and that even "Wall Street" 
 may find it to its interest to come to his aid. 
 
 So then, there is nothing else for the American farmer to do but 
 take off his coat, roll up his sleeves, and go to work, and continue 
 working until he becomes the commercial peer of the commercial 
 cities of this great nation. 
 
 o
 
 A PRACTICAL NATIONAL 
 
 MARKETING ORGANIZATION AND RURAL 
 
 CREDITS SYSTEM FOR THE 
 
 UNITED STATES 
 
 A HEARING BEFORE THE STATE DEPARTMENT 
 JUNE 21, 1915 
 
 WASHINGTON 
 
 GOVERNMENT PRINTING OFFICE 
 1915
 
 A PRACTICAL NATIONAL MARKETING ORGANIZATION AND 
 RURAL CREDITS SYSTEM FOR THE UNITED STATES. 
 
 A HEARING BEFORE THE STATE DEPARTMENT JUNE 21, 1015. 
 
 PRESENT AT THE HEARING: MR. SYDNEY Y. SMITH, CHIEF OF THE 
 DIPLOMATIC BUREAU OF THE STATE DEPARTMENT; MR. DAVID 
 LUBIN, DELEGATE OF THE UNITED STATES, INTERNATIONAL INSTI- 
 TUTE OF AGRICULTURE, ROME. 
 
 THE HEARING. 
 
 Mr. SMITH. As I understand it, you are to make a statement on a 
 proposal for a national marketing organization, also for a rural credits 
 system, for adaptation and adoption in the United States. 
 
 I would like to ask you whether the subjects you will speak about 
 this morning are not covered in the report made oy the national com- 
 mission and State commissions sent to Europe in 1912, to inquire 
 into the European rural credits systems ? 
 
 Mr. LUBIN. They are and they are not. The report of the Ameri- 
 can commission (S. Doc. No. 214) consists of some 916 pages. It con- 
 tains perhaps the most valuable information on rural credits in print 
 anywhere. The presentation, however, is not in the form where it 
 can be availed of off-hand, for there are all shades and phases of rural 
 credit information in it with statements, questions, answers, and 
 opinions, all in part relevant and part irrelevant mixture. A para- 
 graph or two may be relevant and a paragraph or two following may 
 not be. It requires a guide competent to pick out the relevant from 
 the irrelevant. It is much the same in get-up as the Congressional 
 Record. The report needs competent editing and all irrelevant 
 material eliminated. It will then oe in available form for all to use. 
 
 Mr. SMITH. Mr. Lubin, please proceed with your presentation. 
 
 Mr. LUBIN. The presentation is to be divided into two divisions; 
 the first, the Landwirtschaftsrat, the system of Germany, her national 
 marketing organization, and its adaptation and adoption in the 
 United States; and, second, the Landschaft rural credits system of 
 Germany and its adaptation and adoption in the United States. 
 
 I will begin my presentation with the first. The Landwirtschaftsrat 
 of Germany begins with the township organization. Every farmer 
 who owns land has a portion of his tax assessment set aside for the 
 support of the Landwirtschafsrat. This gives him the right to vote 
 for a chamber of agriculture in his township. The township organi- 
 zation elects its representative to the county organization. The 
 county organization elects the members to the State organization, 
 and the members of the 24 State organizations of the German 
 Empire elect then* National Landwirtschaftsrat, consisting of 72 
 
 2 
 
 99122 15
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 3 
 
 members. Thus we have an organization something on the order of 
 a pyramid, the broad base is composed of the township organizations, 
 the layer above forms the county organizations, and the smaller 
 layer above that composes the State organizations, and all these are 
 capped by the apex, the Natonal Landwirtschaftsrat. 
 
 To begin with, the 72 members of the Landwirtschaftsrat have 
 their seat in Berlin. They, in substance, have the right of initiative 
 and referendum touching all laws that directly or indirectly concern 
 agriculture. The imperial laws of Germany direct that the Reichs- 
 tag must submit these laws to the Landwirtschaftsrat for its opinion. 
 
 But this is by no means all or the most important of its functions. 
 The township, county, State, and national organization is, hi sub- 
 stance, a semiofficial information bureau for the purpose of the 
 scientific marketing of agricultural products. 
 
 The membership of this organization consists of several million 
 units. Its semiofficial status gives it the power to swing the dis- 
 tributive end of German agriculture, and thus renders trusts in 
 food products in Germany an absolute impossibility. This is an 
 invaluable service not merely to the farmers but likewise to the 
 consumers of Germany as well. 
 
 In my opinion, this, system is the corner stone, the secret, the 
 the reason of the strength, the transcendent strength, of the German 
 Empire. 
 
 Let us not be mistaken; the great strength of the German Empire 
 does not come from the "goose step" of her soldiers nor from her 
 Krupp guns ; it comes as a direct and indirect result of her Landwirt- 
 schaftsrat system for the scientific distribution of her agricultural 
 products, of the food products of Germany, all of which is reinforced 
 by her effective and efficient rural-credits system. 
 
 I have observed all this going on during the past ten and a half 
 years that I have been the American delegate at Rome at the Inter- 
 national Institute of Agriculture. The scope and labors of the 
 German Landwirtschaftsrat have also been set forth from time to 
 time in the monthly publications of the International Institute. 
 
 I have on many occasions urged in my reports to the Secretary of 
 State and in my communications to the Department of Agriculture 
 and to the former Department of Commerce and Labor the needs and 
 desirability of having due consideration given to the Landwirtschafts- 
 rat system of Germany. This with a view of its adaptation and adop- 
 tion m the United States, to the end that this would meet the economic 
 needs of the American people, especially so of the American farmer. 
 
