A^.RiC. DEPT. MARKETS and Rural Economics Science of Commerce and Distribution An Investigation of Agricultural Production and the Economics of Distribution; Cooperation in Marketing; Rural Credits; Agencies of Impending Change; Present Condi- tions and Tendencies; Future Pos- sibilities and Opportunities. By T. J. BROOKS \\ Professor of Markets and Rural Economics in the A. and M. College, of Mississippi Author of "The March of Intellect" THE SHAKESPEARE PRESS 114-116 E. 28TH STREET NEW YORK 1914 37 Copyright, 1914, By T. J. BROOKS DEDICATION To THE YOUTHS OF THE UNITED STATES IN WHOSE KEEPING RESTS THE DESTINY OF THE REPUBLIC THIS VOLUME Is DEDICATED PREFACE It matters not what vocation we may follow, each of us is vitally concerned, both in a material and social way, in the subject matter of this work. By far the greater activities of mankind are exerted in the pro- duction, distribution and consumption of the material things of life. It is a part of the task of civilization to so conduct these activities as to insure the greatest degree of efficiency. Without sufficient production life cannot exist; with- out proper distribution civilization must halt; without the application of the principles of economics to both, wanton waste must result; without an adequate sys- tem of markets and finance neither production nor dis- tribution can be economically performed. The neg- lect of our institutions of learning to teach these sub- jects to those who compose the masses, who produce and consume, has resulted in our wasteful methods of distribution. It is necessary that these subjects be taught to those who are to be the agricultural pro- ducers, and to those who are to be the urban con- sumers of the future, to properly equip the rising generation for the duties of to-day and make easier the progress of the future. It has been the purpose in these pages to give a work suitable for the class room, reference library and for private study. Sincerely yours, T. J. BROOKS, A. and M. College, Mississippi. CONTENTS CHAPTER PAGE I. General View 17 II. Commerce 22 III. Abstract Brief of Conditions 33 IV. Agencies Controlling Price 43 V. Marketing by Manufacturers 50 VI. Marketing by Corporations 55 VII. Marketing by Wage-Earners 71 VIII. Marketing by the Farmer 76 IX. Cotton Exchanges 83 X. The Grain Exchanges 95 XI. Stock Exchanges . 101 XII. Cooperative Marketing by Farmers 112 XIII. Difficulties in the Way of Co- operation 124 XIV. Legalized Loyalty 133 XV. How to Organize and Operate a Cooperative Company 145 XVI. Finding and Holding Customers by Modern Methods of Marketing 156 XVII. Selling Fruits 163 XVIII. Cooperative Dairies 168 XIX. Live Stock: Poultry 172 XX. Tobacco: Peanuts 176 CHAPTER PAGE XXI. Grain: Cotton 180 XXII. Marketing Perishable Produce. ... 189 XXIII. A Division of Markets Operated by the National Government. . . 194 XXIV. International Institute of Agriculture 2 1 3 XXV. Rural Credits 217 XXVI. Rural Credits in Europe 226 XXVII. Our Banking and Currency System. 244 XXVIII. Rural Credits in the United States. 265 XXIX. Cost of Living 300 XXX. Cost of Living (Continued) 308 XXXI. Cost of Living (Concluded) 313 XXXII. Theories of Reform 319 XXXIII. Home Ownership 329 XXXIV. The Farmer and the Soil 345 APPENDIX PAGE General Form for Cooperative Marketing As- sociation 355 How to Organize a Cooperative Creamery. . . . 366 By-Laws for an Egg-Shipping Association 374 Another General Type of Organization 377 Bibliography 3^ T Opinions of Leading Educators 385 Superintendents of Education 393 Amortization Table 397 OUTLINE OF CONTENTS PREFACE DEDICATION GENERAL VIEW CHAPTER I. Definitions and discussions of certain terms. Education : relative value of different kinds. Intellectual. Moral. Physical. Science : classified knowledge. Market. Price. Value. Commerce. Prosperity: essentials. COMMERCE: Importance of CHAP. II. Its influence in history and Its modern development. CONDITIONS CHAP. III. Our different industries. Our prosperity classified. Fabulous wealth and poverty : a paradox. AGENCIES CONTROLLING PRICE- CHAP IV. The law of price Supply and demand. Trust. Speculation. What insures prosperity. Influence of standards of civilization. MARKETING BY MANUFACTURERS AND WHOLESALERS CHAP. V. Effect of price on consumption. Effect of crowding the market. Manufacturer's price and consumer's price. Secrets of trade : cost of selling. Methods of sale. Drummers. Advertising. Correspondence. For- eign trade. MARKETING BY CORPORATIONS- CHAP. VI. Selling service. Selling products. What we do with what we produce. Different ways of squandering. Lessons the trusts teach. Advantages and disadvantages of large business. MARKETING BY WAGE-EARNERS CHAP. VII. Muscle service. Brain service. The two combined. \ The conflict between capital and labor. % MARKETING BY THE FARMER- CHAP. VIII. Old methods Home production and home consumption. The Roman farmer'? fate. Over-urbanism. New methods EXCHANGES. COTTON EXCHANGES CHAP. IX. Origin and development. The functions of cotton exchanges. Hedging. Gamblers furnish the wide market for hedgers. Bucket shops. Exchange vernacular Futures, basis middling, points, corners, hedging, scalping, margin, broker, ticker, tape, pit, off, on, put, call, long, short, pull, bear, wringout, matched sales, bucketing orders, stop-loss or- ders. Commissions Where the market for cotton begins. GRAIN EXCHANGES CHAP. X. Our largest grain exchange. If future dealing on margin were prohibited. The carrying function. When the farmer comes to his own. STOCK EXCHANGES CHAP. XI. The world's large stock exchanges. Their functions. The question of incorporation. That which determines the price of stock. Wherein stock exchange methods differ from those of cotton and grain exchanges. Borrowing stock. Partial payments. Some opinions of exchanges by eminent men. ^COOPERATIVE MARKETINGCHAR XII. Methods and degrees of cooperation. European methods. American methods. DIFFICULTIES IN THE WAY CHAP. XIII. Working capital. Deserting. Speculation. Too many things. Holding and losing. Place hunters. Lack of common interest. Dissatisfied with the progress made. Proper attitude toward cooperation. LEGALIZED LOYALTY CHAP. XIV. The office of contracts. Examples of success based on the contract agree- ment Kentucky tobacco growers. California fruit growers. Oregon fruit growers. Georgia fruit growers. Florida fruit growers. Virginia truck growers. Grain elevators. HOW TO ORGANIZE AND OPERATE A CO- OPERATIVE COMPANY CHAP. XV. Three kinds of corporations. The methods of each. Details of incorporating. Different ways of using incomes FINDING AND HOLDING CUSTOMERS- CHAP. XVI. The art of salesmanship. Different ways of reaching customers. Creating demand. Why we have not a larger share of the Latin- American trade. SELLING FRUITS CHAP. XVII. Examples from the Pacific slope, i Examples from Georgia and Florida. * MARKETING DAIRY PRODUCTS COOPER- ATIVELYCHAP. XVIII. Creameries. Cheese factories. Local factories. Centralizers. * MARKETING LIVE STOCK AND POULTRY CHAP. XIX. Least expensive to start. ^MARKETING TOBACCO AND PEANUTS- CHAP. XX. Simple rules. Experience in collective methods. Reasons for successes and failures. * GRAIN ELEVATORS AND COTTON WARE- HOUSESCHAP. XXI. Struggles of cooperative elevators. The only way to succeed. The only way of marketing cotton. The warehouse system. Successes and failures and why. MARKETING PERISHABLE PRODUCE- CHAP. XXII. Extent and value of truck farming. East Shore Virginia Produce Exchange. Other examples. OFFICE OF MARKETS IN THE DEPART- MENT OF AGRICULTURE- CHAP. XXIII. Its origin. Its needs. Its functions. Its relation to employment bureaus. Its possibilities. INTERNATIONAL INSTITUTE OF AGRI- CULTURECHAP. XXIV. Inception. Scope of work. RURAL CREDITS CHAP. XXV. Principles involved. Purpose and functions. COOPERATIVE BANKING IN EUROPE- CHAP. XXVI. German systems Schulze-Delitzsch. Raiffeisen. Landschaften. French systems Credit Foncier. Credit Agricole. OUR BANKING AND CURRENCY SYSTEM CHAP. XXVII. Faults of the old system. National banks. State banks. Private banks. Provisions of the new law. Volume of money in countries of the world. RURAL CREDITS IN THE UNITED STATES CHAP. XXVIII. Movements leading up to passage of bill. Features of the "Commission's bill." Criticisms. Special needs of agriculture. Fundamentals. Most prosperous section. Government aid vs. private initiative and self- help. Examples of government aid to home-ownership. COST OF LIVING- CHAPS. XXIX, XXX, XXXI. Fundamentals in economics. Relation of rise and fall of price and cost of living. Factors regulating price. Economic waste. Parasites Idle. Industrious. Squandering. International factors regulating price. THEORIES OF REFORM CHAP. XXXII. Views of leading thinkers. Anarchy. Communism. Single tax. Socialism. Syndicalism. Voluntary cooperation. HOME OWNERSHIP CHAP. XXXIII. Land monopoly. Alien ownership. Struggles at home and abroad. Conditions prophesies of what will follow. THE FARMER AND THE SOIL- CHAP. XXXIV. Conditions most conducive to the greatest develop- ment. Results of impoverishing the soil. The problem we must solve. Most important products of the farm. Other things, incidents, and means to an end. Training brains and soil. Greatest service. Worthy life. APPENOIXV General form for Cooperative Association. How to organize a Cooperative Creamery. By-Laws for egg-shipping association. General type of organization rules. Bibliography. Opinions of leading educators. CHAPTER I GENERAL VIEW IN beginning the study of a subject it is well to get acquainted with the terms used and the pur- pose to be served by the knowledge sought. There are numberless definitions of education. To be educated is to be equipped for life's work. The better the equipment the better the education. Edu- cation has no iron-clad metes and bounds. We differ only in degree, as none ever reach the limit of com- plete knowledge in the various realms of investiga- tion. I would say that education is such a qualifica- tion as will enable one to accomplish the most for one's self and be of the greatest possible benefit to mankind. It is composed of knowledge, discipline and culture, and is obtained by judiciously de- veloping the forces and capacities with which one is endowed. The degree of success achieved is determined by the relationship between the individual and his en- vironment. The value of any branch of knowledge is measured by its relation to human needs. The relative value of a given course of study to the one pursuing it is solely a question of the powers and aptitudes of the student. The relative value of a science or an art to society is determined by the needs of society and the relative utility of the science 1 8 Markets and Rural Economics or art. There is such a thing as knowledge being possessed when there is no opportunity for its use. And an opportunity to one is not necessarily an opportunity to another, because of a difference in the relationship of the individuals to their surroundings. To classify education as intellectual, moral and physical, the subject matter of this work would come under the head of intellectual. The basis of all progress is intellect. The purpose of knowledge is served when applied; and the purpose in studying Markets, the Science of Commerce and the Economics of Distribution, is to enable society to profit by the application of the knowledge secured. Science is classified knowledge. Every branch of study has its science. Classified error never makes a science. Knowledge capable of being classified becomes a science, and skill in utilizing the knowl- edge becomes an art. Surely there is knowledge of markets, commerce and economics sufficient to justify a course covering these subjects. A market is a place of exchange; marketing is the transaction itself. Buyin'g and selling is marketing, and constitutes the commercial business of the world. Without it there would be no industries in the mod- ern sense, and business would lapse back to that of the savage. Price is the commercial value when sold; or the amount asked before sold; or the quotation. Value is human estimation measured in units of account. It may be based on sale value, utility value, or keepsake value. Commerce is exchange or interchange of property, or title to same, between individuals or nations. It is carried on by money, barter, or balancing accounts. Prosperity means advance or gain- in anything Markets and Rural Economics 19 desirable. It implies net gain, a surplus production, or profit. Equity is the giving to each according to his due. Tb establish economic justice is the most difficult of social problems. As judgments and consciences differ, so do men differ as to what is due to each, or what constitutes a just recompense. Conscience is too oft warped by selfishness and disregard for others to be trusted far when self-interest is at stake. The selfish use of power has brought the world's revolutions. Majorities have fought the tyranny of minorities and minorities have fought the tyranny of majorities. Popular conceptions of equity are reflected in the laws of nations and the condition of the people. Here is the task of statesmanship, and the call for popular statesmanship is world-wide. It is estimated that twenty