Cheaper Money 
 
 for 
 
 Agricultural Development 
 
 in 
 
 Saskatchewan 
 
 Speech Delivered by The Honourable Walter' Scott, 'Premier 
 of Saskatchewan, in the Legislative Assembly 
 
 and 
 
 a Paper on European Systems of Co-operative Agricultural 
 
 Credit, read before the Standing Committee on 
 
 Agriculture and Municipal Law. 
 
 PRINTED BY ORDER OF THE LEGISLATIVE ASSEMBLY 
 
 HE 
 
 tyS rrv 
 
 Regina 
 
 John A. Reid, Government Printer 
 
 1913 
 
Vv> 
 
 Digitized by the Internet Archive 
 
 in 2008 with funding from 
 
 IVIicrosoft Corporation 
 
 http://www.archive.org/details/cheapermoneyforaOOscotrich 
 
Cheaper Aloney for Agricultural 
 Development in Saskatchewan 
 
 On Friday evening, January 10, the following report from the Standing 
 Committee on Agriculture and Municipal Law was presented by Mr. 
 Sutherland of Saskatoon County and, upon his motion, seconded by Mr. 
 Bole of Regina City, the same was concurred in by the House: 
 
 "The Standing Committee on Agriculture and Municipal Law begs to 
 "report as follows: That certain information has been presented to the 
 "Committee on the subject of cheaper money for agricultural development 
 "which it is desirable in the public interest should be printed and generally 
 "distributed under the authority of the Legislature; and your Committee, 
 "therefore recommends, that said information be published forthwith." 
 
 A CLEAR MANDATE. 
 
 Mr. Walter Scott (Swift Current) said: Mr. Speaker, at this hour of 
 the evening (10.45) and at this stage of the session I should not think of 
 occupjdng any of the time of the House were it not that the question 
 which is raised by the motion of the Honourable Member for Saskatoon 
 County is of such unusual importance. In view of the fact that the ques- 
 tion is so highly important and that it formed the subject of planks in the 
 platforms of both political parties in the general election campaign last 
 summer, it seems to me that even at this hour of the night it would scarcely 
 be proper to allow the motion to pass without the House paying more than 
 a merely perfunctory attention to it. I think the first question which may 
 be asked in respect of this subject of cheaper money for farmers is as to 
 whether or not the Assembly possesses any mandate from the people of 
 the province to deal with the matter. I am constrained to refer to this 
 on account of the position taken by our honourable friends opposite upon 
 the question of the transfer of the public resources. We heard them 
 yesterday asserting the view that the House had no mandate from the 
 people on the public resources question. The truth is that so far as a 
 mandate is concerned the public resources question and this cheap money 
 question are precisely on all fours. Neither question was an issue in last 
 summer's campaign and why? For the simple reason that the parties 
 were united upon both questions. The same applies to direct legislation. 
 On all these subjects both parties were committed to action— the same line 
 of action — and when everybody favours the same policy there is no room for 
 an issue. If we were to accept the reasoning of our honourable friends 
 opposite in relation to the public resources question we should be under the 
 necessity of following the same line of reasoning upon this cheap money 
 
 25^349 
 
question. No sen^sible person, however, can for a moment dispute that 
 the House has full and sufficient mandate from the people to justify 
 progress with both questions and so far as that point is concerned I think 
 we may proceed with the motion without any misgivings whatever. 
 
 I observe that the term "cheap money" is the name now commonly 
 applied to the subject. I rather think that the term is a misnomer. 
 Under existing conditions today there is no cheap money any more than 
 there is cheapness in relation to any ordinary commodity. I think there is 
 good reason to hope for the application of some practicable policy which 
 will result in cheaper money for the farmers of this province — cheaper 
 money than that available at the present time, but until world's conditions 
 undergo a great change we need not hope to have cheap money. 
 
 EXCESSIVE COST OF FARM LOANS, 
 
 The policy to which both parties are committed is that inquiry shall 
 be prosecuted with the object of arriving at the best solution of the farmers' 
 dear money problem. That such a problem exists needs no argument. 
 What is the average nominal rate paid by Saskatchewan farmers for 
 their borrowed money? I think it is in the neighbourhood of 8 per cent., 
 but to quote the rate of 8 per cent, does not anything like tell the whole 
 story. I was surprised to see a little while ago the statement made on 
 the authority of the President of the United States that the average 
 cost throughout the whole United States of farmers' loans was not less than 
 83^ per cent. This rate surprised me because I was aware that in Eastern 
 Canada, in Ontario, for instance, the rate on farmers' loans in the past ten 
 years has been in the neighbourhood of 5 per cent.; the average possibly 
 slightly above 5 per cent., but I know of cases where the rate was under 
 5 per cent. It would seem probable that the rate throughout the Eastern 
 States would be as low, if not lower, than in Eastern Canada and that 
 throughout the Western States the rate would be as low, if not lower, than 
 in Western Canada; yet President Taft made the assertion in a formal 
 and well-considered letter that the average rate over the whole United 
 States was 83^ per cent. While visiting Washington in October I obtained 
 the explanation from an official in the state department there who had 
 been engaged in a study of this question for many months. His explana- 
 tion to me was that while the nominal rate was perhaps only 6 per cent. 
 or not much above 6 per cent, on the average over the whole United States. 
 an examination of the proportion of loans upon which renewals are obtained 
 and a calculation of the cost of the commissions, etc., upon such renewals 
 brought the actual cost to the farmers of the country to nearly 23/^ per cent, 
 beyond the nominal rate. Now in Saskatchewan if our nominal rate is. 
 say, 8 per cent., then it follows that the actual average cost to our farmers 
 is 10 per cent, or 103^ per cent., because what is true in the United States 
 is true also here namely, that a large proportion of the loans obtained 
 by farmers have to be renewed and the commission charges, legal charges, 
 etc., in the handling of this business are certainly not less here than in the 
 United States. 
 
 THE GOVERNMENT NOT DILATORY. 
 
 There is in some quarters a disposition to blame the Government 
 for not having taken action on this question at an earlier date. My 
 honourable friend, the leader of the Opposition, at the beginning of the 
 
session seemed disposed to complain against tlie Government on this score. 
 Well, if our record in this respect is to be criticised, it will be fair to look also 
 at the record of our Opposition on this question of cheaper money. When 
 did we hear first from the Opposition on the question? It was not until 
 after my present colleague, Mr. Langley, liacl moved on the subject in 
 the grain growers' association. Let me repeat that statement so that no 
 doubt may remain concerning it: Mr. Langley moved on the floor of the 
 parliament of the grain growers at their 1912 convention. Up to that 
 time no word had been uttered in this Assembly upon the question and it 
 was not until subsequent to Mr. Langley's motion in that convention that 
 my honourable friend's predecessor raised the question here. Now the 
 truth is that the Government had been considering the question more or 
 less seriously for very nearly four years as I think the minister of municipal 
 affairs well knows. We had discussed the question with him on a good 
 many occasions. If the Government chd not consider itself in position to 
 take definite action until the session of the House one j^ear ago the fact 
 was not due to any ignorance of the existence of the acute problem nor to 
 any lack of proper interest with regard to the problem. The fact was due 
 rather to the Government's hands being filled wdth other problems. Dur- 
 ing quite a lengthy period we were confronted with the elevator question, 
 the solution of which was not found and applied until the session two years 
 ago. Then for quite a time we were also giving serious consideration 
 to the good roads problem and it was not until the session one year ago 
 that the Government felt itself in position to start to carry out any large 
 and well considered scheme for the solution of that problem. It was, 
 therefore, not until one year ago that w^e felt justified in proposing any 
 line of action with reference to the question of cheaper money for farmers 
 although, as I say, for more than three years past we had been making 
 inquiries into the subject. Back in 1909 Mr. Calder, then provincial 
 treasurer, obtained copies of the New Zealand Statutes with reports, etc., 
 upon the policy in force in that country and I may say further that so far 
 from ignoring the question the Government received at about the same 
 time a definite proposal from a strong financial company with headquarters 
 in London along the lines of the policy which I understand is in operation 
 in both Egypt and Mexico ; a policy under which in return for a guarantee 
 of its bonds a company will make contract to re-loan the moneys which 
 are the proceeds of its guaranteed bonds to farmers at a specified rate of 
 ifiterest. 
 
 THREE POSSIBLE MODES OF ACTION. 
 
 There are three well known and well defined methods for dealing 
 with the problem. In New Zealand and in some of the Australian States 
 a policy has been adopted of the Government borrowing moneys in the 
 regular way by sale of its own debentures and re-loaning such moneys at a 
 small advance in the interest rate. In Egypt, and I believe also in IMexico, 
 a policy has been carried out such as I described a moment ago. The 
 Government guarantees or backs a private corporation in much the same 
 way as this Government has guaranteed railway companies for the purpose 
 of enabling them to obtain in Old Country markets the money they need 
 at a lower rate than would be the case if they sold unguaranteed bonds. 
 The private corporation in return for the guarantee re-loans the money 
 so raised to farmers at a rate specified in the contract. I have been informed 
 
that this poHcy has borne good fruit in both Mexico and Egypt. There 
 is besides a third method and it is the one mainly dealt with in the paper 
 prepared by the deputy minister of agriculture which was read by him 
 before the standing committee on agriculture and which will be printed and 
 published if the motion now before the House be adopted. This is the 
 method which is so largely in operation in Germany and many other 
 European countries, the method based upon the principle of co-operation, 
 the method commonly known as that of co-operative agricultural credits. 
 
 Either the New Zealand or Egyptian plans is comparatively simple 
 and would, I think, be quite practicable for Saskatchewan if the problem 
 of cheaper money was the only problem confronting us. There are certain 
 objections against either one of these systems. For the province to borrow 
 money as does New Zealand would inevitably cause very speedily an 
 enormous increase in the provincial debt. There is also another objection 
 which I think should not be minimised and which applies equally against 
 both the New Zealand and Egyptian plans. This is the objection that too 
 much paternalism in government or too much state management operates 
 to dwarf the initiative, the self-reliance and the spirit of independence 
 which are essential elements in the make-up of any people if the country 
 which they inhabit is to be continuously progressive. Nevertheless. 
 these are not objections which I wish to dwell upon at the moment. The 
 fact is that besides the cheaper money question there are a number of other 
 acute problems. Either of the two plans which I have mentioned would 
 operate to solve the cheaper money question alone. On the other hand I 
 believe there is reason to hope that the co-operative system in operation in 
 Europe may be applied in this province in a way to solve both this and a 
 number of other problems which are confronting our agricultural popula- 
 tion in a very acute way. 
 
 FOUR ACUTE AGRICULTURAL PROBLEMS. 
 
 Inordinately dear money as I say is not our only handicap. Amongst 
 the drawbacks bearing against the Saskatchewan farmer today I may 
 enumerate the following: (1) the excessive cost of loans; (2) the lack of 
 any profitable ready market for the savings of our people ; (3) the excessive 
 cost of all supplies; and (4) the depressed prices of farm products. The 
 excessive cost of loans I have already referred to and it is the point which 
 has mainly given rise to the motion we are now considering. In a waj^ the 
 unfairness of the present cost of loans is perhaps the least of the evils 
 which I have enumerated. At all events as compared with say seven 
 years ago farm loans are lower in cost, that is to say, the cost of farm loans 
 has remained stationary since the erection of the province whereas the cost 
 of loans raised by the Government, by municipalities or by school boards 
 has increased materially. At the same time the cost of farm loans is very 
 excessive as I have shown already. 
 
 LACK OF HOME MARKET FOR SAVINGS. 
 