 The economic advantage of this system is so manifest that it does 
 not require any great depth of mind to find out its utility, its adapta- 
 bility as a means toward economic ends. Nor is it merely economic 
 benefits which result from it; it is even more important as a political 
 factor, a factor for strengthening the political life of the Nation. 
 
 And on this head let me say that President Wilson in his book, The 
 New Freedom, indicates the ideal political status by a figure. He 
 points to the overhead and underneath shafting of a factory, to the 
 pulleys, to the belting, to the journals, and to the bearings. If the 
 shafts be sprung or the bearings too tight or too loose, or the pulleys 
 out of line, or the belts awry, there is trouble, confusion, and loss. 
 But if all these be true and taut and in alignment all is well with the 
 factory; and he points out that if the State, like the factory, adapts
 
 4 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 the proper means toward its highest ultimate ends and conforms 
 itself thereto its progress must tend toward the higher ideal. 
 
 There is yet another figure that may be introduced to help bring 
 out what is intended. Let us imagine a tug of war between A and 
 B. On the side of A there are 10 men at the rope, and on the side 
 of B there are 10. If A offers 50 per cent resistance and B offers 
 50 per cent resistance, the tug is equal, but if A puts forth 20 per 
 cent resistance and B puts forth 80 per cent resistance the tug must 
 soon end with A defeated. 
 
 And now let us apply that figure in the political life of a nation. 
 Let us say that the nation consists of A, tne city man, the urban, 
 and B, the countryman, the farmer. A, as a rule, is the progressive, 
 the radical; B, the nonradical, the conservative. When these two 
 forces are about equal in action and reaction we have stability, 
 political strength. But whenever A, the radical, has his own way 
 is not sufficiently restrained by the conservative B, the political 
 pulse is so rapid as to produce political fever, national illness, and 
 ultimately national death. When, on the other hand, B, the con- 
 servative farmer, is sole director, sole governor, then there is stagna- 
 tion and decay and ultimate national death. 
 
 This was clearly perceived in the early history of the American 
 Republic by one of America's greatest statesmen, Alexander Hamil- 
 ton. He pointed out that we nad a vast domain and a still vaster 
 prospective domain to the west. There was the almost unlimited 
 possibility of the upspringing of a vast agricultural population, but 
 this was not to his liking. A purely agricultural population would 
 have made a stagnant country. The Republic, to live, persist, 
 and develop, required an additional factor, an additional power. 
 It required a radical or progressive power to equal the nonradical 
 or conservative power. And this radical and progressive power 
 has its life in cities, a power which requires manufactories for its 
 upspringing, and where was that power to come from since we had 
 at that time no skilled labor and no means of educating such labor ? 
 
 It was then that Mr. Hamilton advocated protection by a tariff 
 on imports of manufactures, a tariff the cost of which would fall upon 
 agriculture and serve as a bounty to the manufacturer and his pro- 
 tected labor. This protective system he desired toput into operation 
 in order to build up the "infant industries." We have long since 
 changed that cry into "protection for American labor," but that is 
 another matter. 
 
 Now, to return to the needs for the adaptation of the Landwirt- 
 schaftsrat system in the United "States. On the one hand we hear 
 that the economic system of the American farmer is injuriously 
 affected through defective marketing of his products. On the other 
 hand we hear that there is perhaps no time in the history of this 
 country when the American farmer was better off, when he had more 
 money in the bank and then look at his automobiles, and his wife 
 all dressed up in city clothes and Paris hats which she never had 
 before. As for the country as a whole, why look at our cities with 
 their miles and miles of skyscrapers and palaces, the wonder of the 
 world; and when we behold all these things there should seem to be 
 no hurry to catch up some foreign system with an unpronounceable 
 name and try to force it upon the American people.
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 5 
 
 There is a strange similarity between these arguments of to-day 
 and those used in old Home in the time of Tiberius Gracchus, in the 
 days of the Roman Republic, when Tiberius cried, "Rome is dying." 
 "Restore the landowning farmer or the Republic will perish." And 
 what was the response? The Romans showed him miles and miles 
 of streets with marble palaces. Pointing to them they said: "See, 
 before time these buildings were of adobe, of clay and brick, now they 
 are marble palaces; how is Rome dying?" And yet he insisted that 
 Rome was dying and clamored for the Freeing from destruction of the 
 farmers, the freeing of the conservative portion of the Roman 
 Republic. He predicted that the vast number of foreclosures of the 
 landowning farmers of Rome would soon convert the free conserva- 
 tives of the Republic into destructive radicals. And what he pre- 
 dicted came to pass. 
 
 After Rome had conquered Carthage, Egypt, and Syria the con- 
 quering lords brought the cheap corn of those countries into Italy. 
 This forced the Roman farmer into debt, to borrow money of these 
 lords. As a result of all this the Roman farmer was eventually 
 driven from his land. And what happened ? This, Rome perished 
 and crumbled to dust and ruin, and we of the twentieth century go 
 to Rome to see these ruins. 
 
 And so will it be in the case of the American Republic if we stolidly 
 permit the operation of a system which must cause the conservative, 
 the landowning farmer of the Nation, to be replaced by the renter. 
 
 Let us now return to the alleged prosperity of the American farmer. 
 While there should not at this time in American history have been 
 more than a trifling percentage of American farming lands in the 
 hands of renters, what do we find ? We find from the census report 
 that 37 per cent of the agricultural land in the United States is now 
 in the hands of renters; 16 per cent of these renters sprung up during 
 the last 10 years of the census. The census was taken up to 1910. 
 This is now 1915, and with the same ratio of increase it will be very 
 nearly up to 50 per cent. And what of the next census and the one 
 after that ? Shall it rise to 60 per cent, to 70 per cent, and so on ? 
 If so, the American Republic is surely groping its way toward the 
 downward incline of old Rome. 
 