billion people have been in this world, and one and a half billion are here now. We are particularly interested in the 95 million who reside in the United States of America, and in certain questions concerning their welfare. There has always been, in every age of the world, the worker and the shirker, the producer and the parasite. One of the ends of government is to pre- vent the increase of parasitism and to destroy it as nearly as possible. The nation that encourages para- sitism, and becomes subject to the will and authority , of parasites, is inviting its own destruction. One of the duties of society is to obviate waste in produc- tion and distribution. This is not so much a govern- ment task as it is an industrial and commercial task. Under this head come Markets, Agricultural Eco- nomics, Commerce and Distribution. All the energies and powers of mankind are needed to be applied effec- tively and not wastefully. The destiny of the human 2O Markets and Rural Economics race for all the ages to come is more in the keeping of the people of the United States of America than of any other nation in the world. For this reason, viewed as a world citizen, the individual responsi- bility of the citizen of this country is greater than that of the citizens of any other country, and his. privileges and opportunities are correspondingly greater. The fate of this experiment in the Repub- lican form of Democracy has more to do with the future history of the race than the fate of any other sovereignty of the earth. There are subjects needed to be understood not taught in our institutions of learning. There are problems to solve that the big political parties are not attempting to solve. There are things for the farmer to do which do not concern production. There are issues to face with which the average citizen is not familiar. To aid in the work needed to be done in preparing for these duties and opportunities is the object of this volume. LESSON I Give a definition of Education. Is one's education ever completed? Of what is it composed, how obtained, and what is its purpose? How would you judge the value of a branch of knowledge ? What would you designate as included in the words "human needs"? How would you judge relative utility? To classify education as intellectual, moral and physical, under which head would you place the sub- ject we are studying? Markets and Rural Economics 21 What is the moving cause of all progress and the purpose of knowledge? What is the purpose of acquiring knowledge of the Economics of Distribution? Define Market. Define Price. Define Value. Define Commerce. Define Prosperity. Define Equity. Define Production. Define Distribution. Distinguish between Equity, Economy and Fru- gality. Industrially speaking, what two general classes have always been in the world? Whose duty is it to avoid waste? What people do you believe have the destiny of the world in their keeping more than any other? Why? Do you take any pride in the fact that you can help determine the course of history? CHAPTER II COMMERCE : ITS INFLUENCE ON THE RISE AND FALL OF NATIONS Master of Human Destiny; Kingdom, Empires and Republics Made and Unmade by the Shifting Currents of Trade; Control of Commerce the Key to the Future. Most of the wars of history have been struggles for commercial supremacy. Advantage or disadvan- tage in trade has determined the fate of nations in all ages. Read the history of the world and when- ever you find a rich and powerful nation, you will also find that its opulence came, not only from pro- duction, but either from extorting tribute from con- quered peoples, or through commerce generally both. Give to any country the exclusive control of the trade between the temperate and tropical zones, and it will soon tower above all other countries in point of wealth, thrift and power, notwithstanding it appears that Goldsmith has truly sung, u Where wealth and freedom reign, contentment fails, And honor sinks where commerce long prevails. " Markets and Rural Economics 23 In worldly matters, self-interest controls the af- fairs of men, and merchants of any kind generally charge for their services all that the sucessful opera- tion of their business will permit. This being so, deceit and fraud soon creep in to fill out deficits in corporate revenue and keep up the profit column in the ledger of trade. Commerce has builded civiliza- tions and its abuse has wrought their ruin. Let us notice a few examples. In the eastern hemisphere those who have carried on the trade between Europe and India, have been the great commercial magnates of the earth.- In ancient times, the Phoenicians possessed it for two thousand years, and it made them the great wealth kings of the East. But their very wealth and great- ness excited the cupidity of others, and in turn, Assyria, Babylon, Persia, Egypt, Greece and Rome conquered and possessed their lands. But, being wholly a commercial people, they cared little who conducted their political affairs or collected and ex- pended the taxes they could so easily pay. To the Phoenicians the Mediterranean served merely as a roadway over which they went to seek fortune and honor. They were bold seamen and penetrated to the most distant coasts, from the North sea to the Indian oceans, and it is thought by some, traded with Oceanica and even South America and Mexico, to whose Aztec civilization their records seem to allude. Phoenicia included what at present is the Holy Land, or Palestine, which is preeminently a land of .hills and valleys, rough and jagged, one of the most broken regions on earth that is cultivated, a kind of exploded desert, and yet this country possessed the famous cities of Tyre and Sidon, whose splendor and population far exceeded any other cities of the 24 Markets and Rural Economics Levant. Their commerce extended East to China, and westward to all the lands of Europe and in- cluded central and western Africa. Tyre was founded by the Sidonians at a period so remote that the date lies hidden behind the thick mist of centuries, but in the time of Ezekiel and Isaiah, she was "the stronghold of the sea," and u a glowing picture of splendor and maritime power." Sidon was a sister to Tyre, situated only twenty miles to the North, whose power was greatest about 1 5 centuries before Christ, during a period when Egypt held supremacy over Phoenicia. It fell into the hands of the Persians, who destroyed it, about five centuries before Christ. Tyre -was destroyed by Alexander the Gr'eat, 332 B. C.; she had withstood the assaults of Shalmaneser and Nebuchadnezzar with their million men, and against her fortifications the Assyrians thundered in vain. But her fall was complete. Today the relics of her splendor are beneath the restless sea. Back from the shore are still seen some of the rock-hewn tombs of those who once knew the mistress of the sea in her magnificence. The history of Tyre and Sidon with small differ- ence is the history of other cities of Phoenicia, such as Sparta, Antioch, Gabal, Beyrout, Dor, Accho, and later Caesarea. Why this breaking down of the Phoenician strongholds? Because of the shifting of the current of commerce. The conquests of Nebuch- adnezzar, the founder of Babylon, were to obtain possession of this commerce. He carried the traffic to Babylon, and up the Euphrates across Syria and Asia Minor, and gave the Western end of traffic to the Lydians, and Ionian Greeks. This awakened the Greeks from their lethargy of barbarism and Markets and Rural Economics 25 gave them a grand start upon their career of civili- zation. The power of the Assyrian empire was very largely based upon the possession of the eastern end of this commerce; the conquest along the Mediterranean having broken up the old line of trade by way of the Red Sea. Carthage might be called an offspring of Tyre. It possessed a goodly part of the traffic between Africa, Asia and Western Europe. This city dis- puted in arms the mastery of the known world. She was the ancient rival of Rome, with which war prevailed intermittently for nearly seventy-five years. It is related of Cato, the Wise, that upon a visit to Carthage, observing the haughty and intolerant dis- position of the Carthaginians toward the people of his own country, he returned to his place in the Senate of Rome, and ever afterwards closed his speeches, upon no matter what subject, with the statement, u Carthage must be destroyed." This was because Cato knew that if Rome did not destroy Carthage, Carthage would destroy Rome. Rome finally de- stroyed Carthage in the last Punic war, 146 B. C., under the generalship of Scipio's adopted son, Amili- anus Africanus, almost as distinguished a general as the conqueror of Hannibal. It was the Roman policy to divide and conquer, but also to leave to the vanquished their own customs and laws, and to exact merely tribute and supremacy. So it mattered little where the great marts were located, Rome was sure of a division of the profits. Away back one thousand years before the Christian era, when Egypt, Assyria, Chaldaea, Babylon, and the Hebrews were the governmental powers of the earth, the Jews enjoyed the greater portion of this enormous 26 Markets and Rural Economics trade. The Israelites are noted for their shrewdness as merchants and money manipulators. It so en- riched them that, it is said, u silver was in Jerusalem as stones." The development of this commerce was the sphere in which was displayed much of the pro- verbial wisdom of King Solomon, and it constituted the chief glory of his reign. But when Solomon's reign was ended by his death, there was no other man who could so magnetize the world as had he, so his kingdom divided and u The Assyrian came down like a wolf on the fold, And his cohorts were gleaming in purple and gold." Thus Israel was led captive. Nineveh was the Assyrian capital though many historians say Dam- ascus, "The eye of the East," was formerly the capital of all Syria. Here they gathered the spoils of many countries. Their innumerable castles and palaces have been the theme of poets and search- fields of antiquarians, rivalling in interest, Memphis, Thebes, Luxor and Karnak of Egypt. The Persian monarchy under Cyrus overthrew Syria, and under this king Babylon fell to rise no more. Time was when the Arabians shared with the Phoenicians the carrying trade of the then known world. Later, when Venice was at the height of its magnificence and glory, when Portugal was no petty province, but a nation of hardy and adventurous people; when the Dutch, with their quiet but per- sistent enterprise, were claiming at least their share of the world's prosperity, the Arabs succeeded in controlling the trade between Europe and India. The commercial ability displayed by these people was equal to their invincibility, and the vast returns made Markets and Rural Economics 27 to their merchant princes were expended as munifi- cently as even in the days when the ships of the world found their entry port in Venice. In the time of their greatest prosperity, the most beautiful and extravagant palaces were erected. A few individuals obtained a charter for an East India Trading Company from the Dutch Govern- ment, in the year 1602, with "the exclusive right to commerce beyond the cape of Good Hope, on the one side, and beyond the straits of Magellan on the other." There was also a Dutch West India Company, chartered in 1621, which was almost as great a monopoly. Its patent prohibited any person from sailing to the coast of Africa or America except in the company's service. It exercised all governmental powers over the colonies it established. One clause in its charter was that "they must advance peopling of those fruitful and unsettled parts." It established a colony on the shores of the Hudson river in 1622. In 1664, during the war between England and Hol- land, the English took possession of these regions. It must be remembered that the Dutch republic, lately freed from Spain, was during the iyth century the foremost maritime nation on the globe. Its trad- ing stations were scattered along the islands and coasts of Asia, and its ships penetrated the remotest seas. The Hudson Bay Company was chartered by Charles II in 1670, and was a factor in commerce down to our time. It was commercial jealousy that caused the English parliament to pass acts offensive to the colonies. Over greed for commercial domination brought on the revolution and lost England her Western Empire. 