 Of equal importance I look upon the matter of procuring, if possible, 
 a home market for our people's savings. Statistics are not available, at 
 least I have not been able to obtain any accurate information as to the 
 total amounts on deposit in the various banks within the province. I 
 
 6 
 
have been told that the Weyburn Securities Bank, a comparatively small 
 institution mth I think only five branches, has on deposit no less than 
 $1,500,000. If this be true the amount on deposit in all the banks 
 in the province must run into scores of millions of dollars. I understand 
 that in the Dominion Postal Savings Bank there is on deposit between 
 $60,000,000 and $70,000,000. That is of course in the whole of Canada. 
 As to this I speak subject to correction as I have not been able to verify 
 the figures. It is in any case generally known that the Dominion Savings 
 Bank deposits run into the scores of millions. In the United States the 
 savings on deposit, according to latest statistics, amount to the gigantic 
 total of six and one-third billions of dollars. Of the total about four and 
 one-half billions are with mutual and stock savings banks, and the balance 
 with national and state banks and loan and trust companies. These are 
 savings deposits, not ordinary deposits, and the immensity of these United 
 States figures leads one to suspect that in Canada and in Saskatchewan 
 there may be a great deal more 3 per cent, and 3^ per cent, money, the 
 people's savings, in use by our financial institutions as 7 per cent, up to 10 
 per cent, money than we have any idea of. At all events we know that the 
 money which is on deposit in our banks draws for the depositor only 3 
 to 3}/2 per cent, interest. In other words, the Saskatchewan farmer 
 with money to deposit receives only 3 per cent, while the Saskatchewan 
 farmer on his loans is charged, as I have shown, at least 10 to lOj/^ per 
 cent, on the average. They pay 10 and receive 3. It may readily be 
 asked why anybody will deposit money in the banks when interest 
 so much higher can be obtained if the money be placed on farm mortgage. 
 The answer is that when money is placed on mortgage it must be placed for 
 a period of years whereas the average depositor probably is not in position 
 to tie up his savings for long periods. Beyond this the average farmer 
 lacks acquaintance with the machinery and facilities for placing money 
 on mortgage. But the best answer is found in the fact of the many 
 millions of dollars that are actually on deposit. I was in conversation 
 with a banker a few days ago when this subject was mentioned. He 
 informed me that Avhile his bank had a good many millions of depositors' 
 mone}', at the same time his bank had out in loans in the province a very 
 much larger sum. This information by no means meets the situation. 
 The bank is a borrower at 3 to 33^ per cent, and at the same time a lender 
 of the same money at an average of probably 8 per cent, or higher. 
 
 Now in Prussia the individual who has savings to invest finds an 
 immediate and safe market for his savings in the debentures of the co- 
 operative credit associations which yield 3^ per cent, on the money thus 
 invested — and the investments aggregate actually billions of dollars — 
 which money goes out on farm loans at an interest rate of less than 
 4 per cent. There is thus only a narrow margin between the original cost 
 of the money and the ultimate cost of it to the farmer. These debentures 
 or bonds are a constant marketable commodity, almost as readily transfer- 
 able as a ten dollar bank bill, and the value of them fluctuates scarcely 
 more than the value of gold itself. They form a liquid asset and the man 
 ^\^th savings may invest in these debentures and if he wants his money 
 he can obtain cash for them as easily as an ordinary bank deposit can 
 be withdrawn. Let me repeat that in Prussia the farmer pays less than 
 4 per cent, while the man with savings receives for these 33^2 per cent, or 
 better. Suppose, for instance, that by some similar organisation we could 
 
produce in this province a sj^stem under which investments would yield to 
 the individual with savings 5 per cent, upon these savings and which would 
 at the same time secure a rate of 6 per cent, on farm loans, what an enor- 
 mous advantage such a result would be to the province as a whole as against 
 the present condition of only 3 per cent, on savings and 10 to lO}/^ per 
 cent, on farm loans. 
 
 Mr. Speaker, to no one who is at all intimately acquainted with the 
 conditions in this province can the fact be disguised that a very large 
 movement has been taking place during recent years, and it is going on at 
 the present time, of farmers aw^ay from the farms and in an unfortunately 
 large number of cases away from the province altogether. I have been 
 living here and have been acquainted with Regina district during more 
 than a quarter of a century. In this district between the Canadian 
 Pacific Railway main line and the Qu'Appelle Valley there settled in the 
 early 80's as fine a type of farmers as any country ever possessed. A 
 remarkably large proportion of these farmers made comparative wealth 
 and the remarkably small proportion of them who are today to be found 
 on the farms in this district is the sad feature of the situation. Those 
 who were the prominent men of the district when I was candidate for the 
 Dominion House twelve years ago and who were still there in the campaign 
 of 1904 and again in our first provincial election campaign in 1905 when I 
 was a candidate in North Regina have with very few exceptions left the 
 district. They have gone simply by the dozen and most of them have 
 taken away wealth ranging from $10,000 to $50,000 and in some cases a 
 good deal more. I would not say it is true of all of them but I verily believe 
 that the lack of ready facilities here for the investment of savings has been 
 an important factor amongst the several other factors going to make up 
 the cause of the departure of a good many of them. My honourable 
 friend who sits for Lumsden can I am sure substantiate what I say and the 
 movement which I have described has been by no means confined to 
 Regina district. It has prevailed in a considerable degree in many dis- 
 tricts in the province. I am convinced that if these splendid citizens, 
 most of whom have gone from the province altogether, had had right here 
 available to them a safe and reasonably profitable market for their savings, 
 such market would have operated as a factor to keep them in the province 
 and on the farms and I repeat that the problem of finding such a home 
 market for savings is scarcely second in importance to the problem of 
 obtaining farm loans at reasonable cost. 
 
 THE WAYS OF THE MIDDLEMEN. 
 
 I am sure I need scarcely argue, Mr. Speaker, that we are obliged 
 to pay an excessive cost for our supplies and at the same time are under 
 the additional handicap of unduly depressed prices for the main products 
 of the farm and ranch. For the sake of brevity I shall quote a single 
 paragraph from a pamphlet recently pubHshed by Mr. J. H. Haslam, of 
 Regina, in which I find this statement : 
 
 "The farmers of Saskatchewan have received at their local elevators a 
 "price on an average during the past ten years of from ten to fifteen cent's, 
 "and last year twenty-five cents, less for their wheat than their North 
 "Dakota neighbours, and even a greater difference for their other produce; 
 
 8 
 
"and on the other hand have paid about twenty per cent, more on an aver- 
 "age for their implements, and they are dissatisfied with this state of 
 "affairs." 
 
 This statement of fact — and I do not think it can be disputed that 
 what Mr. Haslam states is a fact— certainly demands the most careful 
 consideration of everyone responsible in any degree for the conduct of our 
 public affairs. The statement simply means that Saskatchewan farmers 
 are under an enormous handicap as compared with their North Dakota 
 neighbours against whom we have to compete in the disposition of our 
 wheat and our beef in the British market. Then it must not be forgotten 
 that as against the European farmer even the North Dakota farmer is 
 labouring under a heavy handicap. The middleman is as prominent in 
 North Dakota as in Saskatchewan and the North Dakota farmer suffers 
 from excessive cost of his supplies and depressed prices for his produce 
 only in a lesser degree than does the Saskatchewan farmer. As against 
 the German farmer, for instance, who by co-operative organisations 
 has almost entirely eliminated the middleman and who is thus able himself 
 to sell his produce directly to the consumer, the Saskatchewan farmer is 
 handicapped to an extent entirely unbelievable until a careful analysis 
 is made. 
 
 THE MARKETING PROBLEM. 
 
 I think it may be admitted that in methods of production our farmers 
 are reasonably well advanced. I would not go so far as to say that in this 
 respect nothing is left to be desired because I am convinced that in com- 
 parison with the British and European farmers, the farmers both in Canada 
 and the United States have a great deal to learn. One only needs to 
 observe the fact that larger yields of grain are reaped in Great Britain 
 and most of the countries in Europe from land which has been under 
 cultivation during centuries past than are reaped from farms in the 
 United States or even from the virgin land in Western Canada. Even 
 in Egj'pt where the land has been regularly cropped for thousands of years 
 past it is not exhausted as is the case with a good deal of the land in New 
 England States. Even in the Dakotas where there was no settlement 
 half a century ago and where all the land is thus comparativelj'^ new the 
 average wheat yield has already reached almost the vanishing point. 
 Nevertheless in a general way as a result of the work of excellent agricul- 
 tural colleges, experimental farms and other means of spreading knowledge 
 of up-to-date methods our farmers are fairly well advanced as regards the 
 methods of production and the deficiencies existing are rapidly being 
 remedied. As to methods of marketing, however, there is a very different 
 story to tell. I feel under the necessity of compressing my remarks 
 and it will save time if I give to the House the results of a recent examina- 
 tion made by an American expert into this question. Mr. B. F. Yoakum, 
 in an article in "World's Work," calculates that the farmers of the United 
 States obtained in 1911 only six billions of dollars for products that cost 
 the ultimate consumer thirteen billions of dollars. New York's total bill 
 for one year, according to Mr. Yoakum, for eggs, coffee, rice, cabbages, 
 onions, milk, potatoes, meat and poultry was four hundred and sixty-four 
 millions one hundred and forty-seven thousand dollars. Out of that the 
 farmer received only two hundred and seventy-four million two hundred 
 and eighty-nine thousand dollars, or 59 per cent.; of the balance the rail- 
 
roads received 5^ per cent., amounting to twenty-j&ve million forty-five 
 thousand dollars: and the cost of selling and profits on the products was 
 one hundred and sixty-four million eight hundred and thirteen thousand 
 dollars, or 353^ per cent. He submitted the following table in respect of 
 items of daily food, showing what the farmer received for them and what 
 the consumer finally paid for them : 
 
 Farmer 
 Received 
 
 People 
 Paid 
 
 Cabbages 
 
 Milk 
 
 Potatoes . 
 
 $17,238,000 
 
 1,825,000 
 
 22,912,000 
 
 8,437,000 
 
 $28,730,000 
 
 9,125,000 
 
 48,880,000 
 
 60,000,000 
 
 By another table Mr. Yoakum shows the distribution of cost of the 
 thirteen billions of dollars which United States consumers of farm produce 
 paid in 1911: 
 
 
 1 
 Amount P.C. 
 
 Received by the producers, the farmers 
 
 Received by the railroads 
 
 $6,000,000,000 46.1 
 495,000,000 3.8 
 
 Legitimate expense of selling 
 
 1,200,000,000 9.2 
 
 Waste in selling 
 
 1,560,000,000 12.0 
 
 Dealers' and retailers' profits 
 
 3,745,000,000 28.9 
 
 
 
 Total paid by the public 
 
 $13,000,000,000' 100.0 
 
 
 
 These figures clearly indicate that were it possible for the farmer to 
 directly place his produce in the hands of the consumer, he might receive a 
 much better price for the produce. At the same time the consumer might 
 get his supplies at a much lower price than he is now obliged to pay. 
 The unfair condition which bears against both the producer and the con- 
 sumer is a condition which has been remedied in Germany. The German 
 farmer has found a solution for this problem by the application of the same 
 principle as that by which he has solved the money problem, the principle 
 of co-operation. 
 
 HOW TO DESTROY THESE HANDICAPS. 
 