 Let us not deceive ourselves. There is a force at work, a destruc- 
 tive force. It works silently and incessantly. It is a toll-gathering 
 force, a scientific toll-gathering force. Its ingathering tentacles are 
 not merely the traditional 8 of the octopus, but these multiplied from 
 8 to 80, and from 80 to 800, and from 800 to 8,000. In time this 
 destructive force will sap the political strength of the Nation and 
 leave it a wreck. Some of the onlookers try to frighten these giants, 
 these octopuses, these trusts, away. Some pelt them with rhetorical 
 bombast, some swear at them, some threaten them at law, and some 
 shout at them from the housetops, but, of course, all this is nonsense. 
 Wlio would not be a trust man if he could, say, make a million, two 
 millions, ten millions, twenty millions, or more, or, in fact, for very 
 much less ? Let us have some horse sense in this matter as well as in 
 other matters; it is not the trust man that is the evil, but the foolish, 
 wicked, and criminal conditions which permit practices that make 
 the trust possible. They have done away with that sort of thing in 
 Germany, and why should we not do away with it here in the United 
 States ? We can do away with it if we want to. We can do away
 
 6 PRACTICAL NATIONAL MABKETINO ORGANIZATION. 
 
 with it by adapting and adopting the Landwirtschafterat system in 
 the United States. 
 
 Mr. SMITH. What has preceded. Mr. Lubin, seems to be in the way 
 of preliminary, of argument. What, then, is this system, how does 
 
 it work, and in what way has it become the bulwark of Germany ? 
 Mr. LUBIN. Well, I will try to give you a detailed description ; 
 
 you 
 to appreciate the explanation in detail that I will give further on. 
 
 Some 50 years ago the commerce of this country was carried on 
 about in this manner: There were three people to the transaction. 
 There was the manufacturer, the jobber, and the retailer. Substan- 
 tially the only man that had access to money that could be dynami- 
 cally employed was the jobber. The retailer at that time, could get 
 little or no accommodation at the banks, and neither could the manu- 
 facturer. 
 
 As a result, it was impossible for the retailer to do business with the 
 manufacturer direct, for the manufacturer had no money that he 
 could use dynamically. In fact even in cases where the retailer had 
 cash and desired to buy of the manufacturer he was not permitted to 
 do so. He was plainly told that to do so would cause nim the loss 
 of his business head, and, again, if he went to the manufacturer he 
 was told plainly, " I can't sell goods to you. Go to the jobber." Now, 
 what was the outcome of that system ? This : That 50 years ago we 
 had the poorest manufactures in the world, we made shoddy clothes 
 and paper-soled shoes, and at the highest price in all the world. 
 
 Toward the end of the seventies a change took place. Department 
 stores and mail-order concerns jumped up, as it were, overnight. 
 That meant a boycott of the jobber and a straight run of the retailer 
 direct to the manufacturer, ail of which resulted in war without quar- 
 ter. In the end the jobber went down, and is down and out to-day. 
 What is the result of all this ? Labor is much higher, the manufac- 
 tures of the United States stand to-day as the best in the world and, 
 substantially, at the lowest price in the world. Now, what the jobber 
 was in those days to commerce and industry, that the trust in food 
 products is to-day to the farmer and to the consumer. 
 
 I will now take up the details of the Landwirtschaftsrat and its 
 adaptation in the United States. There is to be a series of organiza- 
 tions of various degrees, all federated into one great organization 
 semiofficial in character. Like in a pyramid, it will consist, as it were, 
 of different layers. Beginning with the apex there will be the 
 national commission; then the wider layer below that, the State com- 
 missions; on the still wider layer below that, the county commissions; 
 with the widest layer at the base, the township commissions. 
 
 There is, first of all, to be a national commission, say, of 15 able 
 representative fanners and 14 other men not necessarily farmers, but 
 leading men. Let us say that one is an eminent carrier, the president 
 of a railway company; then, say, an eminent financier, a well-known 
 banker; then, an eminent man having r knowledge of interstate- 
 commerce relations, an Interstate Commerce Commission man; then, 
 an ex-Postmaster General, say, with a knowledge of parcels post ; and 
 others, captains of industry, men who deal in large matters of business.
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 7 
 
 Thus the 15 farmers and these 14 business men would compose a 
 national commission of 29. 
 
 This commission, say, with headquarters in Washington, would 
 meet hi session for a few days, say, once or twice a year, passing 
 upon all measures and by-laws necessary to govern the national organ- 
 ization. Under this commission there is to be a secretary general 
 with his staff, who are to constitute the working bureau. This 
 bureau is to have its headquarters in which to carry on the work the 
 year round. It is this secretary, with his staff of assistants, these 
 oureaus, who are to do the work. 
 
 A similar commission to this national commission, with its secre- 
 tary and working force, is to be constituted for each State in the 
 Union; that would be the wider or second layer of the pyramid. 
 
 The third and still wider layer is a similar commission for each 
 county in each of the States of the Union. And, finally, the last and 
 widest layer is a similar commission for each of the townships in 
 each of the counties of the State in the various States of the Union. 
 The National, State, county, and township organizations, when con- 
 federated, would consist of several million units. 
 
 The collective organizations would properly be designated the 
 "national marketing organization." Such an organization would be 
 to industry and agriculture what the chambers of commerce, boards 
 of trade, mercantile agencies, and clearance houses are to commerce 
 and finance. Remove all these from commerce and finance and you 
 will soon produce decay, failure, and revolution. All these are absent 
 so far as the industry of agriculture is concerned. The proposed 
 National marketing organization would supply them. 
 
 Once put the national marketing organization in operation and 
 there will be no need to grope in the dark or to guess where to sell 
 and when to sell and how to sell. 
 