28 Markets and Rural Economics But the lesson she learned kept for Britain her other foreign possessions. f Even now the need for markets dictates terms of /peace and war. The control of the sea passed completely into the hands of England after the battle of Trafalgar. Then followed Napoleon's continental blockade, and the Emperor's decrees and British orders in council be- tween them made neutral commerce hazardous. Owing to the English supremacy at sea, Napoleon strove to make France economically independent. This was the origin of the beet-sugar industry in France, which reached in 1910 a million tons. What has made the great cities of the world? What is it that keeps the pulsebeat and heartthrob of industry going? What is the power behind the throne in the world's affairs? Two words tell it production and commerce. The panorama of history follows its currents; power in the comity of nations is measured in the clearing-houses. The rise and fall, development and decay, triumph and defeat of nations and insti- tutions crowd each other in rapid succession from the title page to finis of history's ponderous tome, rich with the spoils of time. Are we today building permanently? Egypt thought she had secured permanency. Drunk with dominion she gloated in her supremacy, wasted and brutalized the lives of myriads of whip-lashed slaves to rear pyramids to the vanity of the Pharaohs; but the hundred gates of Thebes have crumbled and her tombs lost to the dust they were built to com- memorate; and Egypt is the pawn of men whose progenitors wore skins, fought with clubs, and lived Markets and Rural Economics 29 in caves when the Ptolomies wore woven robes and world," u the cradle of learning." She built beauti- So thought Greece, the "darling of the ancient bore glittering blades. fully. The treasuries of nations gilded her domes and made her ruffled peninsulas an enchanted realm. The shores of the Bosphorus rang with the peans of Byzantium, a mart of power, and Athens the capital city was a wilderness of marble. Art, elo- quence, philosophy, generalship, heroism, culture, lit- erature and glory found in her a patron and sought her encircling arms. Was she not builded for all time to come? Yet, in solemn awe, we gaze upon the jumbled stoneheaps on the Athenian hills ! So thought Rome. She answered the u cosmic urge," founded, built, conquered, ruled debauched and died. She took charge of the progress of the world, carried it forward to heights hitherto un- known and tossed it into the sea. Rome is the tomb of the progress of a continent and the culminant civilization of four thousand years the light of ages whose chiefs, scholars, and men of iron are yet the fount at which the panting mind may drink deeply. Mother of dead empires, whose broken thrones and temples shelter 'neath the cypress, the haunt of the owl and the bat! The dust of her sepulchres scat- tered long ago. Crumbled works of genius mark the graves of a world a mirage of ruin. Feudalism built castles all over Europe to stand the wreck of time, and from which the world was to be governed. The feudal lords built these castles and held sycophant monarchs as proteges of their bureaucratic power, planned for a thousand years, ruled by force, gloated in their pitiless pride over the vanquished, and reveled in the wealth and luxu- 30 Markets and Rural Economics ries of spoiliation, till young democracy brandished the sword of revolt and defiance, and the earth trem- bled with the march of militant feet. Some of these castles stand yet, stern and quiet against the sky. No echoes of the chieftain's footfall sound in the big halls that once resounded with merriment and acclaims, when festivities crowded them with those in power. Grass grows between the stones and bats fly at night where royalty once reveled and planned to tax and plunder, as I have witnessed. Lack of proper conservation of resources and just administration of government will bring the same results now they brought in the days of old. To be unmindful of the law of recompense is to defy fate and be cast into the junk-heap. u The ruins of Amer- ica" may some time attest our folly and lack of statesmanship. With the application of machinery to modern in- dustry came a rapid evolution in the methods of com- merce. The classification and segregation of indus- trial pursuits necessitated an increase of exchange even with the same amount produced and consumed. This was due to the fact that no one produced all he needed to consume but produced more of some- thing than he consumed. For farmers to be pros- perous under the old regime it was only necessary that they produce abundant harvests of the ordinary articles of consumption. The surplus sold was mostly bartered, and little net profit in money was neces- sary. Clothes were made at home, and food deli- cacies, elaborate home equipments, extensive farm machinery were not in vogue. The need for a money crop to market in order to purchase the products of factories and of other lands had not been devel- oped. But, with the changes wrought by the rapid Markets and Rural Economics 31 increase in the use of machinery in every department of industry, commerce expanded as never before in the history of the world. This brought a new phase to the business of farming: Production was not all the battle, exchanging at a net profit was the new task. Without net profits there could be no accumu- lation and material progress. One producer of the useful things of life is not relatively of more value than another. Often men of ability work at things that are of no economic value to society and are in a sense useless. If life had no purpose beyond personal gratification social questions would not be worth discussing. It is one thing to see the u lost motion" in a system of business and quite another task to eliminate the useless friction. The economic pressure now mani- festing itself so sensibly is demanding of society a readjustment of some of the machinery of distribu- tion. LESSON II What can you say as to the importance of com- merce ? What can you say of its influence in history? In Ancient times? During the Middle Ages? In Modern times? Name some wars that were brought on by rivalry of nations struggling for commercial supremacy. In Asia. In Africa. In Europe. In America. 32 Markets and Rural Economics Give some special features of the modern develop- ment of commerce. What essential difference in requirements of pros- perous farming now and formerly? To what is due the remarkable changes in methods of distribution? What have you to say of the relative importance of inventors to other useful workers? Are the smartest people always the most useful? Are the best educated people always the most use- ful? Does it make any difference whether or not one is of any use to his f ellowmen ? What is the purpose of life beyond individual grati- fication? Do you see any u lost motion" in present methods of distribution? If so, where? Do you see any efforts to remedy it? If so, give instances. CHAPTER III ABSTRACT BRIEF OF CONDITIONS As a basis for a comprehensive understanding of our subject it is necessary to get a reliable statement of conditions as they exist. Taking as authority Sta- tistical Abstract Number Thirty-four, issued by the Bureau of Statistics, Washington, D. C., we find that according to the census of 1910 we had in continental United States 91,972,266 inhabitants; designated as urban 42,623,383; as rural 49,348,883. Population over ten years of age engaged in gainful occupation, 51,060,500. These are made up of workers desig- nated under five headings : Manufacturing and Mechanical. . . .29,073,233 Agricultural 10,381,765 Domestic and personal service 5,580,000 Trade and transportation 4,766,964 Professional service 1,258,538 Of the total number of inhabitants of 47,332,122 were males and 44,640,144 were females. The na- tive white of native parentage were 49,488,441 ; native white of foreign parentage, 18,900,663; for- eign white, 13,343,583; Negroes, 9,828,294; Indi- ans, 265,683; Chinese, 70,944; Japanese, 71,722; all others, 2,936. These and their descendants are the people we have to deal with and who constitute this Republic. 34 Markets and Rural Economics It depends upon the kind of people that are involved as to what may be expected to be accomplished. At the beginning of the government 90 per cent, of both wealth and population was rural. By 1860, at the beginning of the Civil War, the farmers owned only 50 per cent, of the total wealth. By 1900 they owned scarcely more than 25 per cent, of the total wealth. This decrease in the percentage of the total wealth owned by the farmer was not due so much to his losing his ground as a property owner as to the development of other industries in a greater ratio than at any other period in the history of the world. Manufacturing, mining, railroads, and commercial wealth increased so enormously as to forge ahead of agriculture with astonishing rapidity. In 1900 the total value of all farm property was $20,439,901,164; in 1910 it had reached $40,991,- 000,090. This sudden increase in the value of farm property was not due to increase in intrinsic wealth so much as to increment due to inflation of land values. The productive power had not increased at the same ratio nor had farming paid as large per cent, on investment as the other leading vocations. From 1890 to 1900 the farmers of the United States produced, in round numbers, $40,000,000,000 worth of farm products. There was an average of 9,000,000 engaged in agriculture. They had on an average of $18,250,000,000 worth of farm property in operation each year. And their net gain for these ten years, was $132,000,000. This is $1.58 per year, or $15.80 for ten years' work for each man engaged. Present estimate of the total wealth of the country is approximately $140,000,000,000. Of this amount $40,000,000,000 is agricultural; $14,000,000,000 of this belongs to other than farmers. The total Markets and Rural Economics 35 value of all property in 1904 was $103,104,211,917. From these figures it is plain that farm property had responded to inflation more rapidly during the first decade of the century than had other property. How- ever, we find from consulting the same source of sta- tistics that the value of the products of manufactures increased 40 per cent, from 1904 to 1910, due mainly to increase of output, although the cost of material has increased at as great a percentage as the value of the products. The Thirteenth United States Census shows a growth of 40 per cent, in the value of the products of manufactures in the United States between 1904 and 1909. The total in the former year was $14,- 793,903,000 and in the latter $20,672,052,000. In producing this amount the value of the materials used rose from $8,500,208,000 to $12,141,291,000, an increase of 43 per cent. This cost of materials does not include unused materials and supplies bought for either speculation or subsequent use. The value added by manufacture formed 41 per cent, of the total value in 1909, amounting to $8,^30,761,000, representing the difference between the cost of the materials used and the value of the manufactured products. The miscellaneous expense amounted to $1,945,676,000 in 1909 and to $1,453,168,000 in 1904. This includes rent, taxes, and expenses not elsewhere classified. The average number of wage earners employed during 1904 and 1909 was 5,468,383 and 6,615,046, respectively, and their wages totaled $2,610,445,000 and $3,427,038,000 in the same years. The number of salaried officials and clerks was ^19,^56 in 1904, and 790,267 in 1909, and their salaries amounted to $574,439,000 and $938,557,000, respectively. 36 Markets and Rural Economics , The total number of manufacturing establishments in the United States, exclusive of the hand and build- ing trades, the neighborhood industries, and those whose products were less than $500 per annum in value (except in the cases of factories just starting or idle during part of the year) was 268,491 in 1909, an increase of 5 2,311 over 1904. The capital in- vested rose from $12,675,581,000 in 1904 to $18,- 428,270,000 in 1909. We see from these figures that the manufacturers had in 1909 $18,428,270,000 invested and turned out a product valued at $20,672,052,000. And the number of hands employed was 6,615,046 at a wage cost of $3,427,038,000. The farmer had $40,000,000,000 invested, em- ployed 12,500,000 hands and produced only $9,000,- 000,000 worth at farm valuation, in 1911, which was the largest crop and of greatest value of any ever produced to that date. RAILROADS. We had in 1911 in the United States 238,000 miles of railroads valued at $16,767,- 544,827. These railroads employed 1,500,000 persons, who received annually $1,100,000,000. They used 58,000 locomotives, 46,000 passenger cars, and 2,200,000 freight cars. They carried 900,000,000 passengers a year, and 1,600,000,000 tons of freight. Their operating revenue was $2,500,000,000. Their operating expense was $1,800,000,000. Their taxes were $84,000,000. Poor's Railroad Manual, for the year 1910, shows that there were 237,867 miles of steam railroad in this country, that the gross receipts in 1909 were $2,513,212,763, and the net income was $1,018,- Markets and Rural Economics 37 OI 4>37- They received for carrying 924,423,075 passengers the sum of $510,262,551, or 56 cents per passenger. BANKS. The finances of a country control every other business. The total number of national banks in 1912 was 7,397, with capital paid in, $1,025,441,384.50; the circulating outstanding was $717,258,996, of which $31,947,510 was covered by lawful money of a like amount deposited with the treasurer of the United States. There were in December, 1912, 26,000 banks of every kind in the United States, with an aggregate capital of $1,855,987,360, with deposits of $17,000,- 000,000, and resources aggregating $25,000,000,- ooo. In the last ten years the number of banks has increased 82 per cent., 87 per cent, in deposits, and 6 1 per cent, in capital. Banking facilities have increased commensurate with the increased wealth. In 1900 there was one bank to every 5,560 inhabitants; now there is one to every 5,845. ^ The clearing houses of the country show an in- crease since 1900 of 90 per cent, having risen from $85,546,000,000 to $158,556,000,000. According to the report of the Secretary of the Treasury, November, 1913, our money and currency stood as follows : Gold coin, $614,478,201; standard silver dollars, $74,012,1^2; of subsidiary silver, $160,466,188; of gold certificates, ?48o,O79,73l 5 of Treasury notes, of 1890, $2,583,874; of United States notes or green- backs, $341,401,413; and of national bank notes, $722,615,240; footing up a total of $3,417,109,678. 