 Mr. Speaker, these four questions or problems which I have briefly 
 referred to most urgently call for solution. Saskatchewan is more depen- 
 dent upon agricultural success than is any other country I know of. I 
 would not except even Denmark, because Denmark possesses a vastly 
 greater extent of sea-coast proportionately than does Canada as a whole. 
 In Saskatchewan farming must form the foundation of all activities. 
 If we have successful agriculture we may build up many other lines of 
 profitable business, but without successful agriculture we can do simply 
 nothing. I have become convinced that Saskatchewan, notwithstanding 
 the richness of our native farming resources, can never enjoy the success 
 which she deserves until these enormous handicaps are removed or de- 
 
 10 
 
stroyed. The New Zealand scheme for cheaper money could not affect 
 any of these problems excepting only that concerning the cost of farm 
 loans The same objection applies as against the scheme which is being 
 operated in Mexico and Egypt. On the other hand there is reasonable 
 ground for hope that the German co-operative system can be utilised in 
 Saskatchewan as a solution of all these problems and it is because of this 
 hope that the Government deems it wiser not to decide in favour of any of 
 these three well-defined modes of procedure until a full inquiry may be 
 made into the European system of co-operative agricultural credits. In 
 Germany co-operation has solved the question of dear money and has equally 
 provided a ready and safe home market for the savings of the people. 
 At the same time the system is being utilised to obtain the German farmer's 
 supplies at the lowest possible cost and to obtain for his produce the 
 actual prices paid by the ultimate consumer because through the co-opera- 
 tive selling associations his produce is placed directly in the hands of the 
 consumer. The consumer in Germany pays a very high price but there is 
 this satisfaction that the whole of the price goes to the producer. The 
 producer and the consumer alike are not milked by middlemen as is 
 largely the case throughout North America and is undoubtedly the case 
 in an acute degree at the present time in Saskatchewan. If there exists a 
 trust in Germany controlling the various items which furnish the table, 
 it is a trust composed of the actual producers. If it is necessary to have 
 a trust surely it is much fairer that the benefits shall be reaped by the farm- 
 ers of the country who are the foundation of all progress than by groups 
 of middlemen who neither sow nor reap but who in the United States, 
 and to a growing degree in Canada as well, are fattening upon the results of 
 other people's work. 
 
 THE GERMAN SCHEME. 
 
 The House already knows that when in Germany last autumn I 
 spent some little time in making inquiries into agricultural finance as it is 
 dealt with in that country. The system in operation there has been 
 analysed by Mr. Mantle in the paper now before the House very concisely 
 and very well. I shall not at this hour attempt any exposition of the 
 system inasmuch as Mr. Mantle's paper does it very much better than I 
 could do it. In a word I may say that the German farmers by pooling 
 their credit obtain their loans at the lowest possible cost. It is a fact that 
 cheaper money is not obtained by any authority excepting Governments 
 than is obtained by the farmers in Prussia through their co-operative banks 
 and mortgage societies. The principle is simple enough. We know it 
 even here. If I go to a bank alone I shall fail in obtaining money but if 
 my honourable friend, the leader of the Opposition, goes to the bank with 
 me and indorses my paper the money will be handed out to me. This is 
 merely a minor case of the pooling of credit. It naturally follows that the 
 combined credit of, say, fifty farmers each of whom owns his land is a 
 vastly better security than the credit of a single farmer. The funds dis- 
 posed of by the German co-operative societies are raised by the sale of 
 debentures. Their credit being absolutely sound these debentures 
 command the highest market price and thus is created the home market 
 for savings. The business of the societies beijig co-operative the expense 
 of conducting the business is held down to the minimum and thus the 
 borrowers of money obtain it at a very slight advance over the price 
 
 11 
 
received by those who lend the money, the lenders being the purchasers of 
 the debentures. 
 
 I had the advantage of exceedingly interesting and instructive inter- 
 views with the head of the Prussian department of agriculture who im- 
 pressed upon me that probably the greatest advantage of their system 
 was the permanency of the loans that are advanced upon mortgage. While 
 the borrower has the liberty to pay off the debt at any time the loan is 
 practically permanent at the borrower's option. 
 
 THE UNITED STATES INQUIRY. 
 
 The House is already aware that the people of Saskatchewan are not 
 alone in their interest as regards this important matter of the price of 
 farmers' money. The subject of agricultural finance has been made the 
 subject of inquiry already by both Great Britain and the United States. 
 The inquiry at the instance of the British Government has been under 
 way during more than two years past and I am at the present moment 
 looking with interest for the British commission's report which I have 
 been informed was placed in the hands of the printer some weeks ago. Most 
 of the members have doubtless either seen a letter or reference to a letter 
 issued by President Taft in October last on the same subject, the letter 
 being based upon a preliminary report submitted to him by the American 
 ambassador in Paris — a report based upon the result of the work of a 
 committee of some eight or ten gentlemen who were in Paris with Am- 
 bassador Her rick during the most of the past summer. In addition to 
 this inquiry as is explained in Mr. Mantle's paper, the United States 
 inquiry is to be proceeded with in the coming summer by means of a large 
 committee upon which there are to be two members from every state in the 
 Union and which goes to Europe next May to make a three months' 
 examination of agricultural co-operative systems in some six or eight of 
 the European countries including Ireland. The organisation of this 
 committee has resulted from a conference held in Nashville, Tenn., last 
 spring called by a body known as the Southern Commercial Congress 
 whose activities cover some sixteen southern states and whose functions 
 are similar in considerable degree to the functions of the grain growers' 
 association in this province. There was present at the Nashville con- 
 ference a gentleman whose name is known to every student of advanced 
 agriculture. Mr. David Lubin, of California, who is now the American 
 delegate in the International Institute of Agriculture at Rome. In fact 
 Mr. Lubin was perhaps more than any other English speaking person 
 instrumental in the organisation of the institute. During three or four 
 years past the International Institute has been pursuing inquiries into the 
 subject of agricultural finance and Mr. Lubin came to Nashville upon a 
 special invitation, the conference being called mainly for the consideration 
 of that subject. In Berlin I received advice to communicate with Mr. 
 Lubin at Rome which I did with the result that upon arrival home in 
 November I found awaiting me a reply from him in the course of which 
 he suggested that the Saskatchewan Government should attempt to 
 obtain permission for Saskatchewan delegates to join the United States 
 committee. I then communicated with Senator Fletcher at Washington, 
 president of the Southern Commercial Congress, as Mr. Lubin suggested, 
 and we have as a result not only received permission but have received a 
 
 12 
 
warm and hearty invitation to send one or two delegates to join the 
 committee which is to begin its work at Rome about 1st May. The 
 Government has decided that the opportunity thus offered should not be 
 neglected and it is the intention to arrange for the sending of at least one 
 and probably two delegates to go with the committee. 
 
 CO-OPERATION A SPLENDID PRINCIPLE. 
 
 Mr. Speaker. I do not wish to convey the impression that the Govern- 
 ment is committed to the idea of the European systems as against the New 
 Zealand and Egyptian systems. Personally I have an open mind but must 
 confess that the principle of co-operation which is the mainspring of the 
 European systems appeals to me as being very attractive and as offering 
 the hope of splendid results if applied in larger degree amongst the farmers 
 of Saskatchewan. The principle is by no means new here. It is the 
 principle which we adopted as the solution of the elevator problem, which 
 same principle is in operation in the conduct of Government creameries 
 and is largely the principle which is making such a pronounced success 
 of our rural telephone system. It has also been signally approved by the 
 farmers of the province in relation to hail insurance. It will not be new 
 to at least the older members of the House here to hear me express myself 
 strongly in favour of the principle. Speaking here two years ago towards 
 the conclusion of the debate upon the co-operative elevator legislation I 
 made use of the following words: 
 
 "Already I see reason to hope that the principle embodied in this 
 "scheme will solve not alone the elevator grievances but that this co- 
 -operative principle will be given such a manifestation of usefulness in this 
 "sphere that as a result many other difficulties and injustices will find their 
 "solution in an extension of the application of the same principle." 
 
 The pronounced success which has so far followed the operations of 
 The Co-operative Elevator Company quite justifies the words which I 
 used on that occasion and strengthens my hope that for the problems which 
 I have mentioned tonight a solution may be found by the further applica- 
 tion of the co-operative principle. 
 
 CHARACTER BUILDING. 
 
 I mentioned a little while ago the importance of the encouragement 
 of initiative, of self-reliance and a spirit of independence amongst our 
 people. State management of business which the people are capable 
 themselves of managing does not encourage these attributes but tends 
 rather to diminish them. Co-operation on the other hand has the effect 
 of strengthening initiative, cultivating self-reliance and promoting the 
 spirit of independence. I verily believe that if the co-operative sj^stems 
 which are in operation in Germany and in Ireland and in other European 
 countries could be transplanted in Saskatchewan and if the schemes of 
 co-operation already in force here with regard to elevators, creameries, 
 "telephones, and so forth could be amplified and made the solution here as in 
 Europe of these burdensome and outrageous handicaps, the greatest benefit 
 to our people would not be found in the removal of these handicaps them- 
 selves, enormous as such benefit would be, but would rather be found in 
 the effect which would be produced upon the character of our people. 
 
 13 
 
In the past and at the present time there has been and there is too much 
 individualism, too much of the spirit of each man looking after his own 
 affairs and being careless of the affairs or prosperity of his neighbour. 
 No community can be truly successful and progressive in which the various 
 members are willing to let the other members go to the wall. We have 
 seen in recent times the beneficial effect of the opposite spirit in some of 
 our young cities. In the early days in the province, in the times of 
 stagnation, particularly in the late 80's and early 90's I can well remember 
 how little of the spirit of co-operation prevailed in our towns. Each man 
 was playing his own hand and each man's hand was in a sense against 
 his neighbour's hand. There was no progress, no advancement. Things 
 went from bad to worse. In recent times no one can have failed to notice 
 a very different spirit. I have been told of instances in some of our young 
 cities where when a merchant or firm got into financial difficulties his 
 competitors joined together to save him from going to the wall. It was 
 recognised that a failure would be a damage to the city as a whole and to 
 save the general credit every man was willing to lend his own credit. 
 If the same spirit were to prevail throughout all our farming communities 
 not only would general conditions be vastly improved but there would 
 be also a consequent elevation of the standard of character of the people 
 throughout the province. I might, I think, very well instance what 
 occurred here in Regina in the weeks following last summer's cyclone. 
 Had there been no co-operation following the enormous losses occasioned 
 at that time, does anyone imagine for a minute that the city would be 
 in its present position? No, without co-operation years would have been 
 required to repair the damage and many of the sufferers would have been 
 handicapped permanently in a financial sense. With co-operation the 
 apparent damage has already been almost obliterated and while no doubt 
 many of the sufferers will not fully recover their financial footing for a 
 long time to come at the same time there has been no person allowed to 
 go under. Every one who needed assistance has been assisted to a position 
 in which he is able to carry on for himself instead of being a burden upon 
 the community. I am not sure that I am making myself fully intelligible — 
 I am not sure that I am able to convey the point which I have in mind. 
 Again for the sake of clearness, no less than for the sake of brevity, let me 
 quote a couple of sentences from a very interesting pamphlet which I 
 have recently read from the pen of Mr. G. W. Russell whose authority 
 will be at once recognised with respect to the subject of co-operation as it is 
 being exemplified in Ireland. Writing on affairs in Ireland, Mr. Russell 
 says : 
 
 "With the union of men to help each other came the promise and 
 potency of a progress inconceivable before, that with more economic 
 business methods, with cheapening in purchase, combination in sale, 
 with science in the farm and dairy, with expensive machinery co-opera- 
 tively owned, and with the complete control of their own industry — 
 farmers would create and retain a commercial wealth which could pur- 
 chase for them the comforts and some of the luxuries of civilisation." 
 
 According to Mr. Russell co-operation has done more for the better- 
 ment of conditions amongst the peasantry of Ireland than all the efforts 
 of the politicians. It has not only revolutionised the material conditions 
 and removed the scourge of abject poverty but has worked a vital change 
 in the habits of thought and the character of the people. It has produced 
 
 14 
 
social order where none existed before. Mr. Russell defines a community 
 with social order as a community in which are developed kindly social 
 and neighbourly instincts — the community with no sociarorder being 
 the one in which every man is looking after himself alone. 
 
 IN UNION IS STRENGTH. 
 