 Toward this end the working bureaus oould bring into play all the 
 modern means of up-to-date business facilities. They could employ 
 the telephone, the night-letter telegram, and card-indexing system. 
 The communications could be regulated to come from the township 
 to the county organization, from the county organization to the 
 State organization, from the State organization to the national 
 organization. The national organization could be in touch with the 
 local markets, with the markets throughout the States, and with the 
 market centers of the world. Each producer would thus be enabled 
 to see, not merely with his own eyes, as at present, but with the help 
 of four or five millions of his fellow workers' eyes. Where now there 
 is commercial ignorance and darkness, there would then be commer- 
 cial knowledge and light. At the present tune each producer's lack 
 of knowledge oauses nun to grope around in a limited territory full 
 of cul-de-sacs, but under the proposed national marketing organiza- 
 tion the farmers evervwhere would have the same light and intelli- 
 gence in the commercial end of agriculture as merchants and finan- 
 ciers have in the business of commerce and finance. 
 
 Mr. SMITH. It might be contended that this system would create 
 an organization so powerful as to become a dangerous political factor. 
 
 Mr. LUBIN. You would be quite right if the contemplated organi- 
 zation were a Government institution, but this should not be. 
 
 Mr. SMITH. You would have the proposed organization to be free 
 from any governmental action ?
 
 8 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 Mr. LUBIN. No; not that, either. If this were a governmental 
 institution it would lead to political centralization, when, presently. 
 the Government would become autocratic to an extent that wouM 
 nullify its republican and democratic status. If, on the other hum!. 
 it were absolutely disconnected from any Government infliicn <-. it 
 would then not be possible to materialize itself. There would thru !><> 
 nothing to prevent any number of competingorganizations from 
 springing up with like powers and functions. Were such to be tho 
 case it would soon neutralize the power and effectiveness of all these 
 organizations, the same as it does now in the United States and as it 
 formerly did in Germany. 
 
 The chief merit of the German system consists in the fact that the 
 Landwirtschaftsrat is a semiofficial organization. I wish to empha- 
 size the word "semiofficial." While the German Landwirtschaftsrat 
 exists under the imperial laws of Germany, and while its operations 
 must conform to those laws, there is no jurisdiction between this 
 organization and any cabinet ministries of Germany. The Landwirt- 
 schaftsrat, while under Government law, is not a servant or adjunct 
 of the Government. Apart from obeying the few fundamental and 
 simple by-laws inscribed on its charter by the Government, it is in 
 all other respects autonomous. In the place of being subject to a 
 department of the Government, it is, on the contrary, a critic of the 
 Government; in other words, it is semiofficial. 
 
 Being composed of a membership of millions of units, units com- 
 posed of all poli tical shades, there would then be no danger of wielding 
 this organization as a special political party machine, not any more so 
 than it would be possible to politically utilize the members of the 
 chambers of commerce or boards of trade. 
 
 Mr. SMITH. I do not think you have covered this, Mr. Lubin: For 
 what purpose would this organization be established and in what 
 way would it benefit the farmer ? 
 
 Mr. LUBIN. Let me give you some concrete examples. Last fall I 
 had occasion to travel around in a portion of Massachusetts in an auto- 
 mobile. On the road I saw in the fields heaps of apples on the ground. 
 I said to the lady sitting next to me: "Let's stop and buy some ap- 
 ples." The automobile stopped and the lady got out and brought 
 back a good lot of them. I said: "Where is the man to pay for the 
 apples r' She said there was nothing to pay; that there was no mar- 
 ket for the apples; that anyone might take them; that they were 
 lying around on the ground rotting; that we might take away all the 
 apples we wished. Out in California, at Lodi, I had a talk with the 
 owner of a large vineyard. He gave me to understand that, so far 
 production was concerned, thanks to the scientific information from 
 the Department of Agriculture, there was nothing to complain of; 
 that by skillful pruning and cultivating he had increased production 
 a ton to a ton and a half an acre; but when asked about distribution, 
 with regard to the sale of his wine grapes, that was a different story. 
 The wine grapes from which the " V inordinaire " is made are worth 
 about $30 a ton in Italy, France, or Spain. They used to be worth 
 from $30 to $40 a ton in California, out the organization of wine 
 makers, through combination, have brought the price down to $25, 
 then to $20, then to $15, then to $10, and just now to $7.50 a ton. 
 Now, multiply these instances as they occur on the farms of the 
 North, and of the South, and of the East, and of the West, and what
 
 PRACTICAL NATIONAL MABKETING ORGANIZATION. 9 
 
 are we doing ? We are squeezing out the life and the spirit of this 
 Nation, the better things that go to make a republic, thatgo to make 
 a great and mighty nation. And what else do we do ? Why, we try- 
 to even it up oy bombastic political speeches, by Fourth of July 
 orations, by rhetorical rhapsodies on the Stars and Stripes. 
 
 Were the founders of the Republic here, the fathers of the Revolu- 
 tion, were they to see our conduct in this respect, they would not 
 hesitate to denominate this as political hypocrisy. We are simply 
 selling our birthright for a mess of pottage. Before we may make 
 our country a strong and enduring political entity we must make 
 strong the conservative element in the United States, the producer, 
 so that he may be a match, an equal match, in the political tug of 
 war with the city progressive, the consumer, the city radical. This, 
 and this alone, will make a strong and enduring Republic. If we leave 
 this undone, then all the warships and all the Navy and all the Army, 
 however grand and strong, will not save the Republic. But if we 
 balance equa^y the strength of the country conservative with the 
 city progressive we make a great Nation, not great in bombast, but 
 great in reality. That is the secret of the strength of Germany. 
 
 Mr. SMITH. As I understand it, then, the object is to procure an 
 equitable distribution of agricultural products through well-directed 
 intelligence to employ the best means for the placing of the surplus 
 crops in the localities where they are needed. 
 