3$ Markets and Rural Economics A Comparison for One Year 1907 The wealth of the United States was increased in the year 1907, $4,400,000,000. Who got the increase? The manufacturers received $2,672,000,000 The railroad companies received. . . 327,000,000 The national bankers received 127,000,000 The savings bankers received 238,000,000 State banks received 490,000,000 The life insurance companies received 333,000,000 Accident insurance companies received 40,000,000 Marine insurance companies received 40,000,000 The express companies, news compa- nies, Pullman. Palace Car Company, and other trusts received 156,000,000 Total , $4,400,000,000 The farmers received no profits, although they sold a crop in 1907 for $7,420,000,000. The brawn and brain of 92 million people in 1911 added $4,800,000,000 to our national wealth. Ac- cording to the sworn statements of the 270,000 cor- porations, their net profits were, for the year 1911, $3,300,000,000. The cost of running the national, state, county, municipal, etc., $6,800,000,000. When at $3,500,000,000. Total tribute to corporations and running expenses of the government, national, state, county, municipal, etc., 6,800,000,000. When the toll we pay to the various governments and cor- porations is $5,800,000,000, and the annual increase in national wealth is only $4,800,000,000, it is plain that we are drawing on our capital stock $2,000,000,- ooo every year. The public indebtedness of the United States, na- tional, state, county, municipal, and district, is equal Markets and Rural Economics 39 to the entire volume of money in the nation and costs in interest some $120,000,000 annually. This added to the private debts, which cost a higher rate of interest, and the debt load of the people is ap- palling. The entire area of the United States is approxi- mately 2,000,000,000 acres. There are 6,400,000 farms, or 878,800,000 acres are in farms; 478,500,- ooo acres are improved. The farm area represents about 46 per cent, of the total land area, and the improved land represents more than half the total area in farms. Improved land represents about 6ne- fourth the total land area of the country. On these acres are produced 22,000,000 carloads of products a year, equivalent to a train of cars reaching six times around the earth. The value of the 1910 crop, at the average price received by the farmers, amounted to nearly $9,000,- 000,000. Presuming that the farmers consume $3,- 000,000,000 of it (about one-third of our population live on the farm), the amount sold by the farmer is $6,000,000,000. For this the consumer paid $13,- 000,000,000, making a difference of $7,000,000,000 for the cost of getting it from the farmer to the consumer. There is a necessary expense in distribution that cannot be avoided, but there is entirely too much waste between the producer and consumer. At least $2,000,000,000 could be saved through cooperative efforts on the part of the farmers and consumers. To divide this $2,000,000,000 equally between the farmer and consumer would be $1,000,000,000 to the farmers, which would be $44.44 for each man, woman and child living on the farms of this country. 40 Markets and Rural Economics And to divide the $1,000,000,000 among the con- sumers would be $16.66 per capita for the consumers of the United States. The value of our exports for 1911 was $2,049,320,199 The value of our imports for I9 11 1,527,226,105 The value of both exports and imports for 1911 3^76,546,304 The amount of exchanges of the clearing houses of the United States for 1910 . . $168,986,664,000 With a population of 33,000,000, the South now has invested in business about $84,000,000 more than the whole United States could show in 1880. The value of the South's crops now exceeds the value of the crops of the whole country as late as 1890. The South's coal products in 1911 amounted to two and a half times the coal output of the whole country in 1890. Notwithstanding these signs of fabulous wealth and evidences of prosperity, the pessimistic fact re- mains that as land values and product values increase the number 'of farms relatively decreases and the pro- portion of tenants grows greater! There is a grave economic problem involved in this anomalous and paradoxical situation. In the states of Kentucky, Tennessee, Mississippi, Louisiana, Texas, Arkansas, and Oklahoma tenant farms have increased from 3 ? to 5 1 per cent, during the last thirty years! In Mississippi and Georgia two-thirds of -the farms are tilled by those who have no share in their ownership. In South Carolina 63 per cent, of the farms are operated by tenants. The states with the largest average annual income Markets and Rural Economics 41 per farm worker are decreasing in farm population. The average farm wages in the upper Mississippi valley, where wages are highest, is less than thirty dollars a month. At the present price of farms in the most productive states of Illinois, Indiana and Iowa, if the wage worker saved every dollar it would take him from thirty-five to forty-five years to earn enough to own an average farm ! Half the number of those holding the plow-handles of the United States are homeless ! Taking the country as a whole, more than one- half of the families have an income of less than $600 a year, and more than 4,000,000 families have an income of less than $400 a year. If these facts do not concern us nothing human is worth while. LESSON III What percentage of the inhabitants that have been in the world are i>ow living? What percentage of the people now living are in the United States? How many over ten years of age are doing some- thing; useful? Give the population as per vocations. Has the farmer held his own as a property owner with those of other callings? To what do you attribute the enormous increase in farm values during the first decade of the century? Did this increase indicate greater net profits on amount invested? How do farm product values compare with manu- factured product values on a basis of wealth invested and hands employed? 42 Markets and Rural Economics How do farm profits compare with railroad cor- poration profits on the same basis? How does farming compare with banking under the same test? What becomes of the annual net increase in wealth? What is our volume of money? What is the amount of public indebtedness of the country ? What are the annual expenses of the governments, national, state, county and municipal? What percentage of our national area is cultivated? How much waste is estimated to take place be- tween the farmer and the consumer? Does the annual output of the farms of the United States indicate laziness or thriftlessness of the farmers ? What effect has the increase of farm and farm product values had on tenant farming? Give some statistics on tenantry. Give your version of the cause of this tendency as indicated by the statistics. What can you say of the opportunity of farm laborers to become farm owners? What can you say of the average incomes of half the families of the country? Why is it worth your while to be concerned about these things? CHAPTER IV AGENCIES CONTROLLING PRICE THE LAW OF PRICE. One of just three things, or a combination of them, controls the price of abso- lutely everything bought and sold : 1. Supply and demand. 2. Trust. 3. Speculation. When not interfered with by artificial means, supply and demand will regulate prices (not forgetting that the supply and demand of money act conjointly with the supply and demand of that which money buys). But very few articles of modern commerce are not interfered with by artificial means. Articles perishable in quality and limited in use truck gardening products, strawberries, tomatoes, etc. are subject to the fluctuations of spasmodic de- mands. But articles non-perishable in quality and general in use, such as cotton, grain, meats, machin- ery, coal, etc., are not subject to violent fluctuations in the market if controlled by the law of supply and demand or regulated by a trust. Only speculation operates to change suddenly the price for which there is a constant demand and a general supply. So that when commodities of this kind vary in price, so as to bring about spasmodic changes one may know that speculation is setting the price. The 44 Markets and Rural Economics law of supply and demand does not operate that way. Nor does a trust allow its output to vary in value by the "ticker V 1 points manipulated by "riggers" on change. One never hears of anyone buying fu- tures on coal, oil, beef, steel, or any of the great commodities handled by trusts. The supply is reg- ulated by demand at a fixed scale of price, arbitrarily set, and the article furnished to consumers only as demand meets the price. It does not matter how many new oil wells are developed, it does not tumble the price of oil below the cost of production the trust sees after the supply and price. Go through the list of trust-handled articles of commerce, and the underlying business principle is the same regulate the supply to demand in accordance with the law of markets. The same law applies to a railroad system, the supply of the money volume, sugar, coffee, beef, iron, coal, oil, electricity, a patent, any commodity or ser- vice that the public demand and the available supply of which is limited. The demand for the great staple products of the farm is constant the year round, and it is a violation of every law of business success and principle of economy to rush these supplies on the market regard- less of the needs of the consumers. There is a sci- ence of commerce, the same as of chemistry, and it behooves the farmer, as a feeder of the streams of commerce, to understand the part he plays in the economy of business. Trust managers understand the science of com- merce and apply their knowledge. Knowledge is power, and commercial knowledge, applied by the few, and commercial stupidity of the masses, have left the masses the victims of the classes. Markets and Rural Economics 45 To illustrate by concrete examples: We have a great crop in the South which the farmers peddle out or auction off to the local bidders as soon as the crop is gathered. The more they make of it the less they get for it. Is that the best way to sell a crop that is non- perishable and of universal use? Do manufacturers sell that way? Do mine owners sell their products that way? Do railroads sell their service by peddling their tickets or selling them at auction? Do banks loan money through street-hucksters? Are public offices let out to the lowest bidder? The very thought is so preposterous that to answer these questions would be childish. Then why does the farmer do this in direct violation of every principle of success- ful business? Should he continue thus to use his vvealth to show how little he knows about rural economics? Is it not within the purview of rural economics to deal with this question, and help to solve one of the big business problems confronting us and demanding solution? There is certainly no excuse whatever for the till- ers of the soil not getting full measure of remunera- tion for their labor. When the change contemplated has been ushered in, there will be no more thought of returning to the old ways than we think now of going back to the reaping hook, the stage coach and the wooden plow. The opportunity presented is a test of the business intelligence of the man behind the plow. Do you not know that it does not necessarily mean anything for a people to live in a rich country? Other things being: equal, a people are prosperous in pro- portion to their industry and the fertility of the soil. But other things are hardly ever equal. 