 Co-operation in mutual liability engenders mutual trust. Wherever 
 there is constant give and take — wherever the prosperity of the individual 
 depends directly and obviously upon the prosperity of the community 
 about him — there the social order tends to produce a fine type of character 
 with a devotion to public ideals and public duties. Co-operation means 
 organisation for mutual self-help — means communities where the splendid 
 principle prevails that each is for all and all for each — means the building 
 up of a rural population upon a basis of permanency — means the destroying 
 of the causes which make for disintegration. Co-operation means the 
 application of the old principle that union is strength. The shrewd mili- 
 tary general aims to divide the enemy and so to conquer. The predatory 
 interests successfully pursue this plan. They are able to conquer because 
 their victims are divided. The plain lesson is that the farmers of Saskat- 
 chewan who have to count themselves at present amongst the victims 
 should no longer remain divided but should band themselves together 
 by the principle of co-operation and so be able to successfully defend them- 
 selves against the common enemy. 
 
 I have said, Mr. Speaker, that the Government wishes to be under- 
 stood as retaining an open mind on the question of the method which ought 
 to be followed in the solution of this cheap money problem. We do not 
 wish to be considered as committed at present to any of the schemes which 
 I have mentioned. By voting for Mr. Sutherland's motion all that the 
 House will be doing will be to provide for the publication and distribution 
 of the information contained in Mr. Mantle's paper and giving approval 
 to the proposal that we should carry on further inquiry into the subject 
 by acceptance of the invitation received from Washington to send one or 
 two delegates with the United States committee. It has been asked 
 and will no doubt again be asked whether necessity exists for any further 
 inquiry or at all events for the sending to Europe for further information. 
 I may state that one of the reasons why any paper was prepared such as 
 Mr, Mantle has prepared and why such paper should be circulated through- 
 out the province is that the farmers of the province in our opinion are not 
 as yet well enough versed in the question to make it advisable to inaugurate 
 any particular scheme. I am convinced that a campaign of education is 
 very desirable. Even if we needed no further information, even if in our 
 own minds we were entirely satisfied as to the lines for the determination 
 of the best possible scheme, I should still very much doubt the advisability 
 of inaugurating any scheme at the present moment. The co-operative 
 elevator plan would not have proved" the success that it is if its inauguration 
 had not been preceded by a considerable period of lively agitation of the 
 question throughout the province. The circulating of this paper, the dis- 
 cussion which we are now having in the House, the sending of delegates to 
 Europe — all these steps will tend to create a public interest in the question. 
 Our farmers of course well know the existence of the problem — they know 
 it bitterly — at the same time I question whether thej^ have given the study 
 
 15 
 
which ought to be given to possible methods of solving the problem. As 
 will be found in the pages of this paper the United States delegation is not 
 going to Europe so particularly to obtain information. The facts as to the 
 European systems are fairly well known already. Two men are to be sent 
 from each state rather for the purpose of ensuring that in each state there 
 shall be at least two men thoroughly saturated with first-hand information 
 about the actual operation of the system in the several European countries 
 so that they may act as educators in respect of the question in their 
 respective states upon their return. It is largely with the same idea that 
 we propose the acceptance of the Washington invitation. 
 
 INQUIRY WILL REALLY SAVE TIME. 
 
 I am fully convinced that no time will be lost but that on the contrary 
 time will be gained and the welfare of our farmers far better served by 
 thoroughly investigating this whole question before deciding upon any 
 attempted remedy rather than by yielding to impatience and starting to 
 apply a scheme without being amply convinced that the scheme selected 
 is the one which is going to yield the best results. This Government has 
 been during its seven years in office a careful observer of the maxim that 
 "raw haste is half-sister to delay." We were chided from the Opposition 
 benches for too slow action in the matter of our rural municipal law, in the 
 matter of telephones and upon the elevator problem as well. Not a single 
 person today would think of suggesting that there was unwise delay by 
 the Government upon any of these questions. We took time to make 
 reasonably sure of the ground before deciding our policy in all these matters, 
 and the outcome has justified the care and time so taken. We have not 
 had to retrace the steps, and we need only note our position now in respect 
 of both telephones and elevators in comparison with the position of the 
 Manitoba people to appreciate how unwise it is for Governments to deal 
 hastily with far-reaching problems. There are contingencies in which 
 instantaneous decision is essential and when opportunity must be grasped 
 at once or lost forever, yet in the economic development of a country one 
 year or two years is so to speak merely an atom of time. Even the most 
 hard-pressed and impatient farmer admits now that any legislation upon 
 the elevator question in 1910— and I recall that we were roundly condemned 
 for failure to legislate in 1910 and held up in imfavourable contrast with 
 Manitoba — ^when we certainly lacked that adequate comprehension of 
 the situation, the jDossession of which a year later as a result of the un- 
 •usually able work of Dr. Magill and his colleagues, enabled the Assembly 
 to legislate wisely and along lines which experience in the meantime shows 
 to have been proper and permanent, would have been in the last degree 
 foolish and unfortunate — foolish for the Legislature and both unfortunate 
 and costly for the wheat-grower whose welfare was involved. This is not 
 idle speculation — it is a proved proposition — proved by Manitoba's 
 experience, because there my friend Roblin succumbed to the same im- 
 patience; he did in 1910 what we abstained from doing, and everybody 
 interested learned by costly experience later that a notorious blunder had 
 been committed. For us at the present stage to attempt legislation 
 on the far-reaching problem of agricultural finance would be equally 
 unwise as attempted legislation in regard to elevators would have been 
 for Saskatchewan in 1910. Of this I am completely convinced. In a 
 superficial way we know what is being done in other countries, in Australia. 
 
 16 
 
New Zealand and Egypt, and I ihink I have obtained a fairly accurate 
 understanding of the systems of mortgage societies and credit banks 
 operating in Europe because I believe these systems have their best 
 exempHfication in Prussia where I was fortunate enough to get my infor- 
 mation about them. Parenthetically I should perhaps state that my 
 visit to Prussia was made not officially but privately and my expenses were 
 not borne by the province. But it needs to be remembered that conditions 
 in Europe with populations running from 50 to 350 or 400 persons upon 
 each square mile of land and with farms tilled by father, son and grandson, 
 generation after generation, are vastly different from Saskatchewan condi- 
 tions. Eighty per cent, of all the billions of money loaned on farm security 
 in Germany by way of mortgage loans and short-term loans on personal 
 credit is supplied by the members of the co-operative associations them- 
 selves, that is to say, by the land owners and farmers themselves. No 
 such percentage could be hoped for under the same systems here for a long 
 time to come. I cannot pretend to know, nor do I think that any other 
 person is as yet in position to know, just how and to what extent the 
 European systems can be applied to meet our entirely different conditions. 
 In behalf of the Government I simply want to assure the farmers of the 
 province that now the way is clear and our hands are freed sufficiently to 
 permit us to take hold of the problem, there will be absolutely no waste 
 of time. 
 
 Mr. Speaker, in conclusion I shall merely say that for the reasons which 
 T have stated I give my support very readily and heartily to the motion 
 which our honourable friends from Saskatoon county and Regina city 
 have presented and before sitting down I wish in a brief word to compliment 
 the member who made the motion upon the forceful and convincing 
 manner in which he presented it. 
 
 On Saturday, January 11, Mr. McNeill (Hanley) presented the 
 following Report, which was adopted by the House: 
 
 "The standing Committee on Public Accounts and Printing recom- 
 mends that 20,000 copies of the information presented to the House on the 
 subject of Cheaper Money for Agricultural Development, together with the 
 speech deUvered on the said subject by the Premier, be printed and 
 distributed." 
 
 17 
 
CHEAPER MONEY FOR AGRICULTURAL DEVELOPMENT. 
 
 A Paper, containing Extracts from some publications on European 
 systems of co-operative agricultural credit and a memorandum dealing 
 with the inquiries into the subject made by Honourable Walter Scott, 
 Premier of Saskatchewan, while in Germany in the autumn of 1912, 
 submitted as evidence before the Standing Committee of the Saskatchewan 
 Legislature on Agriculture and Municipal Law, by A. F. Mantle, Deputy 
 Minister of Agriculture for Saskatchewan^ in January, 1913. 
 
 The subject of Cheaper Money for Agriculture is of more interest to 
 the farmers of Saskatchewan today than any other question attracting 
 public attention and probably interests them more than any similar 
 subject has ever clone. A study of what cheap money has made possible in 
 European agriculture will prove to any one that no subject more vital to 
 the material prosperity of this province could engage the attention, not 
 only of the farmers and of the government, but of all other classes of the 
 community as well. A study, too, of the condition of our basic industry, 
 grain raising, at the present time reveals to thoughtful men that there is 
 no greater need in our province today than better agricultural credit. 
 
 What is the matter with Agricultural Credit in Saskatchewan? 
 
 1.— It Is Too Dear. 
 
 The prevailing rate of interest on loans made by mortgage institutions 
 on the best. security there is, namely farm lands, is 8 per cent. Other 
 charges incidental to the loan increase the cost of this kind of credit. 
 The German farmer borrows on similar security, to the extent of two-thirds 
 its value, at from 43/^ to 33^ per cent., and the French farmer, through his 
 Credit Foncier, at 4.3 per cent. Various causes might justify a certain 
 disparity between interest rates on farm loans in Continental Europe and in 
 Western Canada, but so great a disparity as that cited cannot be regarded 
 as inevitable or unavoidable. 
 
 But the agricultural credit obtained on the security of a first mortgage 
 on his land is the cheapest credit the Saskatchewan farmer obtains (outside 
 of the interest on the purchase price of his land if bought from the larger 
 holders). The credit he obtains through his storekeeper, his implement 
 dealer and his neighbour is far more costly to him because he is paying 
 "credit" prices for everything he buys and, except in the case of the store- 
 keeper, 8, 10 or 12 per cent, interest on the "credit" price as well. On 
 the cheap money the German farmer borrows for his current expenses — to 
 purchase his supplies, implements, etc. — he pays only 43^2 or 4 per cent, 
 and is thus placed in a position to buy at rock bottom cash prices. These 
 high interest rates and other heavy charges for agricultural credit make a 
 tremendous drain on the resources of the farmer and make agriculture less 
 profitable than it should be. 
 
 18 
 
2. — It Is Provided Through Too Many Different Sources. 
 
 The business of the storekeeper is to sell merchandise — not credit. 
 The business of the implement dealer is to sell farm machinery — not credit. 
 When these and other agencies are called upon, or undertake, to sell 
 what it is not their business to sell, they naturally cannot procure and sell 
 it very cheaply. The business of the mortgage corporations; trust com- 
 panies and banks, it is true, is to sell credit, but at a substantial profit to 
 themselves. What Saskatchewan agriculture needs is credit at cost 
 or very near it. The business of co-operative agricultural banks and 
 mortgage institutions is to sell agricultural credit at or near cost. 
 
 3. — It Is Indiscriminate. 
 
 When ever}' merchant or dealer in a community is called upon to 
 sell credit as well as goods, or finds it profitable to do so, there is a natural 
 tendency to sell credit indiscriminately — to overload men with credit 
 obligations, if t^hey are unwise or inexperienced enough to assume them, 
 in order to sell them merchandise or implements. 
 
 4. — It Is 111 Regulated or Unregulated. 
 
 What is everyone's business is no one's business. When every mer- 
 chant or dealer in a community, as well as banks and loan companies, is 
 supplying agricultural credit, it naturally follows that no one agency knows 
 just what total of credit obligations a given farmer has assumed, or what 
 relation that total bears to the earning power of his farm. Were the 
 providing of agricultural credit placed in the hands of one or two institu- 
 tions, created especially for that purpose, in each locality, indiscriminate 
 and unregulated credit — which must mean expensive credit — would not 
 be obtainable. 
 
 5.— It Is Too Static. 
 