 Mr. LUBIN. Yesj intelligent and equitable distribution. 
 
 Mr. SMITH. I think I now understand what you mean. 
 
 Mr. LUBIN. Very good. I will now take up the rural credits 
 matter. 
 
 RURAL CREDITS. 
 
 The origin of the rural-credits propaganda in the United States can 
 be traced to the labors of the International Institute of Agriculture 
 at Rome. The importance of rural credits is now beginning to be 
 understood, but the difficulty comes in centering the mind on what 
 would be likely to prove the best system for adoption. 
 
 During the many years' observation in the institute I have come 
 to the conclusion that an adaptation of the Landschaft system would 
 be of the most advantage to the American farmer. 
 
 Mr. SMITH. Will you please explain what this rural credits system 
 is? 
 
 Mr. LUBIN. There are several kinds of rural credits systems. 
 There is the personal credit and the mortgage credit. I wish to limit 
 my remarks to mortgage credit, to the adaptation of the Landschaft. 
 
 The Landschaft rural credits system has been in operation in Ger- 
 many for 151 years. It was proposed by a man by the name of 
 Buring. It was rejected by the Reichstag, but it was taken up by 
 Frederick the Great and adopted. It has been in operation for 151 
 years, with a record that during that tune there has not been a single 
 failure. 
 
 From figures given by the International Institute of Agriculture I 
 find that the Landschaften of Germany have outstanding 420,000,000 
 marks in 3 per cent bonds, 2,000,000,000 marks in 3 per cent bonds, 
 and 500,000,000 marks in 4 per cent bonds. (A mark is 25 cents.) 
 
 Mr. SMITH. How is the Landschaft formed and how does it operate ?
 
 10 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 Mr. LUBIN. The Landschaft is formed under tin- I'ru.-Man law 
 much the same as a national bank is formed in the United Si 
 A group of landowners ask for a charter to form a Landschaft. 
 Now, supposing the collective value of the farming land in this 
 Landschaft to oe worth $5,000.000, if there is a bond of $1,000 
 floating in the open market of tnis Landschaft what is the security 
 of this $1,000 b9nd? The security is the $5,000,000 value of the 
 Landschaft. This being the case, it becomes the reason why the 
 Landschaft bond sells in the open market at about the same rate as 
 a Government bond. In fact, it has a merit far above a Government 
 bond. A couple of months ago I wrote on to Prof. Brodnitz, of the 
 Halle University, who is in a position to make an authoritative state- 
 ment on the subject. I asked him the question: "How about the 
 Landschaft bonds ? How are they standing during the present war ? 
 Are i 1 ey holding their own or have they fallen like other securities ?" 
 And he replied: "They are holding their own as they did in panics 
 and wars before now. The Bourse, as you know, is at present closed, 
 but the Landschaft bonds in passing from hand to hand maintain 
 their values as before the war." 
 
 Mr. SMITH. How does the farmer get hold of one of these bonds ? 
 
 Mr. LUBIN. The farmer gets them from his own Landschaft, from 
 his board of directors. 
 
 Mr. SMITH. What security does he give ? 
 
 Mr. LUBIN. The mortgage on his land. 
 
 Mr. SMITH. That seems to be a simple thing. Could we do the 
 same thing here ? 
 
 Mr. LUBIN. Yes, we could; but something has to be done before 
 we can do what the German farmer can do under the Landschaft. 
 Unless we can do that "something" the bond would not float. It 
 would fall flat to the ground. It would prove of no value whatever. 
 
 Mr. SMITH. What is that "something? ' 
 
 Mr. LUBIN. That "something" really consists of two "some- 
 things." The first relates to the tenure of land. Under the Land- 
 schaft there can be no question raised as to title. A mortgage on a 
 piece of land within that Landschaft is in fact equivalent to a judg- 
 ment, and foreclosures may be effected by the Landschaft without 
 any further recourse to lawsuit. 
 
 And then there is no doubt as to the correct valuation of the land 
 and for processes to maintain its profit-earning value. 
 
 Mr. SMITH. That would be a matter requiring special laws, not only 
 by the United States but also by the States. 
 
 Mr. LUBIN. Certainly. There would have to be laws governing 
 the question of titles and the waiver of foreclosure suits. And then, 
 as to valuation, that has to be provided for. It has to be determined 
 what is the depth of the soil, whether it is subject to overflow or 
 atmospheric troubles, what it produces, what its net earning power 
 is, and there must be a method for the maintenance of that earning 
 power during the life of the mortgage. 
 
 These things must be settled; settled to the satisfaction of the 
 Government; settled to the satisfaction of the borrower; settled to the 
 satisfaction of the expert ; and settled to the satisfaction of the novice. 
 And there will be no trouble to sell the bonds in the open market at 
 the same rate as Government bonds.
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 11 
 
 In fact, they will be better than Government bonds, for Govern- 
 ment bonds fall during political troubles or wars, but Landschaft 
 bonds of the character aoove set forth maintain then* value for a 
 50-year or 75-year term, as they do hi Germany. 
 
 Mr. SMITH. This bond, then, is really a mortgage given by the bor- 
 rower to the bank? 
 
 Mr. LUBIN. There is no bank. The Landschaft does not require a 
 bank. There is simply an organization of borrowers, an organization 
 of farmers who borrow, an organization called the Landschaft, with 
 its board of directors, and the public bourse or exchange, and that is 
 all. The bonds are sold the same as shares of stock of the United 
 States Steel Corporation, the copper corporation, shares of Erie, or 
 Lake Shore, or Pennsylvania Railways. 
 
 Mr. SMITH. The farmer who borrows pays interest, does he not ? 
 
 Mr. LUBIN. Yes; certainly he does. 
 