46 Markets and Rural Economics Let us consider an instance or two. The Israelites were given the pick of Egypt, which was itself the garden spot of the world. But when Joseph died and other Pharaohs came to the throne that knew not Joseph, they enslaved the Israelites, reducing them to abject servitude. All but a bare existence was taken as tribute by the Egyptian mon- archy. They were placed under task-masters and compelled to "make bricks without straw." Nothing was in life for them but servitude. Fertility of the soil and industry did not mean prosperity to them. Finally, before they could prosper, they had to exile themselves to a country, which, in comparison with the one they had left, was an exploded desert. And there they did prosper, till they excited the cupidity of the Babylonians, who came and transferred them to the valley of the Euphrates, to serve the Baby- lonians. India is one of the richest countries in natural re- sources in all the East; and yet more people starve to death there, every year, than in any other country on the globe. Ireland is one of the most fertile countries in all Europe, and yet, because of the failure of the Irish potato crop in the year 1846, 1,000,000 Irish people actually starved to death, and another million fled. With all their industry and natural resources they lived so close to the brink of starvation that the fail- ure of a crop left the people helpless, and no matter what the rest of the world produced they could not purchase. Take South America, practically an undeveloped continent of wealth, but a country that plays but little part in the international affairs of governments. What do all these instances show? Markets and Rural Economics 47 In the case of the Israelites it was a case of oppres- sion they did not get justice. Government robbery would express it. In the case of India, it was a case of government extortion linked with the ignorance and the supersti- tion of its tropical people. With Ireland it was a case of discrimination and landlord extortion. In South America it is the people. How is it with us here in the United States? Take New England, the poorest part of our do- main that pretends to be cultivated at all. They have poverty there. But in point of wealth per capital, they are ahead of the most fertile section of the whole country the rich alluvial bottoms of the Mis- sissippi valley, where they make a bale of cotton to the acre and other things in proportion. Wherefor is this difference? It is not because they havt natural advantages in the sterile hills of the East. It is nothing more nor less than a difference of management. Production, transportation, wholesale jobbing and retail expenses, agencies of advertising and taxation expenses all enter the bill to the consumer. Legisla- tion affects price by regulating the money supply, by taxation and tariff and immigration regulations. Standards of civilization have much to do with the wants of the people, and these wants determine the quality and amount of products consumed. The phys- ical needs and wants of people of the tropics are different from the physical needs and wants of the people of the temperate zones. Even a greater dif- ference exists when it comes to intellectual wants. 48 Markets and Rural Economics These are determined almost wholly by the degree of culture and refinement that is possessed. Any article produced exclusively for sale and not for use by the producer is wholly dependent for a market on standards of civilization, and the power to consume. Human desire is always beyond the power to supply when it comes to articles of comfort, pleasure and property of permanent value. This in- sures constant employment so long as the power to purchase labor or its products is possessed by the masses. Every dollar's worth of wealth or time wasted means so much denied the people which they might have. LESSON IV What are the agencies of distribution? What are the agencies controlling price? What proportion of the cost of distribution is con- sumed by transportation? What proportion is consumed by merchandising? What proportion is consumed by unavoidable waste ? How many kinds of merchandising? Name them. Is the cost of production easily obtained? Is the cost of distribution easily obtained? Which are the easier to obtain, and why? In determining price what steps would you follow to reach a correct conclusion ? Does living in a rich country and raising big crops insure prosperity? Can you name exceptions to the rule? What do you consider the cause for these excep- tions? Markets and Rural Economics 49 What do you consider the greatest controlling fac- tor in controlling price? What is your opinion as to the influence of legis- lation on price? What determines the power to consume? What is your opinion of the influence of the vol- ume of money? Of tariffs? Of taxation? Of physical needs and wants? Of intellectual needs and wants? How are standards of civilization determined? What effect does the standard of civilization have on price? CHAPTER V MARKETING BY MANUFACTURERS Manufacturers sell by wholesale or through agen- cies which they operate at retail distributing points. The cost of manufacturing, the cost of marketing, the demand, and the competition to be met are care- fully estimated by the manufacturer. It is not the amount of an article produced as compared to the annual demand that sets the price but the manner in which the market is fed by the supply that sets the market price. Two articles that can be readily sub- stituted each for the other must mutually respond to quotations. The price of an article, let it be a luxury or a necessity, is a ruling factor in determining the amount consumed. The power of the human race to consume has never been measured. The character of the products consumed is to a large extent a ques- tion of custom. Often customs are changed by sales- men introducing new devices, patterns, methods or styles. Here the psychology of salesmanship plays a part in the economy of business. The personal equation is the strongest force in human affairs. The business world is subject to the power of personal contact. This is the secret of the policy of sending representatives direct to customers. A representa- Markets and Rural Economics 51 tive of a manufacturer or wholesaler to a retail dealer is called a drummer; if sent direct to the retail pur- chasers he is called an agent. The latter is the more expensive method, as so many more people have to be canvassed to handle a given volume of business, but often it puts things immediately on the market that would not be called for if kept for sale by retail dealers. The average cost of marketing from fac- tories by consumers varies, but is constantly being lowered. Just what part of tfiis expense is unavoidable and what percentage could be saved and divided between the producer and consumer cannot be .definitely stated, but we know that in the aggregate it would be a fabulous sum. Many large concerns divide up the territory in which they operate and so systematize their sales de- partment that each order secured, no matter by what method, must come through certain offices and be credited to the sales-managers of certain districts. A uniform price is set regardless of the amount of the article on hand or the rate of sales per week, month or year all agents must conform strictly to the price thus arbitrarily set on penalty of losing their positions for any variation. This abolishes competi- tion among agents and also prevents retaliatory price- cutting by competitive firms. The only instances where this rule is violated is where a firm or corpora- tion feels that it is strong enough to completely de- stroy competition by underselling competitors until they have to surrender the territory to the stronger company. These tactics have been roundly de- nounced by publicists and the public generally con- demns them as unfair and unjustifiable, but laws have not been enacted to prevent it and some of the great- 52 Markets and Rural Economics est trusts of the country fought their way to mastery by this method. The methods of the department stores are little different from those of the ordinary retail store ex- cept the strict organization into departments and the details incident to a larger business. The mail-order houses use printer's ink instead of drummers and sell either by wholesale or by retail exclusively. The psychology of salesmanship extends to the advertis- ing method of finding customers. Correspondence has its art and is a part of the catalogue system of soliciting patrons. The foreign markets are even more sensitive to judicious soliciting of trade than home markets. Reciprocal trade agreements count but little for trade until exporters learn to cater to the idiosyncracies of the foreign customer. When once secured he is hard to turn to other quarters for supplies. A line of merchants are adopting the plan of em- ploying a few expert buyers who know the market, the demand, and the quality of things. These buyers command the very best prices from the factories be- cause of the enormous bills they can furnish. This enables this line of merchants to either sell cheaper or make more than the little "one-horse" buyer. And all this means a process of elimination in the business world. The marvelous development and expansion of modern commerce has done more to introduce and disseminate European civilization to the utmost parts of the earth than all other agencies combined. It has so interlinked the interests of nations and inter- woven the interests of the citizens of every countrv with those of every other countrv that the danger of strife between nations becomes less and less as the Markets and Rural Economics 53 years go by, and the dream of universal peace is nearer realization than ever before since the twilight dawn of history. LESSON V What are the methods of marketing by the man- ufacturers? What kind of knowledge does he seek to obtain? Why? What does the manner of furnishing supply to demand have to do with price? What about substitution in its effect on price? What effect does the price have on consumption? What have you to say of foreign trade methods? between the amount the people can consume and the amount they can exist upon? What have you to say of the difference between the manufacturers' price and the consumer's price? Is there room for improvement? What are your suggestions? State advantages and disadvantages of selling di- rect to consumers and to jobbers and wholesalers. What are the methods of marketing by jobbers? What are the methods of marketing by whole* salers? What are the methods of selling by retailers? Describe department-store methods. Describe mail-order methods. Why have codes for cost marks? Give the advantages and disadvantages of selling through drummers; selling by catalogue; by corre- spondence. What have you to say of foreign trade methods. 54 Markets and Rural Economics What can you say of the influence of modern commerce on the civilization of the world? How has it carried progress to dark continents and mutualized the business relations of the people of all countries ? CHAPTER VI MARKETING BY CORPORATIONS Corporations, like individuals, sell products or service. Manufacturers sell products. Insurance companies sell "protection." Banks hire out money. Railroads sell service. Corporation agencies sell service. Shipping companies sell service. It matters not whether it is products or service that is for sale, there is judicious feeding of the market at schedule rates. Corporations once com- peted with each other for trade, but that is a thing of the past except in sporadic instances. Competi- tion is so far from being the life of trade that it is the death of the weaker m the contest. A trust may be a monopoly or it may not be. A monopoly is such control of an output or service that it can crush competition; if a trust on produc- tion it can limit the output, if a trust on service it can limit the service till the prices are inflated. A public monopoly is one owned and operated by the government. A private monopoly is one owned and controlled by private citizens as individuals or as members of a corporation. A franchise monopoly is one granted by law ostensibly for the consider- ation of certain service. 