 Money obtained by mortgage is static money; that obtained from a 
 bank by open account is dynamic money. Every dollar that is borrowed 
 in either way should be put to productive uses that it may earn the 
 interest that is being paid for its use, and a profit for the sorrower besides. 
 Farmers, hke business men, should borrow only as much static monoy 
 (money on mortgage) as they can immediately put into uses that will be 
 productive for a long time — during the life of the mortgage in fact — and; 
 like business men, they should depend on the dynamic dollar borrowed as 
 needed and for only as long as needed, and on personal rather than real 
 security, for the ordinary needs of their calling. A barn may be built 
 or a permanent fance built, or live stock purchased with the proceeds of a 
 mortgage (static money), because these will be in productive use as 
 permanent equipment of the farm during the full life of the mortgage; 
 but machinery should not be bought nor store bills paid nor hoUday tr.ps 
 •taken with the proceeds of a mortgage, for all of these things either are 
 not productive at all — will not earn any interest — or will not remain 
 productive throughout the life of a mortgage. Machinery and implements 
 should be paid for with dynamic dollars borrowed from a bank exactly 
 when needed, to exactly the extent needed and for only the time actually 
 
 19 
 
needed to earn the money to repay them. If this could be done none of 
 the dollars borrowed for this purpose would lie idle or remain borrowed 
 to have interest paid on them when no longer in productive use as is apt 
 to be the case when money obtained by mortgage, that is to say, money 
 borrowed to a fixed amount for a fixed time, is used for such purposes. 
 
 The trouble is that at the present time there are insufficient facilities 
 for providing the farmer, even at 8 per cent, interest, with the dynamic 
 dollar he needs and s .ould have,, and which his cousin in business in the 
 city can obtain for perhaps 6 per cent, interest. Thus he is forced to 
 pay even more heavily to the retailer and dealer for the use of their dynamic 
 dollar in the form of "time" or else to resort to the too plentiful and 
 almost equally expensive static dollar of the mortgage or t -ust corporation. 
 What the Saskatchewan farmer needs, therefore, is the cheap "dynamic" 
 money and not merely or only cheap "static" money obtained on mortgage. 
 He requires cheap "static" money for his permanently productive improve- 
 ments and for the extension of bis operations, and for these purposes alone. 
 He requires cheap "dynamic" money for the varied needs of productive 
 development of the kind that quickly earns and repays its cost. 
 
 TROUBLE NOT CONFINED TO SASKATCHEWAN. 
 
 It need hardly be stated, but perhaps, lest there be any misunder- 
 standing it had better be, that the condition of rural finance described 
 in the foregoing is not confined to Saskatchewan, but exists to a greater 
 or less degree in all of the provinces of Canada and throughout the states 
 of the Union. While in some of its phases the condition may be worse 
 in Saskatchewan than in the eastern part of the continent, in others it is 
 undoubtedly better. The loans_ of money at 3 per cent, interest to co- 
 operatively owned creameries and the financing of their operations (when 
 government-operated) by the provincial government constitute material 
 provision of cheap "static" and "dynamic" money respectively for agricul- 
 tural purposes and thus are a contribution to improved agricultural 
 finance. Every patron of such creameries benefits in proportion to his 
 contribution of cream in the benefits of this cheap money. 
 
 The loaning at 5 per cent, of upwards of $1,000,000 to the Saskat- 
 chewan Co-operative Elevator Company forms a still more striking 
 example of the provision through government assistance of cheap "static" 
 money for agricultural uses. Every shareholder and patron of that 
 company cannot but be benefited financially by the transaction. Other 
 governmental policies that have a direct bearing on the question of rural 
 finance or the cost to the farmer of the credit which is essential to the 
 proper development of his business, are the bonusing of rural telephone 
 companies, the importation of live stock at cost, and the building of 
 millions of dollars' worth of country roads with 4 per cent, or 5 per cent, 
 static money secured on the credit of the province instead of 6 "per cent, 
 money secured on the credit of the several municipalities. 
 
 The point, however, is that, were the farmers banded together in 
 suitable organisations for the purpose, they could obtain all of this money, 
 and many scores of inillions more than any provincial government could 
 ever borrow in their behalf, upon the security of their own farms 
 in the case of static money, or their joint personal worth and their farming 
 operations in the case of dynamic money. The people of any country are 
 worth more than, and can offer as good security as, their government. 
 
 20 
 
As to the need throughout the United States for improved agri- 
 cultural credit, and the ability of the farmers themselves to provide it 
 when suitably organised, the words of the president of the United States 
 in a recent letter on this question to the governors of states are author- 
 itative : 
 
 "The need for the establishment of an adequate financial sj'stem 
 as an aid to the farmers of this country is now quite generally recognised. 
 The interest rate paid by the American farmer is considerably higher 
 than that paid by our industrial corporations, railroads or municipalities. 
 Yet. I think, it will be admitted that the security offered by the farmer 
 in his farm lands is quite as sound as that offered by industrial corporations. 
 Why, then, will not the investor furnish the farmer with money at as ad- 
 vantageous rates as he is willing to supply it to the industrial corporations? 
 Obviously, the advantage enjoyed by the industrial corporation lies in the 
 financial machinery at its command, which permits it to place its offer 
 before the investor in a more attractive and more readily negotiable form. 
 The farmer lacks this machinery, and, lacking it, he suffers unreasonably." 
 
 After commenting upon what has been done in Europe towards 
 solving this problem and upon the benefits that would result from its 
 solution in the United States, he says: 
 
 "All this can be done, and I am convinced that in this country it 
 must be done, by the efforts of the farmer himself. It is natural that 
 some of the European governments should have extended a paternal 
 protection over the systems of agricultural finance and to have given 
 them financial as well as legal assistance. This^ however, must be guarded 
 against in this country. We must establish a credit system of, for, and 
 by the farmers of the United States. It were better, otherwise, not to 
 consider the matter at all. It is an interesting commentary on the value 
 of paternalistic governmental support to note that this plan of agricultural 
 co-operative credit has thrived best — in fact, has enjoyed a substantial 
 development onl}' — in those countries where the movement has grown 
 up from the farmers and where the government has to the greatest degree 
 refrained from attempts artificially to nurture the plan by subsidy and has 
 restrained its interference to the proper field of imposing restrictional 
 legislation for the purpose of preventing speculation." 
 
 OLDER NATIONS HAVE ENCOUNTERED AND SOLVED THE 
 SAME PROBLEM. 
 
 The farmers of the North American continent are accustomed to 
 solving their agricultural problems in their own way and in setting the pace 
 for those of other nations. This is because their attention has been 
 chiefly directed to increasing their production through improved 
 methods of cultivation, etc. When they turn their attention as they are 
 now doing to reducing the cost to the farmer of producing his crops, 
 they find that at the root of this part of the matter lies the problem of 
 better agricultural credit. At the beginning of a publication of the 
 International Institute of Agriculture entitled "An Outline of the European 
 Co-operative Credit Systems," appears the followng account of the causes 
 that brought Europe into the forefront in this connection : 
 
 21 
 
''Since the early part of the nineteenth century European farmers 
 have been struggling against adverse economic conditions. Chief amongst 
 the difficulties against which they have had to contend has been the 
 competition of new countries of immense territory and virgin soil, which, 
 owing to the improvement in the means of transport, have been able to 
 flood the markets of Europe with agricultural produce. Even in the most 
 perishable products the competition has been severe, for the development of 
 cold storage has enabled them to be brought to Europe from the most 
 distant parts of the world. 
 
 "To make headway against this competition an economic transforma- 
 tion has been necessary, comparable to the transformation which has 
 taken place in industry. The European farmers have, accordingly, 
 reorganised not only their technical but their business methods. 
 
 "The new business methods which have spread all over Europe and 
 have been adopted even by the new countries (the United States and the 
 British Colonies) as well as by Asiatic countries, such as India and Japan, 
 consist, in the main, in the application of co-operation and mutuality — 
 combined efforts and the acceptance of mutual obligations— to the various 
 branches of the business of agriculture, of which the following are the 
 most important: 
 
 "(1) The provision of capital ; 
 
 "(2) The purchase of agricultural requirements; 
 
 "(3) The preparation and sale of agricultural produce; 
 
 "(4) Farm insurance." 
 
 The same excellent publication describes the principles of co-operative 
 credit as successfully worked out in Europe as follows : 
 
 "The main principle underlying all forms of co-operative credit is that 
 if a group of persons combine to furnish a collective guarantee they can, 
 on the security of that guarantee, obtain money at lower rates of interest 
 than they could obtain it individually. 
 
 "The collective guarantee may be that of real property. A number of 
 landowners may obtain capital on the security of a collective mortgage of 
 their lands. This is the basis of German Landschaften, one of the oldest 
 forms of co-operative credit institutions. 
 
 "Or, again, the collective guarantee may be a personal one. A 
 number of persons may obtain capital by making themselves jointly 
 responsible for its repayment. Such liability may be unlimited or limited. 
 
 "Unlimited liability is a fundamental part of the Raiffeisen system, 
 but in the Schulze-Delitzsch system the liability of the members of the 
 group is usually limited. Where the members are land owners, the collec- 
 tive personal guarantee becomes indirectly a property guarantee. 
 
 "Upon such guarantees capital may be obtained in a variety of ways. 
 In Germany the Landschaften issue bonds, but the Raiffeisen banks derive 
 their working capital mainly from the deposits they are able to attract. 
 In France the rural banks depend mainly upon capital advanced by the 
 state. In all countries the credit societies are able to obtain capital from 
 the larger banking institutions or from the investing public. 
 
 "Having obtained the capital, the group of persons must be able to 
 lend it to one another at a rate of interest only slightly in excess of the 
 
 22 
 
rate which they pay collectively. This requires two conditions: (1) that 
 the expenses of management shall be small in proportion to the business 
 done ; and (2) that the risk of loss shall be reduced to a minimum." 
 
 Where the money obtained as indicated above is loaned upon mortgage 
 the mortgage is itself abundant security as between the borrower and the 
 co-operative society, but in the case of the other and larger class of loans, 
 those made upon personal security for short terms as many as may be 
 necessary of the following safeguards are in every case provided: 
 
 "(1) That loans are only made to members of the group and 
 that only persons known to be trustworthy are admitted; 
 
 "(2) That membership is confined to persons residing within, 
 a small district and that, therefore, the members are personally known 
 to one another ; 
 
 "(3) That the members being mutually responsible,, it will be to 
 the interest of all members to keep an eye upon a borrower and to 
 see that he makes proper use of the money lent to him ; 
 
 "(4) That, in like manner, it is to the interest of all members to 
 help a member when he is in difficulties; 
 
 ''(5) That the borrower is required to find sureties or give other 
 collateral security for the repayment of the loan; 
 
 ''(6) That the borrower binds himself to apply his loan to a specific 
 purpose which will bring in a monetary return sufficient to enable 
 him to repay the sum borrowed, to pay the interest charged, and to leave 
 a profit for himself." 
 
 CO-OPERATIVE AGRICULTURAL CREDIT ORIGINATED 
 IN GERMANY. 
 
 While co-operative schemes of rural finance are to be found in success- 
 ful operation in a variety of forms and to the number of many thousands 
 of societies in German}^ Austria, Italy, France, Belgium, Great Britain, 
 Ireland and some other European countries, it is to Germany that all 
 nations have turned first for information as to the workings of co-operative 
 agricultural credit societies, for it was in that country that the first societies 
 of each of the leading types were formed, and it is in that country that 
 the whole movement has developed most rapidly and along the most 
 progressive lines. Having this fact in view. Honourable Walter Scott,, 
 Premier of Saskatchew^an, while in Europe last autumn (1912) instituted 
 some inquiries into this subject that is of such vital importance to the 
 basic industry of this province. The following memorandum contains 
 the substance of the information gleaned in the course of that inquiry, 
 and outlines in sufficient detail the organisation, methods, growth and 
 business of the different groups of agricultural banks in Germany, together 
 with some mention of the steps now being taken to bring the farmers of 
 this continent into closer touch with the results obtained in Germany: 
 
 23 
 
MEMORANDUM RE CO-OPERATIVE AGRICULTURAL CREDIT 
 SYSTEMS IN PRUSSIA. 
 