 Mr. SMITH. What advantage over the present system would it be 
 to the farmer who borrowed from this organization ? Is the interest 
 less? 
 
 Mr. LUBIN. It is decidedly less. In Germany it is 3, 3, or 4 per 
 cent. The farmer has the choice of either one of the three rates of 
 interest with amortization. The bonds run from 50 to 75 years. The 
 mortgage may run all that time, but it may be canceled at any 
 moment by the farmer buying the bonds in the open market. He 
 may then bring them to the Landschaft directors, when he can 
 receive back his mortgage on the land on demand. 
 
 Mr. SMITH. Am I to understand that when a farmer goes to the 
 Landschaft to borrow that he is given a bond rather than money, 
 and that he negotiates this bond in the open market ? 
 
 Mr. LUBIN. Yes; because the Landschaft has no money. It is no 
 bank. There is simply a board of directors. 
 
 Mr. SMITH. Say he goes to borrow $1,000 from the Landschaft at 3 
 per cent interest. He is given a bond which he negotiates in the 
 open market at 92. Does he not obtain his money at a discount and 
 pay interest on the face value of the bond? What would be the 
 advantage to a man to borrow from this organization at less than par 
 when he could go to an outsider and get the full amount of his note 
 at the same rate of interest ? 
 
 Mr. LUBIN. That would all depend upon a question of land tenure, 
 and a question of the character of the valuation. Your question is 
 tentatively correct but hardly coincides with the facts as they are. 
 In the first place, there is not a farmer anywhere in the world that 
 can get money on an ordinary farm mortgage at 3 per cent or 4 per 
 cent nor for 5 per cent, and very rarely for 6 per cent. Normally 
 the rate is from 8 per cent to 12 per cent, and sometimes higher than 
 that when the cost of record searching, legal requirements, commis- 
 sions, and other incidentals are considered. The few cases in the 
 United States where mortgage loans on farms can be had for less than 
 7 per cent are cases where there are special reasons for it the bor- 
 rower has considerable wealth outside of the piece of land he may 
 mortgage. In other words, he is considered "good" independent of 
 the mortgage. Even then he may only obtain a loan for a few 
 years, and he must go to the expense and trouble from time to time 
 to renew.
 
 12 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 In a hearing on the Hollis-Bulkley bill one of die malingers of the 
 Prudential Life Insurance Co. testified that his company had I 
 sums of money out for which they received something over 5 per rent . 
 That seems low enough, but on cross-questioning this witness it was 
 found that there was a middleman between the Prudential Co. and 
 the fanner. The Prudential received this low rate from the middle- 
 man, but the fanner paid his 8, or 8, or 9, or 10 per cent, as the case 
 might be. The middleman, in fact, served as a sort of Landschaft 
 for his own benefit. 
 
 Let it be understood once for all that the farmer at present can not 
 have a mortgage loan in the United States from 50 to 75 years at any 
 rate of interest, nor can he get any money on a mortgage of his farm 
 at any such rate as 3, 3, or 4 per cent with or without amortization. 
 He would find it a hard job to get it to-day at double that amount. 
 He would find it no hardship to get it at all at 3, 3 , or 4 per cent, as 
 he would elect, under the Landschaft, provided, of course, that the 
 Landschaft is properly constituted, as in Germany. And then take 
 the matter of cancellation, if he takes out a mortgage to-day for 10 
 years he can not cancel that mortgage until the 10 years are up. 
 Under the Landschaft, even if the oond reads for 75 years, he can 
 cancel it a day or two after he has mortgaged his land. All he needs 
 to do is to buy the bonds back in the open market, bring them to the 
 directors, and he receives his mortgage back on demand, and is free 
 from debt right then and there. 
 
 Now, as for the selling of the bond at 92 in the open market, if he 
 sells it for 92 he can in all likelihood buy it back for 92. If his Land- 
 schaft stands high, it will sell for above par and not at 92. 
 
 It is the Landschaft that can do all that, provided the underlying 
 laws of the Landschaft are made to apply here as in Germany. 
 
 It would be well to understand first of all that we should carefully 
 avoid adopting some plan simply because of some inspiration that 
 may find its way into the heads of those who are looking for inspira- 
 tions in the financial line. A plan may seem to be logical, may seem 
 to be plausibly put, a plan may even be eloquently advocated, but 
 which might in the end prove to be a serious loss to borrower and 
 lender. It is no more practical to play finance from a written plan 
 than it would be to produce symphony music by handing a novice a 
 violin and a written symphony and expect him to play. In matters 
 of finance, especially so in a case where speculation is almost entirely 
 eliminated, it is the safest course to go down to the bedrock of 
 experience. 
 
 We have had experience in the case of the Landschaft. It has 
 operated for 151 years. It is operating now during this great war in 
 Europe. And during these 151 years there has not been a single 
 failure and the Landschaft bonds have maintained their value. 
 
 Mr. SMITH. I wish to ask, Mr. Lubin, does the German Government 
 have generai supervision over the Landschaft system ? 
 
 Mr. LUBIN. Yes. 
 
 Mr. SMITH. If adopted in the United States the United States 
 Government would then have general supervision ? 
 
 Mr. LUBIN. Supervision, yes; but no guarantee, nor would the 
 Government be called upon to buy any 01 the bonds. 
 
 Mr. SMITH. Who gets the benefit of this system ? 
 
 Mr. LUBIN. The farmers who are members of the Landschaft, but 
 this is by no means all, for the public, the lenders, are also benefited.
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 13 
 
 Under the laws of Germany the Landschaft bonds are considered 
 so safe that the German Government directs that the trust funds of 
 widows and orphans must be invested in these Landschaft bonds. 
 Then there are a great many merchants and others who may have a 
 surplus which they would very much like to invest in bonds that are 
 as mobile and as safe as the Landschaft bonds are and as easily con- 
 vertible into cash. 
 