56 Markets and Rural Economics There is nothing confronting the statesmanship of the age that is more perplexing than to legislate properly on trusts and monopolies. Much legislat- ing, both state and national, has been done, and lit- tle definitely settled or accomplished. It is hardly possible for farmers to form a trust, for the reason that they cannot limit supply. There is no regulation of production from a central head as in manufacturing. Each family is an independent unit, free to produce whatsoever it elects. If a price is demanded above the consuming standard consump- tion is cut short and the new supply coming on will pile up on the reserve and doubly depress the price. Is the immense wealth secured by trust magnates wasted because they have it? No. /^ It is still in existence and kept busy making more. The families of rich men frequently squander to the limit, and show that they do not know what to do with what they have. But the great bulk of the wealth thus absorbed by trusts is very actively em- ployed by owners. However, this is no excuse for monopolies. But really it might be well to look at some of our real squandering, the squandering that destroys, the squandering that is done by all classes. The only reason the poor do not squander is because they have nothing to squander. They are no better and no worse than the rich who have it to throw away. Squandering is an economic crime and no class is any more excusable for it than another. Envy plays a good part in our denunciations of the rich. Unless we are willing to get down to business and correct the absurd system under which we are work- ing, squandering on the one side and suffering on the other will continue. Markets and Rural Economics 57 We have touched the half billion mark in our yearly expenditures for schools in this country. A wonderful lot of money; more than any other govern- ment ever spent for the same purpose during a twelve months in the history of the world! It is actually five-eighths as much as we spend yearly for tobacco ! It is nearly a third of what we spend annually for beverages ! HOW WE SQUANDER Yes, we are a great nation, and we are great squanderers. Our annual whiskey, wine and beer bill is $i,- 700,000,000. Our annual tobacco bill is $800,000,000. Our annual coffee bill is $66,000,000. Our annual tea bill is $16,000,000. We spend to prosecute crime $600,000,000. To support 300,000 prostitutes over $200,000,000 is contributed annually, and some 40,000 new re- cruits are plunged into this maelstrom to the ruin of the race. The government appropriations approximate an average of $1,000,000,000 each Congress; one-half of which goes for war and the concomitants of war. We are still organized on the principle of Cain, whose yoke was neither easy nor his burden light. In Europe the war debt is $26,000,000,000, which causes taxes of $9,500,000 a year. Americans spend $200,000,000 a year in Europe, and American heiresses sell themselves in marriage to the titled nobilitv of Europe, showing the vanity of even those raised under American influences, and their cravings for the empty baubles of royalty. We spend for bread-stuffs $780,000,000; for pub- lic education, $500,000,000, 58 Markets and Rural Economics Each year the American people produce billions of dollars of wealth more than are consumed in the process of production. This surplus is absorbed by the freebooters of commerce. Fifty years ago there were but few stocks and bonds in the country. Now there are $70,000,000,000 of stocks, bonds and se- curities marked on the boards of the exchanges, and otherwise operated, yearly. Financial buccaneers use them as a means of scooping in the wealth of the millions. The rise and fall of the stocks and bonds are manipulated so as to lure the public to invest, and then they are frightened to sell at slaughter prices, and the stocks and bonds are repurchased. These artificial booms and panics are engineered to leave millions of profits to those behind the throne as the market swings to and fro. This process is allowed to be repeated at irregular intervals and the investing public continues to bite at the same old bait with the same old hook in it. Be- cause you do not invest does not free you from the penalty. You deal with those who lose, and they get it from you. The stock market has become the vam- pire of commerce. The stocks of copper, railroads, steel, oil, tobacco, etc., are sent up and down at will, and legions of unsuspecting investors are robbed by the corsairs of the mart. By the triple alliance of money, politics, and the press, the corporate-owned industries, the money of the nation, and the very earth itself are all under the control of practically the same power, masked in vari- ous guises. CORPORATIONS AND TRUSTS The business corporation was a device of the Romans. The original idea came from Caesar, and was suggested by the uncertainty of human life. It Markets and Rural Economics 59 was an insurance against the dissolution of a project in case of death. The intent was to provide for the continuance and perpetuity of enterprises which probably no man could carry out during his lifetime. The application of the corporation was for building water systems and laying out roadways. The cor- poration provided against stoppage of the work in case of the death of any man connected with it a body without death, a mind without decline. According to a writer in a recent number of the Banking Law Journel, 100 years ago there was no institution in the country formed on the basis and conducted for the purpose of the modern trust com- pany. In 1836 there were two in New York and two in Philadelphia. Twenty-five years ago there were thirty, and at the present time there are over 1,500, with assets of over $4,000,000,000. Since 1890 the growth has been rapid and all States except Florida, Nebraska, and Wyoming now have trust company laws. The relation of the trust company to the people and its primary and elemental functions is that of trustee, and it is in this capacity that the trust com- pany renders its largest and best services to the com- munity. As a fiduciary institution the trust company has sev- eral advantages over the individual, among which are continuity of management, there being no guarantee that the individual will live to fulfil the task assigned him, nor that he will even make a good beginning. The corporation is endowed with perpetual life, and can assure a continuous administration. The trust company can serve a man after death as effectively as in life. It can advise him while living, act for him, if need be, and administer his estate when dead. 60 Markets and Rural Economics Another advantage is that investments are made by experts. This is a distinct advantage over private methods. In the development of modern business and indus- try we found need of a man that did not exist. Great enterprises were in need of enormous capital, more than any one person had. They needed thousands of workers who must be paid before the enterprise reached the point of earning returns for the outlay. In this extremity the state, in its sovereign capacity, created and named him Corporation. The industrial god of America is Business and his prophet is Cor- poration. The way it has resulted, the chartering of corporations amounts to granting letters of marque and reprisal to exploit commerce. Granting letters of marque and reprisal in time of war is legalized piracy operating as a military necessity. Corporations are creatures of necessity, but they are prone to run to greed. There are 1,000,000 corporations in the United States doing business. They employ 82 per cent, of the capital; pay 72 per cent, of the wages; employ 71 per cent, of the wage earners, and buy 7^ per cent, of all the materials used in the manu- facturing enterprises of the country. The corporation has bred the trust. The trust is the final development of organized greed. This nation is passing through that world-old proc- ess of concentration of wealth, resources and power into a few hands. We see about us billion-dollar industrial trusts controlling: every avenue of opportu- nity and business, and putting forth the mailed hand on the government itself. These preat industrial combinations are plundering the people of this coun- try, transportation, manufacturing, mining, and noth- Markets and Rural Economics 61 ing is allowed to interfere with "business," the god of the age. There are two kinds of combinations in "restraint of trade"; those held under signed agreements be- tween corporations, companies, or individuals, and those operating under a "gentlemen's agreement." The Sherman law is an attempt to reach the former. There is no law, State or National, that reaches the latter. There is no more oppressive trust than the Lumber Trust, but the Sherman law does not reach it. It is founded on "a gentlemen's agreement." By an embargo we limit our coastwise trading to Amer- ican vessels. Under the "gentlemen's agreement" this coastwise shipping is under an absolute trust. The iron hand of the law was brought to play on the Standard Oil Company and it was ordered to dis- solve. It proceeded to do so, and oil went up to pay the additional expense of operating several com- panies instead of one. It is operating under the elusive but effective trust of the "gentlemen's agreement." Forty-odd prose- cutions have been brought under this national law and seldom have material benefits resulted. Speculators in grain, tobacco, cotton, etc., through- out the country, agree to divide territory and not bid against each other. When an interloper drops in they combine to drive him to the wall and then go back to their old trade. They have no legal contract to that effect. "There is absolutely nothing to pre- vent anyone from going anywhere at any time and buying anything he chooses, and paying whatever he has a mind to pay," is what we are told by them; every word of which is absolutely true, so far as any binding, legal contract or agreement is concerned; 62 Markets and Rural Economics but the "gentlemen's agreement" is there. The boy- cott is often operated in the same way. When Rome went down, and 3,000 men owned the empire, Crassus, the richest Roman of them all, who made his wealth dealing in slaves and mines, and was defeated in Mesopotamia by Sorena, where 20,000 Roman soldiers were sacrificed, was worth only $12,000,000, the income of John D. Rockefeller for one year. Pompey was worth $3,500,000; but Joseph Leiter, an American, lost as much by the change of the chalk mark on the board of the Chicago wheat-pit. Alexander is reputed to have conquered the world in his day, but all the ransoms he ever wrung from conquered foes would not equal the contributions of the American people to the Vanderbilts and Goulds. Pizarro robbed the Incas of Peru of treasures that made Spain the most powerful nation of Europe, but his extortions were not equal to the purse banked by our corporation on water-stock. Warren Hastings despoiled India of vast treas- ures, for which he was tried at the bar of the House of Lords, and Burke, Sheridan, and Fox hurled philip- pics at him that will live in invective literature for- ever, but the tribute he took from the princes of India is overshadowed by the amount contributed by a guillible public to the leeches of the New York Exchanges. And still we slumber with a false sense of security, and refuse to believe that each voter in America is responsible for every wrong that is tolerated. There is nowhere else to put the blame. Voting for men before you know what they will do is the folly of the age. To shun the responsibility imposed by a republic is to invite monarchy. A despotism of greed Markets and Rural Economics 63 reigns under the protection of privilege sanctioned by those who pay the bills. Are we incapable of forgetting the little questions and solving the big problems of the day? CHARGES AGAINST COMBINATIONS The evils charged against large combinations are well known. These include the power to exploit the producer and consumer by depriving them of a com- petitive market, thus making the prices of the raw material unduly low, and those of the finished com- modity unduly high; the concentration of power, some- times perilous in a few hands, through holding com- panies; the ruin of competition in a given locality by selling at prices below the cost of production; the selling of one variety of goods at less than cost for the purpose of driving from the field a rival who produces chiefly that variety; refusing to furnish goods at trade rates to merchants who buy anything from rival producers, or who refuse to maintain list prices as required by "sellers' agreements"; the use of pat- ents to protect what is not patented; checking im- provements in methods of production when monopoly is successfully assured; the exploitation of investors by the manipulation of stocks and securities, and the buying up and suppression of useful inventions to prevent their introduction from diminishing the prof- its of monopoly. CERTAIN ADVANTAGES CLAIMED Among the advantages claimed are economies in production and distribution, the greater use of by- products; steadier employment of labor, and at better wages; better protection against industrial accidents; more command over international trade; a command of the best ability; assurance of a steady market, and avoidance of those fluctuations which, under old com- 64 Markets and Rural Economics petitive conditions, so often brought disaster alike to employer and employed, and the standardization of products, so that dealer and ultimate consumer know exactly what they are purchasing. As to what should be done with the trusts the best thinkers of the day differ widely. The theories may be grouped under three heads: 1 i ) That monopoly is natural and should be ac- cepted and regulated. (2) That monopoly is artificial and never could have grown up through economy; that size increases efficiency up to a certain point and then reaches the law of diminishing returns; that our biggest monop- olies have obtained their power by special privileges or by illegal means. (3) That monopolies are the natural result of industrial development; that they are more economical than competition; that government regulation is a failure and government ownership is the only rem- edy. /TSome are willing for the government to take over (certain monopolies, but want to draw the line against general government ownership. Just where to draw the line would obviously be a subject for endless con- tention and discussion. It is argued by the second group that the point of diminishing returns is reached sooner under govern- ment than under private management. It is com- monly admitted that the government itself could be run as effectively and judiciously as it is on several hundred millions less than it now takes. Were it run as an individual would run his business or a cor- poration would operate its business enormous ex- penses would be lopped off. The point of diminishing returns is reached when Markets and Rural Economics 65 a concern obtains an absolute monopoly. The sharp- ening effect of competition is gone; the need