 The undersigned when at Berlin took occasion to make inquiries 
 concerning the processes or systems under which in Germany and other 
 continental nations the rates charged on moneys borrowed by farmers 
 and landowners have become as low if not lower than the rates charged 
 against the borrowings of merchants or manufacturers. Amongst other 
 sources of information I obtained through the good offices of the British 
 Ambassador in Berlin interviews at the Landwirtschaftsministerium with 
 Herr Geheimer Regierungsrat (head of the Prussian department of agri- 
 culture), whose information upon the whole question is immediate and 
 thorough and who was kind enough to give a most interesting summary 
 of the several systems in operation in Prussia, besides placing me in touch 
 with certain printed literature. From the interviews together with the 
 printed matter I have gleaned the subjoined information. 
 
 It was interesting to me to learn in Berlin that the governments of 
 both the United States and Great Britain are conducting investigations 
 into the same question. The latter government has had its inquiry 
 under way for more than two years past, and I was informed that Mr. J, 
 R. Cahill, acting for the board of agriculture in London, visited Berlin in 
 1910 in pursuit of the British inquiry. By communicating with Mr. 
 Cahill I have learned that the British report is almost ready (December, 
 1912) and that its publication may be expected very soon. As regards 
 the United States investigation the name was given me of Mr. David 
 Lubin, who is the American delegate to the International Institute of 
 Agriculture at Rome, with whom also I communicated, in addition to pay- 
 ing a visit to Washington, where from Honourable James Wilson, head 
 of the department of agriculture, and also from the heads of the department 
 of state, I obtained further information as to the purpose and scope of the 
 United States inquiry. There are indeed, two more or less independent 
 inquiries under way by United States authority upon the same subject. 
 On October 11, 1912, President Taft drew pointed attention to the question 
 by a letter which he issued to all the state governors. The president's 
 letter was based on a preliminary report made to him by the United States 
 Ambassador at Paris, Mr. Myron T. Herrick, in conjunction with whom 
 during several months of the present year some six or eight prominent 
 and wealthy citizens from different parts of the United States had been in 
 Paris pursuing an inquiry the initiation of which I gather was due to 
 efforts of Mr. Herrick through, or with the aid of, the American Bankers' 
 Association. The members of his committee were working in Paris at 
 their own expense. The other investigation, which Mr. Lubin is directing, 
 and which has been sanctioned and approved by unanimous vote of the 
 senate at Washington, is under way as the result of action decided upon at a 
 conference held at Nashville, Tenn. April 1-6, 1912. of the Southern 
 Commercial Congress, which is an organisation formed to promote the 
 economic development of the sixteen southern states of the Union. At the 
 conference,, however, which was held primarily to discuss rural finance, 
 and to which Mr. David Lubin had come from Rome on special invitation, 
 there were present delegates from twenty-seven states as well as officials^ 
 of the Washington Government. On April 26, 1913, there will leave New 
 York a commission composed of two delegates from every state who are 
 
 24 
 
to carry on investigations during three months in Italy, Austria-Hungary, 
 Germany, Russia, Denmark, Switzerland. Sweden, Belgium, Holland, 
 France, Ireland and the Balkan States. In all these countries the principle 
 of co-operative rural finance is being operated in some form. 
 
 RAIFFEISEN CO-OPERATIVE AGRICULTURAL BANKS. 
 
 Germany is regarded as the birthplace of co-operative agricultural 
 credit. The founding of the German system of agricultural co-operative 
 banks is attributed to Friedrich Wilhelm Raiffeisen, a burgomaster of 
 Weierbusch. who was led by the distress of the years 1846 and 1847 to 
 seek a remedy in a system of co-operation for the slight amount of credit 
 obtainable by the small landed proprietors. At Weierbusch, the first 
 town of which he was appointed burgomaster, and at Heidersdorf , to which, 
 he was appointed later on, he founded the first agricultural co-operative 
 loan banks, which were called after him and whose estabhshment was 
 followed by that of many others. 
 
 Raiffeisen saw that while the individual farmer might be too small 
 a factor to command extended credit facilities at good terms, a combination 
 of such farmers would represent a strength with which money lenders 
 would be glad to make terms. For the guidance of those entering into 
 the co-operative associations he laid down three maxims: First, that the 
 members of the association should hold themselves liable to an unlimited 
 extent for the transactions of the society; secondly, that the association 
 should operate only in a limited field, so that the members would be in 
 effect neighbours, and thirdly, that the management of the business of the 
 society should be done at a minimum cost, most of the members giving 
 their services gratuitously. 
 
 Raiffeisen feared speculative control of the banks, and in order to 
 avoid this and to extend the benefits of the system as widely as possible, 
 he declined to allow the banks to be established with a foundation capital 
 secured by selling shares of capital stock. To provide a working capital 
 for the banks he offered four sources of income; namely, deposits on 
 current account, savings deposits, loans from other banks or from private 
 individuals, and the reserve fund made up of earnings of past years. Since 
 the system was first established a law has been passed requiring all co- 
 operative banks to have a foundation capital and the Raiffeisen banks have 
 complied with this law by selling shares of stock, but limiting their value to 
 a nominal amount and restricting the right of individuals to hold large 
 quantities of stock. 
 
 A further concentration of strength was secured through the estab- 
 lishment of co-operative central banks, one in each province of Prussia. 
 These modelled on the lines of the local banks and the latter, speaking 
 generally, constitute the membership of the central banks. The local 
 banks subscribe to stock in the central banks to form their capital, and 
 their surplus funds are deposited in the central institution. The latter 
 also secures some money from loans outside banks, and some from loans 
 advanced by the central banks (one in Berlin and one in Darmstadt) 
 which form what might be called the cap.stones of the system and are to 
 central provincial banks what the latter are to local institutions. The chief 
 function of the central banks is to equalise the credit needs of the institu- 
 tions immediately subordinate to them. As a general proposition, the 
 
 25 
 
local banks have money enough to finance the farmers with all the loans that 
 they require, but the distribution of this financial strength is not always 
 uniform, one bank at times finding itself with a surplus, while another 
 may be in need of money to meet calls made upon it. The surplus of one 
 bank is deposited with the provincial bank and is in turn loaned to a 
 bank or banks requiring additional funds. Surpluses not needed in this 
 way are invested either with one of the two general central banks, or in 
 securities. 
 
 The banks finance the farmers through two sorts of loans, one on 
 current account and the other for fixed periods. The loans on current 
 account form about one-third of the total, and there is said to be a strong 
 tendency at present to extend this feature, inasmuch as loans on current 
 account form the most convenient kind for the borrowing members and 
 are similar to the loans of city banks to mercantile houses. Security is 
 given for the loans in the form of mortgages by the deposit of stock or 
 other securities and sometimes by mere promises. The Raiffeisen banks 
 were not organised for profit, and therefore none of the profits are dis- 
 tributed in the form of dividends; but while some of the money is expended 
 in the furtherance of public utility projects, the bulk of the profit is carried 
 over into reserve funds. 
 
 It is a remarkable fact that of the working capital used by the banks 
 to finance the farmers and members. 88 per cent, is furnished by the 
 farmers themselves or by the local depositing public, while the banks do 
 their business with a capital which amounts only to 3.8 per cent, of their 
 total funds. Savings deposits form the great bulk of their working capital. 
 Their expenses are small, for the reason that generally only one person is 
 a salaried employee, namely, the secretary, who does the actual executive 
 work. The basis of management for the banks is the general meeting of 
 members, at which a council of supervision and a committee of manage- 
 ment are chosen. In 1909 the average cost of management was only about 
 one hundred and fifty dollars. The business done, however, is large, as 
 may be gathered from the fact that the Raiffeisen banks numbered 15,158 
 in 1910 with 1,163,186 members and a total turnover of $1,061,568,167, 
 while the central banks comprised 38 institutions with 15,436 members 
 and a total turnover of SI, 557,293, 580. 
 
 THE LAND MORTGAGE ASSOCIATIONS— "LAND SCHAFTEN." 
 
 By "Landschaften" is understood the public credit institutions 
 resting on private, or corporate, mortgaging of landed property. The 
 historical Prussian "Landschaften" from which the newer and in some 
 degrees differently organised credit institutions have borrowed the name, 
 are much lauded creations of Frederick the Great. The plan of these 
 banks was accepted by that shrewd ruler, but would hardly have been real- 
 ised but for the authority of an absolute government. Only a few decades 
 later a crisis broke over Prussia which severely tested newly created credit 
 institutions. They may be said to have acquitted themselves splendidly. 
 Indeed, in the most critical times, agricultural credit was more solicited 
 than that of a state ; for the latter came to the East Prussian Landschaf ten 
 in 1808 and 1809 to raise a part of the military contribution by the issue of 
 mortgages on its forests and domains. The results of the Napoleonic 
 wars, together with the agricultural depressions of the twenties, rendered 
 
 26 
 
state aid necessary; the Landschaften finally fulfilled all of their obligations 
 and contributed very greatly to the relief of necessities that the estates of 
 the eastern provinces, which were most concerned, experienced at that 
 time. But the Landschaften helped also directly in the national uprising 
 of 1813; chiefly the East Prussian Landschaften in whose assembly hall 
 (which is still standing) the East Prussian provinces with General Vomn 
 York, decided upon the organisation of the voluntary popular rising of 
 the memorable days of February, 1813. 
 
 The fundamental idea of the Landschaften consisted in the substitu- 
 tion of the mortgage system (Pfandbrief system) for the individual mort- 
 gage in which creditor and debtor deal directly with each other. The 
 Landschaften is the intermediary between the estate (Grundbesitz) which 
 needs credit and the capital which is seeking investment. Its aim is to 
 afford the advantages which the mortgage bond (Pfandbrief) payable to 
 bearer, has over the individual mortgage, namely, the possibility of 
 releasing on the former at any time, and the added security of the institu- 
 tion and those joined together under it. In order to do this it evokes a 
 supply of capital which enables it to supply the need of the estate for credit, 
 under cheaper and more moderate conditions than would be otherwise 
 possible. 
 
 This ingenious organisation of land credit on banking principles, 
 first created in the Landschaften, has been initiated in and out of Germany. 
 A distinction must be made, however, between the mortgage institutions 
 of the most widely differing sorts. From the Landschaften in the above 
 senses are to be distinguished not only the mortgage banks and stock 
 companies, which carry on mortgage business for their own profit, but also 
 the state or communal-land-credit institutions erected in the interest of 
 the estate — agricultural banks (Landesbanken), provincial auxiliary 
 banks (Provinzial Hilfskasson), agricultural credit banks (Landeskredit- 
 kassen), etc. These institutions which take the place of the Landschaften 
 in those sections where the latter are wanting or but feebly developed 
 differ markedly from the Landschaften in that they do not rest on the inde- 
 pendent management of the organised estates, but are operated either by 
 the state, province or the communal union on its own account. In this 
 respect they are similar to mortgage banks. The security which is inherent 
 in the nature of the Landschaften constitution, namely the treatment of 
 agricultural credit as the most important factor, is thus largely lacking in 
 the other constitutions. The tendency has therefore grown to use the 
 latter institutions as a means for earning an income for the special purposes 
 of the union which has created them, in order to avoid assessments which 
 would otherwise be necessary. A fall in the rate of interest is not always 
 followed, as with the Landschaften, by a fall in the mortgage rates charged 
 by the institution on mortgage and bonds. The Landschaften are public 
 corporations under state supervision, which is exercised in Prussia either 
 by a commissioner especially appointed by the King, or by the minister 
 of agriculture domains and forests. 
 