 Where is the avenue at the present time for the investment of 
 widows' and orphans' funds in the United States? Where is the 
 opportunity for investments to run from 50 to 75 years that would be 
 as safe as the Landschaft bonds are in Germany ? Then, again, there 
 are the great life insurance companies who have hundreds of mil- 
 lions of dollars to invest in farm mortgages. Would they not be 
 better off to invest their money in Landschaft bonds if we could have 
 them in the United States of as safe a character as they are in 
 Germany. 
 
 In other words, what the ordinary money lender does on a small 
 retail scale of searching records, of diving down into the real value 
 of a piece of land, is all done, as it were, at wholesale under the Land- 
 schait system. So long as the money lender does all this in detail he 
 alone knows the character of the risk. This knowledge is his monopoly 
 and he charges for it accordingly. 
 
 Mr. SMITH. As a matter of fact, the Landschaft becomes a finan- 
 cial institution from which some people derive profit ? 
 
 Mr. LUBIN. No; the Landschaft is not a financial institution. It 
 is simply an agent between borrower and lender. The Landschaft 
 is not a bank. It never has any money, excepting it be a few dollars 
 for paying rent of a room or to buy a tew office chairs, a desk, or a 
 safe. Otherwise it has no money. 
 
 Mr. SMITH. I understand that there are bonds, and that these 
 bonds draw 3 per cent interest ? 
 
 Mr. LUBIN. Yes. The Landschaft issues these bonds, gives them 
 to the borrower in exchange for his mortgage. The Landschaft 
 collects from the borrower the 3 per cent interest on that bond and 
 immediately pays it over to the holder of the bond. 
 
 Mr. SMITH. I do not see where they get the 3 per cent from to pay. 
 
 Mr. LUBIN. They get it from Johnson and Thompson, from the 
 farmers, the members of the Landschaft who have deposited then* 
 mortgages and received their bonds and sold them. 
 
 Mr. SMITH. Then the Landschaft becomes a financial institution 
 for gain ? 
 
 Mr. LUBIN. No. The Landschaft is not a financial institution for 
 gain. The Landschaft merely acts as a medium or agent between 
 the borrower and lender for the collection of the interest from the 
 borrowers and the distribution of it among the holders of the bonds. 
 
 Mr. SMITH. If such a system were established in the United States, 
 to what extent would the financial institutions here be opposed to it ? 
 Who would benefit by the 3 per cent interest ? 
 
 Mr. LUBIN. As for the first question, I can understand that there 
 are a certain number of farm-mortgage money lenders who are at 
 present receiving high interest rates who would be likely to oppose 
 the Landschaft. 
 
 In contradistinction to these there are the great railroad corpora- 
 tions who may quite likely favor the Landschaft, for the railroads are
 
 14 PRACTICAL NATIONAL MARKETING ORGANIZATION. 
 
 beginning to understand that the values of their roads are determine! 
 by the economic status of the farmers on both sides of their railroad 
 track. Then there are the great capitalists of the country, those wlm 
 have a fortune already amassed. These would be inclined to favor 
 the Landschaf t because any system or condition that would work for 
 the economic welfare of trie farmers of this country would at the 
 same time stabilize their values and securities. 
 
 I think hi answering the first of your questions I have answered the 
 second. Let me repeat it: Who will benefit by the 3 per cent inter- 
 est? The whole country will benefit by it, the farmers, the widows 
 and orphans' trust funds, the railroad companies, the great financial 
 concerns, the capitalists, and, necessarily, though indirectly, the 
 workingmen of the United States, for you can not improve the con- 
 dition of the farmers throughout the country without bettering and 
 advancing the wage rate. 
 
 Mr. SMITH. Is it not possible for us to start other kinds of rural- 
 credits systems that wiD do the same thing as it is proposed to do 
 under the Landschaf t and without any such changes in the law? If 
 so, why should we make such changes in the land laws and in the 
 land titles when we can do the same thing in another way? What 
 is the matter with those other proposals ? 
 
 Mr. LUBIN. I am rather glad that you asked that question. I wish 
 to say the same question has been asked by many other inquirers. 
 The answer is this: There are other systems, such as, for instance, 
 personal credit, not on land mortgages. These personal rural-credits 
 systems are not under our consideration now. The matter before us 
 is solely confined to the subject of farm-land mortgage credit; and 
 when we confine the matter to this alone we will find the Landschait 
 to be by far the best and safest rural-credit system of any in the world. 
 
 It should be understood that interest on money borrowed on a 
 farm mortgage must, under present conditions, necessarily be high, 
 for the money lender, say, has paid out $5,000 on a mortgage, and he 
 deposits the mortgage in his safe, and that's the end of his $5,000 
 until the mortgage is redeemed; but, in the case of converting the 
 mortgage into a pond, this same $5,000 handed over to the farmer 
 is reproduced again by the sale of the bond. If private banks could 
 do business of that kind, they could, with a very nominal amount of 
 money, do an enormous business. They could lend out the same 
 $5,000, receive their mortgage, convert it into a bond, get back the 
 $5,000, lend it on another piece of property, receive a mortgage, .con- 
 vert it into a bond, and they have got their $5,000 back again ready 
 for another loan. 
 
 They could do this indefinitely, if it were safe, but it is not safe. 
 It is dangerous, dangerous to all concerned. As was pointed out 
 under our present laws each State, each county, each township, and 
 each tract of land is, as it were, a law to itself, the bearing and sig- 
 nificance of which would have to be taken on the faith of statements 
 in a ''prospectus" or the representation of the bank. The bank, in 
 turn, would have to take their information from their agents. The 
 public would then have to have faith that all was right and that all 
 would continue to be right. 
 