for alert- ness no longer exists in adopting improved devices; economy is not so pressingly necessary, and that in- dolence born of satisfaction comes into the equation. Economic efficiency does not necessarily increase with size of business. Plenty of instances can be cited to prove this statement. The enormous dividends made for the stockholders of our larger trusts were not made so much because of economic efficiency as from market-domination. When we turn from the great trade-dominating trusts to the trusts that have never risen to the point of crushing competition we find a condition where the competitors have a market steadily encroaching upon the larger trusts. It even takes place where there is an almost complete monop- oly. Twenty years ago the sugar trust held 95 per cent, of the American market; in 1911 it held only 43 per cent. Monopoly does not insure maintenance of quality in the material turned out. After an in- vestigation by the Interstate Commerce Commission the figures showed that, during the first decade of the organization of the Steel Trust, a deterioration in the quality of steel rails resulted in increasing de- railments from 72 accidents in 1902 to 249 in 1910. The United States Steel Corporation had a smaller proportion of the steel business of the United States than it had in 1901. There has also been a decline in the rate of earnings of the Steel Trust on its in- vested capital. At the beginning of the century Eu- rope was alarmed over our invasion of their markets. Then came our great combinations. In 1900 Ger- many exported iron and steel 1,800,000 tons, and in 1910 she exported nearly 5,000,000 tons. We went from 1,154,000 tons to 1,534,000 tons, and thirty 66 Markets and Rural Economics per cent, of the steel corporation's plants laid idle. The increase in the cost of ore in America put us out as competitors, while Germany and England were able to keep down the cost of production and thereby outdistance us in the world markets. In social efficiency the big trusts have proved that they cared nothing for their workers except for the profits earned. They have lowered the standard of citizenship by resorting to the lowest stratas of so- ciety in the remotest corners of the earth to get cheap labor. The lesson for the farmer to draw from all the examples of the immense wealth is that none of those who possess this wealth got hold of it by the methods pursued by the farmers as a class. They did not follow competition to the limit as farmers have done. They did not auction their wares, goods, products, services, etc., but regulated the supply to demand at a schedule rate and made millions. Now there is one kind of monopoly of which it is well to study and understand the relationship such monopolies bear to other monopolies in the economics of the day. I refer to the Cooperative Monopoly. In what particular is it distinguished from all other monopolies? In the fact that it is not run for private gain. Does it matter how large a business is or how much of a complete monopoly it has if it is run on the cooperative plan and is not allowed to extort from the public? If all the steel business in the world were consolidated into one company and the capital in- vested only allowed a dividend equal to the average increase in wealth, the balance of the profits to be distributed to the workers, and the public be protected from extortion, would there be anything to alarm us, Markets and Rural Economics 67 from an economic standpoint, in the operation of such a monopoly? If the worker gets the full re- turn for his labor and the purchaser gets full value received for his money which is paid for the laborer's product, there is nothing left between for graft or parasites. Usually in deciding how much is due the brain worker, and how much is due the muscle worker, the brain worker gets the lion's share. Were muscle workers as well remunerated as brain workers it is argued that the inducement to become a brain worker would not be sufficient to encourage brain workers to forge ahead and do the great things that are needed to be done and are being done now. Suppose all of our trusts and monopolies were com- pelled to cooperate with each other and with the pub- lic, brought to a physical valuation, and made to fol- low the Rochdale principle in the distribution of prof- its, would not the terrors of monopolies be destroyed and the advantages be retained? LESSON VI What is a corporation ? Where and when did corporations originate? What is the purpose of a corporation? Where have they been used to the greatest extent? Why? What would result if corporations were abolished? How many kinds of corporations ? Describe each. What percentage of the industries of the country is carried on by corporations? How many workers do they employ? What does a corporation have to market? How many kinds of service are there? 68 Markets and Rural Economics Give an account of how railroads market passenger service. Give an account of how railroads market freight service. Give an account of how shipping companies market passenger and freight service. Give an account of how life insurance companies market service. Give an account of how property insurance com- panies market service. Describe the methods of National Banks in selling service. Describe the methods of State Banks in selling service. Explain how coal mining companies sell their out- put. Explain how iron mining companies sell their out- put. Explain how silver mining companies market their output. Explain how gold mining companies market their output. Which is the more expensive, the marketing system of the mining companies or of the manufacturers? Why? LESSON VII What is a trust? At what period did the trust have its rise? Give the cause of the trust. What are its uses? What are its abuses? How many kinds of trusts are there? What is the difference in effect between a legal Markets and Rural Economics 69 trust and one based on a ''gentlemen's agreement"? Name some of each. Is there such a thing as a trust based on the Roch- dale theory of cooperation? What can you say of anti-trust legislation : State, National? What kinds of u Big Business" should be exempt from anti-trust legislation ? Is a money trust possible? If so, how brought about? How could it be prevented? LESSON VIII Define monopoly public and private. Based on commercial achievement; based on fran- chise. Industrial. Commercial. Trust monopoly. Cooperative monopoly. Are some monopolies desirable? If so, what kind? Are some undesirable? If so, what kind? Should monopolies be owned or controlled? If controlled, to what extent? Which is the better, cooperative ownership or pub- lic ownership? What is meant by u the spirit of the shop"? Is it desirable to have and encourage? Where is it encouraged to the highest degree? What can you say as to the legislation on trusts and monopolies? State and National? Is there such a thing possible as a political monop- oly? 70 Markets and Rural Economics If so, how? And what would be the remedy? What have monopolies to do with markets? Do monopolies exist as entities in law? Do they buy and sell? What is "watered stock"? What has watered stock got to do with the high cost of living? Do millionaires "consume" the wealth they obtain? How is wealth "squandered"? What becomes of squandered wealth? Would a cooperative monopoly be desirable? If so, why? If not, why? CHAPTER VII MARKETING BY WAGE-EARNERS Wage-earners have something to market. It is their time, service, and skill. So long as they are not organized they sell it to the highest bidder in competition with the lowest bidder among their fel- low wage-earners. Necessity is not long in overtak- ing the mass of wage-earners when out of employ- ment. This eternal tugging of human need keeps the hireling ever on edge for a job. In finding a market for his service he often finds it hard to get employ- ment at wages that mean a decent living. In this extremity laborers organize, place a price on their la- bor and prescribe conditions under which they are willing. to work. If the employer refuses to accede to the demands the organized laborers go on a strike. To quit work is easy; to live without work is impos- sible. It becomes a battle between capital and hun- ger. Often millions of dollars' worth of property lie idle and deteriorate, and thousands suffer for want of the necessities of life while the struggle is on. When the employer makes a demand on employees which they refuse to comply with, the employer may close business, and a lockout is the same as a strike only it is the employer who is on the strike. Reverse the position of the employers and the em- ployees and we would have the same conditions. It is merely a question of whose ox is gored. Capital 72 Markets and Rural Economics is prone to arrogance and tyranny; so is labor. Labor has learned that it is competition that renders it helpless. Labor sees capital eliminate competition by organizing; capital taught the lesson of mastery and labor is copying. Rockefeller made his millions by crushing out com- petition. Carnegie made his millions by monopolizing the steel business. Railroad magnates have made their millions by getting control of the carrying trade in certain ter- ritory. There are various ways to eliminate competition: by superior business management, by legislative en- actment, by copyright, by secret process, etc. The superiority of business management is shown in the Marshall Field and John Wanamaker stores. Legislative enactment, is the cause of the greater number of the great fortunes of the day. The pro- tective tariff is professedly to eliminate foreign com- petition. The abuse of this principle has been the fruitful source of much of our trust prosperity. Ex- clusive franchises have built up the fortunes of many millionaires. There is scarcely a large city in Amer- ica that has not at some time granted a franchise for railway, light, and water supply and allowed the promoters to bank piles of unearned wealth wrung from the tax-payers of the city. Buying up the source of supply of some necessity or luxury and arbitrarily pricing it to the public is one of the commonest of commercial methods of financial legerdemain. A copyright is considered the most legitimate way of eliminating competition. This is due for giving Markets and Rural Economics 73 to the world a new idea, and upon new ideas we build civilization. Secret process of manufacture is the twin brother to the copyright method of making the world pay a premium for knowledge. In the long-ago, schools where the arts and crafts were taught were secret. This was to eliminate competition. It was in this manner that Masonry had its origin. They were lob- byists, too, even in that far-away time, for they had themselves exempt from taxation, and that was the origin of the title of Freemasons. Exclusive knowledge is the surest way of eliminat- ing competition. This is what gives the graduate the advantage over the non-graduate in the professions at least it is supposed to, and usually does. Why would one care to prepare himself for certain work by years of study if it did not give him an advantage over those who will not make this preparation? And the purpose of gaining this advantage is to enable one to minimize competition in that particular line of work or profession he aims to follow. Skilled labor has the advantage of unskilled labor on the field of competition for the reason that it has a monopoly on the knowledge necessary to conduct the business or perform the labor. Why have the lo- comotive engineers made a greater success of their organization than other railroad employees? Simply and solely because they had a monopoly on the skill in their particular line of business; they made their demands, and refused to work unless their demands were conceded by the railroads; could tie up every branch of road in the country in a day, and carried no one's grievances but their own. Being limited in numbers, and absolutely indispensable to the railroad business, the demands of the engineers have been 74 Markets and Rural Economics granted one by one till they are a well-paid and well- treated class of laborers. They have persistently re- fused to enter sympathetic strikes and carry the bur- den of other organized bodies of employees and have therefore been masters of the situation. So it is throughout the realm of organized labor. Power means mastery, whether justified or not, and mastery in the industrial world is a question of elim- inating competition and possessing a monopoly on labor, its service and products. The u open shop" is one that employs either union or non-union employees. The "closed shop" is one that employs none but union labor. A strike occurs when the employees quit work for a real or supposed grievance, and is usually ordered by organized labor. A lockout occurs when the employer closes down, either because his business is not paying or because of some difficulty with the employees. The blacklist is used where a man who is dismissed from one place and his name is furnished to others to keep the dis- missed laborer from getting employment. The boy- cott is the endeavor of a number to stop customers from patronizing a firm because of some real or imag- inary grievance. Each