 The board of directors of the above mentioned Landschaften have 
 the character of public officials. In this capacity they not only introduce 
 and supervise the coercive proceedings against dilatory debtors according 
 to the statutes and demand legal compulsory sale, but they also have been 
 given public duties of other kinds, such as the making out of certificates 
 of clear title and the determination of valuations for loans. The officials 
 
 27 
 
of the Landschaften are indirectly state officials. They are sworn in, 
 are subject to the disciplinary code and enjoy the privileges of state 
 officials with regard to communal taxes. The syndics (syndici) qualified 
 for the office of judge have notarial powers within their business district. 
 The higher officials are chosen by the credit unions, and the appointments 
 are ratified by the King of Prussia (the German Emperor) or the royal 
 minister, except in the case of the Landschaft of Posen where the members 
 of the board of directors are nominated by the state. The syndics and the 
 subordinate officials alone receive full salaries. The salaries of the mem- 
 bers of the board of directors who belong to the land-owning class are 
 nominal and based on the compensation for loss of time and out of pocket 
 expenses. 
 
 Within the limits of state supervision the Landschaften are self- 
 governing and independent in their methods of business. The organisation 
 of the individual institutions is similar only in its general characteristics. 
 The executive authority is composed of a general Landschaft board of 
 directors ; associated with this is a board of representatives (subcommittee) 
 which, with the exception of Brandenburg, forms at the same time the board 
 of appeal from the decision of the general Landschaft board of directors. 
 The highest court of appeal and the chief representative body is the 
 general "Landtag" formed of representatives of the land owners presided 
 over by royal commissioners. 
 
 Of the numerous privileges granted to the old "Landschaften" at 
 the time of their creation, the most important is the right to levy executions 
 on mortgaged real estate without legal process. The statutes of newer 
 Landschaften do not include this right, which would require a special 
 legislative Act. They have been able to protect themselves in part through 
 the statutory provision that the debtor on taking the loan must, by 
 statement before a notary, consent to immediate foreclosure in accordance 
 with certain sections of the civil process ordinance. 
 
 It follows from the defined purpose and the corporate organisations 
 of the "Landschaft" that each member has a right to be granted the use 
 of credit in the ways provided b}^ statute. The "Landschaft" is not 
 authorised like the mortgage banks, savings banks, and other institutions 
 simply to decline to make loans that are asked for. The purpose for which 
 the loan is desired is not generally inquired into by the "Landschaft." 
 However, in the case of the "Landschaft" of the Margravate, a request 
 for a loan to four-sixths of the estimated value must be based on an existing 
 material need, for example, the redemption of another mortgage im- 
 provement. Credit is created by means of the issue of mortgage bonds 
 (Pfandbriefs) bearing interest and payable to bearer. The earlier system 
 of so-called old mortgage, which were partial mortgage instruments on a 
 definite piece of property with the additional responsibility of the "Lands- 
 chaft" corporation has been abandoned. 
 
 The mortgage bonds are obligations of the Landschaft which are to be 
 considered as founded on a mortgage claim of the same amount. At least 
 this is the case in the older Landschaften. The legal connection between 
 the mortgage bonds and ,the hypothecated security which supports 
 them is evidenced by the fact that the mortgage bond is drawn up by a 
 special commissioner of control, who must be convinced by 
 looking . through the mortgage documents in question of the 
 existence of an equivalent amount of mortgageable property, and that the 
 
 28 
 
mortgage document is provided at the same time with a stamp. The 
 effect of the latter is that the keeper of the land register may record the 
 surrender, or the redemption, of the mortgage security only on proof 
 being given him by a certificate that a similar amount of mortgage deeds is 
 withdrawn from circulation. In the case of the individual Landschaft 
 the stamp is cancelled by the commission of control itself, under the same 
 conditions. In the case of several other Landschaften it is further pre- 
 scribed by statute that the hypothecated securities shall be liable ex- 
 clusively for the mortgage deeds. Most of the newer Landschaften have 
 not adopted such a provision, the legal effectiveness of which is not free 
 from doubt. The newer Landschaften have not adopted the commission 
 of control and the seal for the maintenance of equality of mortgages 
 between mortgages and mortgage bonds, but have placed the whole 
 responsibility with the board of directors — in other words,, the advisory 
 management. 
 
 Thus the legal relation between the mortgage deed and the hypothe- 
 cated security in the individual institution has been until now a more or less 
 loose one. In reality this matters but little. The organisation of the 
 Landschaften and the nature of their management are a guarantee that 
 no more mortgage deeds are issued than securities available. The question 
 whether the holders of the mortgage have a lien on the mortgage is of little 
 significance to the Landschaften because they do not enter into business 
 of other kinds,, and the mortgage holders do not thus compete with other 
 kind of creditors. 
 
 LIMITS TO WHICH LOANS ARE MADE BY THE PRUSSIAN 
 "LANDSCHAFTEN." 
 
 This limit is determined by establishing a definite valuation of the 
 property; loans may be made to a certain proportion of this valuation, 
 which is variously determined by the individual institutions. The 
 "Landschaften" loaned originally to half of the estimated value. At 
 present they loan generally to two-thirds of the value. The West Prussian 
 "Landschaft" loans to six-tenths; the Posen "Landschaft" which formerly 
 loaned only to one-half on properties of less than 30,000 marks valuation, 
 has recently introduced the general policy of loaning to two-thirds of the 
 value 
 
 The detailed provisions drawn up by the old "Landschaften" for 
 estimating the value of real estate are numerous. In general three groups 
 were distinguished in which the basis for the mortgageable valuation was : 
 
 (1) The land tax (assessment); 
 
 (2) A simple estimate of the value made on the basis of the land tax ; 
 
 (3) A formal estimate of the value. 
 
 In the first case loans were made to certain multiple of the yield of the 
 land tax, usually to fifteen times that tax, without further inquiry into 
 .value. Under the second method a simple estimate of the value was 
 made,, which was based on the land tax. Under the third method an 
 especial estimate of the value was made. The second method is applied 
 advantageously in making loans on large properties. The first and second, 
 or the first and the third alternate with each other, so that he who desires 
 only a small loan can select the cheap and convenient method of making 
 
 29 
 
the loan according to the land tax. The formal estimate of the value 
 is partly an estimate of the value of the land, partly an estimate of the pro- 
 duct ; even in the case in which estimates of the land values are introduced, 
 the value is measured so that it does not represent the purchase price, 
 but the value of the product. Forest lands are mortgaged on the basis 
 of the value which the land would have for other purposes. The mort- 
 gaging of the forests as such, which presupposes a permanent felling of 
 the trees and the forest culture in general, occurs in Silesia and was prac- 
 tised earlier in Brandenburg. 
 
 The estimate is made by the local deputies who (as members of the 
 "Landschaft") are responsible for its correctness. 
 
 The "Landschaften" grant amortisation loans which can be repaid 
 by the debtor at any time with the statutory period of notice. These 
 loans can only be recalled by the Landschaft on definite grounds (waste of 
 property, destruction and the like). Thus the comparative safety that 
 the borrower enjoys by obtaining a loan from the Landschaften, viz. the 
 unlikelihood of his being compelled to repay the loan at short notice) 
 constitutes one of the chief advantages of the Landschaft for the borrower 
 as compared to a private loan instution. 
 
 The old Landschaften pay the value of the loan in mortgage bonds, 
 which are converted into money for the debtor by the loan banks; the Han- 
 overian institute pays in cash. If the rate of the mortgage bonds stands 
 below the face value the old Landschaften furnish the additional loans on 
 demand from their ready capital to make up the difference in the rate. 
 Interest is figured on this advance for a number of years in addition to 
 the quotas payable to the amortisation fund on the principal. 
 
 The ''Landschaften" according to the nature of their organisation 
 furnish the credit as cheaply as conditions of the money market permit. 
 Only the newer institutions collect assessments to cover extraordinary 
 administrative costs. The older ones meet such costs from the interest on 
 the corporate property, formerly from a stamp tax (Quittungsgroschen). 
 The funds belonging to the ''Landschaft" were created in former times 
 mainly by additional payments of the debtor. 
 
 AMORTISATION— DISPOSITION OF THE SINKING FUND. 
 
 The old Prussian "Landschaft" regulations laid no obligation on the 
 debtor to make amortisation payments. At present this requirement has 
 been generally introduced, but the payments vary widely in amount and 
 manner. The newer "Landschaften" has a general one-half to three- 
 fourths per cent, amortisation. In the Pomeranian "Landschaft" as soon 
 as the debtor has paid off 5 per cent, of his debt he can demand to be 
 released from further amortisation payments, but must definitely give up 
 the right to make any later dispositions of the amortisation fund. The 
 West Prussian "Landschaft" collects amortisation payments of one-half 
 per cent, for ten years on that part of the debt which is based on the first 
 half of the estimated value. For that part of the debt which exceeds 
 the first half of the estimated value (up to six-tenths of the estimate) a 
 permanent amortisation payment of one-half per cent, is required. The 
 East Prussian Landschaft has made the amortisation payments more 
 stringent since 1899, in that one-half per cent, of the whole loan must be 
 
 30 
 
paid off annually for those loans which exceed the first half of the estimated 
 value. A voluntary increase of the amortisation payment is permitted 
 generally. 
 
 Corresponding to the nature of the amortisation credit is the right 
 of the debtor to demand release from that part of his debt which has been 
 redeemed. This is generally limited by statute, so that at least 10 per 
 cent, of the debt must first l)e redeemed. Furthermore with most I>ands- 
 chaften the debtor is granted the right after the redemption of 10 per 
 cent, of his debt, to demand new credit to this amount — that is to demand 
 an amount of credit corresponding to his redemption and deposit. In 
 this case a revision of the estimated value is made. 
 
 LOANS ON PEASANT PROPERTIES. 
 
 While the newer Landschaften were founded for peasant properties, 
 the older Landschaften were intended originally for the property of the 
 nobler classes alone, and have only later voluntarily made their creclit acces- 
 sible to the peasant class, or more exactly, to the properties not belonging to 
 the nobler classes. In East Prussia peasant property is accepted by the 
 "Landschaft" itself. The minimum property on which loans can be made 
 is generally fixed at 75 marks to 150 marks land tax, or a corresponding 
 capital value, and thus includes the large peasant holdings and the medium 
 holdings and a part of the independent smaller holdings. The Silesian 
 "Landschaft" extends its loans considerably further under the limits of 
 an independent development of the land. In 1895 it reduced the minimum 
 land tax necessary for loans from 30 to 15 marks. 
 
 RESULTS SECURED BY THE LANDSCHAFTEN. 
 
 The services which the "Landschaft" as the intermediary between 
 capital and the estate which needs credit performs for the former are 
 ordinarily less considered; and yet it is evident that the preparation of 
 over $2,000,000,000 of investment securities which have stood at the test 
 of the worst crisis through which the country has passed is significant 
 for solid capital. 
 
 The great importance of the "Landschaften" however, lies not in 
 their achievement for capital, but in the improvement of land credit. 
 The interest of the estate requires unrecallable credit, which is given as 
 cheaply as possible. Besides the "Landschaft's" unrecallable credit 
 is also given by mortgage banks and communal credit institutions (not 
 savings banks) but those institutions are generally not able to compete 
 with the "Landschaften" in cheapness of credit. Hence w^here the 
 "Landschaften" have developed, the business of mortgage banks is limited 
 chiefly to municipal loans. The great importance of the impossibility of 
 recalling the loan consists partly in the fact that the debtor (w^ho on his 
 part can cancel the loan at any time) has an advantage of the fall of the 
 " rate of the interest rate, but not the disadvantage of a rise, such as 
 happens especially in times of tightened money conditions. 
 