 It can be safely predicted that a bond of that character would not 
 be brought by such a concern as J. P. Morgan & Co., Kuhn, Loeb & 
 Co., or the New York Life Insurance Co. None of these concerns
 
 PRACTICAL NATIONAL MARKETING ORGANIZATION. 15 
 
 would buy a bond of that kind for 10 cents on the dollar, certainly 
 not on long time, at 97, and at 3| per cent interest. But it is safe 
 to predict that the same concerns would buy a Landschaft bond if 
 they were as safely devised in the United States as in Germany. 
 They would then buy them as freely as they would Government 
 bonds. 
 
 That all this is more or less vividly present in the minds of those 
 with rural credit bills in Congress wno ask that the bonds be guar- 
 anteed or purchased by the Government is evident. It must seem 
 obvious that any such propositions, propositions whereby the Gov- 
 ernment must guarantee the bonds, or must buy them, should be 
 looked upon with suspicion. If the bond is good, it will float and 
 keep floating without Government aid. If it can not float of its own 
 accord, it ought not to be made to float with Government aid. Gov- 
 ernment aid applied to a bond that will not float on its own merits 
 is doomed to fall, is doomed to cause disaster and loss. 
 
 And if we are to have bonds of a character to float without Govern- 
 ment guarantee or Government purchase, then we would have to 
 have the same legislation that would be required for the Landschaft 
 system. 
 
 And if we are to change the laws at all, why should it be done for a 
 system of banks when farmers know nothing about running banks? 
 But, say these others, the farmers need not run the banks; the banks 
 can be run by bankers. Well, and what would we then have ? We 
 would have a rural-credits system run by bankers, whereas the 
 Landsohaft is a rural-credits system run by the farmers. In the one 
 case we have the money lenders united in the bank the united 
 money lenders but in the Landschaft we have the united farmers, 
 the cooperation of borrowers, with the public at large as the lender. 
 This would make available to the farmers the widows' and orphans' 
 funds, the surplus cash of the merchant, the savings of the working 
 people, the millions of the life insurance companies, the reserve of 
 the capitalists, anyone, the public. All these compose the primary 
 source for money everywhere the world over. It is from this source 
 that money can be had at from 3, 3, and 4 per cent. Yes, and at 2 
 per cent, as witness the postal savings banks. But does anyone 
 believe that this money can be had at 3, 3, and 4 per cent on bonds 
 of a doubtful value ? It certainly can not. Even if it could, would 
 it not be criminal to permit it ? Widows' and orphans' funds should 
 be considered a sacred trust and guarded securely against fraud 
 or loss. 
 
 A sound Landschaft, a Landschaft no less sound than in Germany, 
 would provide a safe investment, and thus not alone procure the 
 farmer money on long terms at the lowest rate of interest in the 
 world, but at the same time provide a safe investment for widows' 
 and orphans' funds. 
 
 But why lay such stress upon widows' and orphans' funds? 
 Because it is deserving of it. Here in this Nation of, say, 100,000,000 
 are the millions of husbands working early and late, working with all 
 their might. Why? To "lay by" something for wife and children. 
 Very good. Now, what becomes of the "lay oy" ? Well, it goes to 
 the widow and orphan. Supposing the same foots up to $1,000, 
 $5,000, or $50,000. What is the widow to do with it? Invest it? 
 How? When? Where? Here, for instance, is a woman who is
 
 16 PRACTICAL NATIONAL MARKETING OKUAN1ZAT1< 
 
 hardly able to manage her account in the grocery store, who 
 
 never before invested a dollar, is asked on the spur of tne moment to 
 
 invest the savings of a lifetime. 
 
 If the Landschaft could be rendered as safe in the United States as 
 it is in Germany, it would provide the safest investment in the world 
 for the widows' and orphans' funds, as well as provide the American 
 farmer with long-time loans at 3, 34, and 4 per cent, with amort i/at ion. 
 
 There are, so far as I am aware, but three objections offered against 
 the Landschaf t. These are: 
 
 First. It has a foreign name; that we need not go to foreigners 
 when we can think out a plan by ourselves. This objection is, of 
 course, foolish. 
 
 Second. That the conditions governing financial transactions are 
 different in Germany from what they are nere. This is absurd. We 
 may just as well assert that the law of gravitation works differently 
 there than it does here. 
 
 Third. But right here comes another objector who cries: "This 
 proposal is nonsensical. It could never be put into practical opera- 
 tion. Take, for instance, the required National and State legislation 
 to make it operative; would it be possible to coerce each State in 
 the Union to change its laws?" 
 
 In the first place, if we are to have a bond that will float and be 
 "good" and remain "good," whether on the Landschaft or whether 
 on the mortgage bank plan, we may only have it by changes in the law. 
 And, in the second place, there is no need to coerce at all. Let Con- 
 gress pass the law, providing in the by-laws of its charters what 
 must or must not be done. Let it offer these charters to such States 
 whose laws enable them to comply. The States who will desire them 
 will find ways how to comply. 
 
 I suspect that much of the opposition comes from the camp of the 
 interested mortgage credit money lenders. To get at the facts in the 
 case, to leave no room for doubt, I would suggest that there be held, 
 under the auspices of the Government, a public debate when farmers 
 and financiers, after going over the matter, could then bring in their 
 report upon the merits of the case. 
 
 Air. SMITH. There is one thing, Mr. Lubin, that is not clear to me. 
 There must be some expense attached to the issuing of these Land- 
 schaft bonds and to the auditing and liquidation of the same. How 
 are these expenses met ? 
 
 Mr. LUBIN. The expense is quite nominal and is provided by the 
 Landschaft. 
 
 Mr. SMITH. I have listened to your statements, Mr. Lubin, with 
 interest, and I shall take pleasure in submitting them. 
 
 o