 It lies in the nature of a corporation which is compelled to maintain 
 a definite standard that the "Landschaften" are deprived of the mobility 
 which mercantile mortgage banks have. Yet charges of oppression, or 
 
 31 
 
tardiness and expensiveness in loan proceedings are but seldom heard. 
 Meanwhile perhaps all institutions have improved in this respect in the last 
 few decades, to which end the introduction of simplified principles has 
 contributed particularly. The keen interest that has been manifested 
 recently with regard to "Landschaften" give assurance that they will find 
 in the achievements of the past a spur for further efforts in the future. 
 (Signed) Walter Scott. 
 
 HOW TO ADAPT EUROPEAN CREDIT SOCIETIES TO SASKAT- 
 CHEWAN CONDITIONS. 
 
 It is by no means certain that an attempt to form and operate agri- 
 cultural credit societies modelled along the lines either of the "Raiffeisen" 
 or the "Landschaften" would meet with success in Saskatchewan or any 
 other part of this continent. But on the other hand there would appear 
 to be no good reason why an earnest attempt should not be made to apply 
 the principles underlying the success of those institutions to the problems 
 of rural finance in this province. Three courses are open to the Govern- 
 ment in dealing with this matter. Either they may do nothing, leaving 
 the field to private or unaided co-operative effort, or they may proceed 
 blindly without further examination to encourage the organisation of 
 societies of one or both of these kinds on some existing model, or they 
 may be seriously impressed with the importance of the question, their 
 responsibility in connection with it and with the probability that its 
 permanent settlement lies along some of the linesfollowedinEurope.andcon- 
 clude that the whole matter should receive further detailed study at first 
 hand with the avowed object of devising the best possible way of applying 
 the principles underlying success to conditions as they exist in Saskat- 
 chewan. The Government believes that the farmers desire them to pro- 
 ceed along the last named rather than along either of the two first named 
 lines. 
 
 It may be contended that there has been enough investigation, 
 and that the time for action has now arrived. In so far as this province is 
 concerned this is not the case. Nothing would be gained and very much 
 might be lost by proceeding without sufficient knowledge as to the extent 
 to which these European systems, or any of them, can be transferred to 
 Saskatchewan with a reasonable prospect of success, and the adaptation 
 of them that would be needed where European conditions do not obtain. 
 Governor Herrick, United States Ambassador to France and head of the 
 American committee of diplomats that has been investigating this question 
 under instructions from the President of the United States, says on this 
 point : 
 
 "I think it would be most unfortunate if after the public has been, 
 awakened to an interest in this matter, ill-considered organisations should 
 succeed in getting into the field and bringing about a repetition of the 
 farm-mortgage financial disasters of some twenty-five years ago. * * * 
 Therefore I am most willing that authoritative warning be made on this 
 point." 
 
 THE PROPOSED PLAN FOR FURTHER INVESTIGATION. 
 
 In April, 1912, the Southern Commercial Congress (a body formed to 
 promote the economic development of the 16 southern states, much as our 
 
 32 
 
grain growers' associations are formed to promote tlie economic develop- 
 ment of our three prairie provinces), invited Mr. David Lubin, the American 
 delegate to the International Institute of Agriculture, which is the official 
 international organisation through whose publications attention has been 
 chiefly directed to the achievements of agricultural credit systems, to 
 address their annual conference on the subject of rural finance. Mr. 
 Lubin did so, and as a result of what he was able to tell the delegates of the 
 successes of the European systems and of the possibility of their being 
 adapted to meet conditions on this continent, the following resolution was 
 passed unanimously by the congress: 
 
 ''Whereas, the solution of the problems of rural finance lies at the 
 basis of every attempt to improve rural conditions; and 
 
 "Whereas, the latent wealth of the farmer can only become active 
 wealth through the possibilities of credit freely obtainable on the basis of 
 his character and his assets; and 
 
 ''Whereas, there are in operation in Europe the following systems and 
 their variants, namely, Raiffeisen, Schulze-Delitzsche and Landschaften; 
 and 
 
 "Whereas, these systems have, during their existence,, greatly stimu- 
 lated rural finance in these European countries; and 
 
 "Whereas, we are convinced that the systems should be further studied 
 by the United States : Therefore be it 
 
 "Resolved, That we recommend to the directors of the Southern 
 Commercial Congress that a select committee on rural finance investiga- 
 tion, consisting of one or more, but preferably two, members from each 
 state of the Union, go to Europe in the summer of 1912, under the general 
 management of the Southern Commercial Congress, and under the adminis- 
 trative management of an executive committee to be elected by the 
 members of the select committee and under bylaws to be adopted by the 
 committee as a whole; be it further 
 
 "Resolved, That the daily findings of the select committee shall be 
 recorded in such form that each member may return to his state possessed 
 of one copy of said findings for publication and use in his state and that a 
 second copy be given to the nation through publication to be recommended 
 to the Congress of the United States for general distribution; and be it 
 further 
 
 "Resolved, That we preferably recommend two members from each 
 state for the reason that when the committee returns there will be in each 
 state two men well informed on the whole subject and locally interested in 
 solving the problems of rural finance as presented by the state of their 
 residence, and for the additional reason that a large committee bringing 
 many minds to bear upon the phases of one subject can be expected to 
 produce greater national good than would be possible from investigation 
 by a small committee not individually representative of the states of the 
 nation and in a measure unacquainted with the varying needs of the 
 . various sections." 
 
 It will readily be appreciated that the following advantages at least 
 will accrue to the work of a large and representative select committee 
 such as is proposed as compared with that of committee of commissions 
 representing only individual states or provinces: 
 
 33 
 
1. A greater aggregate of intelligence and experience will be brought 
 to bear upon a greater mass of information in the case of the large select 
 committee representing all parts of this continent than could possibly 
 be the case if only committees representing localities were sent; 
 
 2. Such a large and representative committee will have placed at its 
 disposal, or at the disposal of any of its various subcommittees, much more 
 information and many more important witnesses than a smaller or less 
 important body could hope to secure; 
 
 3. The findings of such a committee will attract much more attention, 
 carry more weight and authority, and be more likely to be harmonious 
 than would be the findings of a number of smaller committees. Thus there 
 is better prospect of prompt concerted and similar action being taken after 
 its return: 
 
 4. The expense of the inquiry to each province or state will be much 
 less than if individual inquiries were held by each. 
 
 For these reasons the Government of Saskatchewan feel that it 
 would be wiser on their part to provide for and appoint representatives 
 from Saskatchewan upon the large select committee which will visit all of 
 the principal European countries in which agricultural co-operation, both 
 in finance and in other matters, has been highly developed, during May, 
 June and July, 1913, rather than to provide for and conduct during prac- 
 tically the same months an inquiry which must inevitably follow identi- 
 cally the same lines but which could not hope to be so complete or 
 authoratitive. 
 
 Concerning the work of this select committee which will be representa- 
 tive of so large a part of this continent, Mr. Lubin makes the following 
 comments : 
 
 "Thus it will be seen that the mission of the select committee is not 
 merely to go to Europe for the purpose of reading up printed documents. 
 It is for the purpose of observing the working of the European co-operative 
 rural credit systems; of speaking to the farmers who are working under 
 them; of ascertaining their experience. It is for the purpose of gaining 
 information on the laws under which these systems operate ; of interviewing 
 the government officials who supervise their working; of visiting the local 
 credit banks and the central banks which handle the financial end of the 
 co-operative business. The select committee is to interview the presidents 
 and directors of the great agricultural associations and the leading econo- 
 mists. All the information thus acquired is to be assimilated, and at 
 stated intervals during the tour the various points are to be brought 
 up for discussion at meetings of subcommittees and of the committee as a 
 whole. The essential points thus brought out will be noted in the minutes 
 of the proceedings, and finally a report will be drawn up containing the 
 conclusions and recommendations of the committee." 
 
 With the return of this select committee and of the Saskatchewan 
 representatives who will be on it, and the reception b}-- the Government of 
 the report of those representatives, it should be possible to determine with 
 tolerable certainty the extent to which and the means by which the 
 principles underlying the success of co-operative agricultural credit in 
 Europe may be applied to the solution of the same problem as it exists in 
 Saskatchewan today. 
 
 34 
 
SUMMARY. ' •• '• ••:'.:•:•..•• 
 
 1. Cheaper money for agricultural development is a very live and 
 important subject in Saskatchewan at the present time. 
 
 2. This is because agricultural credit in this province at the present 
 time is dear, indiscriminate, unregulated, and to too great an extent 
 static. 
 
 3. What the farmers need is: 
 
 (a) Cheaper and more abundant credit of the kind that a mer- 
 chant or manufacturer obtains through his commercial open account 
 at his bank (dynamic money) . 
 
 (b) Cheaper and more discriminate credit upon amortisable 
 mortgages extending over longer terms (static money). 
 
 4. Such cheaper, abundant and discriminating credit can be obtained 
 best by the farmers themselves under government regulation through 
 co-operative institutions of two general types created and conducted for 
 the sole purpose of providing credit of two kinds — dynamic and static — 
 practically at cost, and for agricultural uses only. 
 
 5. Unsatisfactory and inadequate agricultural credit is not a condition 
 peculiar to Saskatchewan among the provinces but is common to a 
 greater or less extent of all the provinces of the Dominion and states of 
 the Union. 
 
 6. Driven, 140 years ago in the case of one class of societies, and 50 
 years ago in the case of the other, by the pressure of far greater abuses 
 and economic necessity than exists on this continent, German students 
 devised means for providing the farmers of that nation with the cheap 
 money essential to not only the development but the very life of their 
 agriculture. 
 
 7. Societies of both types (Raiffeisen and Landschaften) have proved 
 perfectly suited to their purpose, have multiplied in number until there 
 is now one such society for every 1,600 persons of the population and 
 the outstanding loans of all such societies of the various sorts are in excess 
 of three and one-half billions of dollars. 
 
 8. The rates of interest upon these loans whether temporary or mort- 
 gage never exceed 4}^ per cent. 
 
 9. The principles underlying- societies of both types have been applied 
 through the medium of institutions more or less resembling the originals, 
 to the solution of the problems of agricultural credit in all of the principal 
 nations of Europe. 
 
 10. Only in the Province of Quebec and the State of Massachusetts 
 has the principle underlying the Raiffeisen farm banks (one of the two 
 principal types in Germany) been applied on this continent. In both 
 cases it is reported that the plan has met with success. 
 
 11. Only in the cases of the co-operative mortgage banks created by 
 the Grange in the early seventies, and of the mortgage banks established 
 by the American bankers in the eighties has anything approaching the 
 principles underlying the German Landschaften and mortgage banks 
 (the other of the two principal types in Germany) been applied on this 
 continent. These attempts are reported to have failed through deceptive 
 and fraudulent methods and on account of being speculative. 
 
 35 
 
12. There is every reason to believe that if full investigation of the 
 conditions under which European systems have worked successfully, 
 and a careful comparison of those with Saskatchewan conditions is made, 
 and the task is approached in the right spirit, the principles underlying 
 the successful operation of those systems can be applied to the solution of 
 the same problem in Saskatchewan, and a satisfactory form of organisation 
 and method of procedure devised. 
 
 13. A select committee composed of two members from practically 
 every state in the Union will investigate this whole question right on the 
 ground, during and immediately following the meeting of the International 
 Institute of Agriculture at Rome in May, 1913. This committee will 
 work in Europe during the months of May, June and July, 1913. 
 
 14. The appointing of representatives from Saskatchewan offers 
 the cheapest, best and most expeditious means for the proper and necessary 
 detailed investigation of European systems of co-operative agricultural 
 credit in the interests of this province.