of these are weapons of war- fare in our industrial struggle and evolution. Capital is justified in organizing; labor is justified in organizing; Society is justified in organizing and compelling a cooperation between Labor and Capital; and Society has a right to 'dictate the terms of the cooperation. It is the duty and opportunity of this generation to solve these most intricate problems. Markets and Rural Economics 75 LESSON IX What is a wage-earner? What have wage-earners to sell? What is the difference between the "commodity" sold by a hired hand and that sold by a railroad? By an insurance company? How many kinds of "hirelings" are there? What is the difference between a "job" and a "position"? What is your opinion as to the brain worker and the muscle worker either doing the work of the other? Has the manual laborer or the mental worker been the more favorable to equal pay for equal time? Which has been organized to the greater extent? Give instances of the origin of organization of each class. What have you to say of the open shop? What of the closed shop? What have you to say of strikes? What have you to say of lockouts? What have you to say of the black-list? What have you to say of the boycott? What has the price paid to wage-earners to do with the price of farm commodities? CHAPTER VIII MARKETING BY THE FARMER Old methods of marketing are gone forever. Local markets are no longer the dependence of either coun- try or city producers. Home production exclusively for home consumption is a thing of the past. Mer- chandising today is quite different from merchandis- ing in the Middle Ages, or in ancient times. The one-price policy and honesty have won out in modern times. Changes in marketing methods have taken place in every department of business more than in farming. Every vocation except farming seeks to eliminate competition in every way possible. "Back to the farm" has been the slogan for years from platform, press, and forum. The farmer has not objected. He has joined the cry. Why should he do this? He has not learned the lesson of the great economic law of elimination of competition. Why has farming begun to pay more than usual of late? There are various reasons, but one of them is that, in spite of all that can be said in praise of farm life and the profits of farming, those who w r ere born and reared on the farm refused to continue the business and sought other vocations. This has drained the farms of the tillers and left a few farmers the task of feeding the teeming millions. Thus by a Markets and Rural Economics 77 process of automatic elimination there is no longer the fierce competition among farmers that there used to be. The farmers constituted 90 per cent, of the population at the beginning of the government; now they are only about one-third of the population. The increased power of production has urbanized the world. Prescott F. Hall, in the January (1912) issue of the North American Review, says : u To take the classical error on the subject, we have been told repeatedly that on the one hand it was the conquering Goths and Vandals, and on the other hand their own vice and luxury, which cost the Romans their Empire. The real cause of the fall of Rome was neither of these." In the February issue of The World Today is an article by a man who is reputed to be the greatest living writer of Roman history, Dr. Ferrero, an Ital- ian historian. He uses the following language : There never was in history a richer, more knowing, more powerful, more daring period than ours. Therefore, to many it will seem strange to think that in the midst of such splendors there may be re-enacted that terrible ancient story of the last cen- turies of the Roman Empire, which was one of the most deplorable episodes in the his- tory of the world. And yet, it is beginning to be reenacted. The showy wealth, the clamorous triumphs of modern civilization do not conceal on the contrary, they reveal to him who stud- ies in philosophic spirit the fall of the Ro- man Empire. Among the similarities the most important is the malady that unmade the great body of the Empire and slowly, 7 8 Markets and Rural Economics subtly, insidiously, begins to infest the world of today the excess of urbanism. The condition of the peasant in the sol- iditude of the depopulated country district became ever gloomier and more pitiable in proportion as the cities became larger and more beautiful and fuller of diversions and gaieties. The first grave symptom, and the one felt by everyone, is that very excess of ur- banism which was the ruin of ancient Rome. The country has been too much abandoned during the last half century, and agriculture too much neglected exactly what began to happen in the Roman Empire at the commencement of the second century. Let us hear what the eminent German writer, Kalt- hoff, has to say on this matter in his work, u The Rise of Christianity." Speaking of the exploitation of the farmer in Ancient Rome, he says : The noble Roman becomes a relentless exploiter of the poor peasant. He is a spec- ulator on a grand scale and menaces the State. . . . There is no political and social, and certainly no ethical resistance to the evils of this great concentration of cap- ital. The capitalistic accumulation on an agrarian basis has the whole power of the State at its disposal at Rome the army, the fleet, the law and the government. . So the great serpent that is to strangle the finest strength of Rome, its peasantry, brings its coils closer and closer together. Markets and Rural Economics 79 And let us ask what was the end of it all. Listen a moment to what Tiberius Gracchus said: The wild beast has its cavern and its den; every one of them has its place of refuge. But those who are called the lords of the earth have nothing left but light and sun- shine. There is not a stone that they can call their own and lay their weary heads to rest on. . . . And every effort to re- form the situation in the Roman world com- pletely failed. There is a cause for this excess of urbanism. There are different causes, of course, but one of the prime causes is that the farmer is not getting his just pro- portion of what the consumer is paying for his prod- ucts. Until farming pays as much on the capital in- vested, as is paid in other lines of business, the cry of "back to the farm" will not be heeded. When this excess of urbanism brought Rome face to face with a crisis she sought to remedy the evil by putting labor to work on the highways and on public improvements generally. The cities were beautified and immense structures for public amuse- ments were built. The resources of the cities and the government were poured out to keep labor quiet. This kind of work brought only temporary relief. The great underlying cause was neglected. When improvements were completed and treasuries were exhausted, labor was again clamoring for work. Corrupt politicians bought their support by the droves. Governments, local and general, became a seething cauldron of corruption. Rome had not provided for an increase of the power of agricultural production. 8o Markets and Rural Economics She had not legislated to keep lands in the hands of the tillers of the soil. Rome had taken a superficial view of things and had failed to exemplify statesman- ship in applying remedies for excessive urbanism. Shall we profit nothing by the example, and fall into a similar error? We had better foster produc- tion and distribution than to squander on brick and mortar, subvent corporate greed, making assets of a maudlin sentiment, and "pork-barrel" appropriations through Congresses by pandering to promiscuous par- asites because they have the gall to ask for more. The best agricultural States we have are decreas- ing in rural population, the small towns are fewer, an3 landlordism has its tightest hold. Analyze these conditions and tendencies, young man of America, and study what they mean. More of the rural population are to be started to farther ag- gravate over-urbanism. You must face the future whether you wish to or not. We have evolved away from individualism in its primitive sense, and to ig- nore the fact will only bring the result that must ever follow ignoring facts. LESSON X In what sense is the farmer a manufacturer? In what sense is he a merchant? In what sense is he a consumer? What were the old methods of marketing from the farm? When other than local markets were used what were the means of transportation? What can you say of ancient fairs? Of modern fairs? Markets and Rural Economics 81 What caused radical changes in merchandising? Give present methods. What can you say as to the segregation of in- dustries incident to the use of improved machinery? How is the exchange of products facilitated by the use of money, banks, credits, clearing-houses, etc. ? What can you say of the cost of the present system ? LESSON XI What has been the percentage of decrease of farm- ers since the beginning of the government? What has been the cause? What is the result? Who has held his own as a property owner? What is the cause of over-urbanization? Can you draw any parallels from history of over- urbanization? What was the cause of over-urbanization in Rome? What means of palliation were resorted to by the general and municipal governments ? What did the Roman philanthropists do to ward off the evil day? Might Rome have spent her money to better ad- vantage ? Have we any parallels in this country? Is there any significance in the relationship of the rural wealth per capita and the number of small towns in a State? Have you any suggestions as to what should be done to induce people to stay on the farm? Do you think the high cost of living in cities will have this effect? Do you consider that we have over-urbanization? 82 Markets and Rural Economics Is over-urbanization an "evil" or is it rather a "misfortune"? What effect has the drift from the country to the town and city had on markets? CHAPTER IX COTTON EXCHANGES Cotton exchanges are incorporated institutions com- posed of brokers who elect their own members, make their own rules, limit their membership and do not report the volume of their business to the public. The chief function of the cotton exchange is supposed to be to furnish a place and the means by which buyers and sellers come together and carry on their business; but the chief function of the exchanges, as now oper- ated, as defined by Herbert Knox Smith, in his ex- haustive report while commissioner of corporations, is to furnish uniform quotations and furnish a place to hedge. The manufacturer of cotton goods wants to know what price to ask for his goods to be delivered several months ahead. He has not bought the raw cotton from which he is to make the cloth. He does not know what it will cost him. So how is he to price his goods to his customer? A cotton merchant comes to the manufacturer and offers to furnish the cotton at a specified time and price. The trade is made. The manufacturer knows what to ask for goods to be made from this cotton, as the price it is to cost him is es- tablished so far as he is concerned. But how is the cotton merchant to know but that he will have to pay more for the cotton he has sold than he got for it, 84 Markets and Rural Economics or is to get for it? He does not know. It is up to him to throw the risk on some one else. He goes to the exchange and buys an equal amount of cotton to be delivered at the same time of his delivery to the manufacturer. His buying on the exchange consists in putting up a margin to cover the probable fluctua- tion between the date of purchase and date of deliv- ery, which is usually $2 a bale. This transaction on the exchange is called a hedge. If the rise and fall of spots and futures remain relatively the same he will neither make nor lose by the change in price. If cotton advances in price, and futures advance at the same ratio, he will make as much on his future deal as he loses on his spot deal. If cotton declines he will lose on his future deal as much as he makes on his spot deal. Then, where does he get any profit out of the two deals taken together? This cotton merchant looks up the market before he makes an offer to the manufacturer, and makes a price at so many points above present price so as to leave a margin of profit. It is then up to the cotton merchant to get his cotton as cheap as possible, and make the difference between the market quotation and the price he is to get for it. When a cotton merchant bought his hedge, from whom did he buy it? He bought it through his broker from some one who was willing to take the risk in price fluctuations. It might possibly be some one who was selling a hedge to cover a purchase in spots, but more likely it was some one who had no cotton, did not expect to have any and could not get it if he were to try. He is apt to be simply a specu- lator who is selling short in the belief that cotton will go down before the date specified for delivery. The Markets and Rural Economics 85 buyer and the seller stake their margins with the broker and await results, the same as in any other game of chance. The only investment is the amount of the commission; the hedge is simply a "stake. 11 Suppose that in the instance above related the price of spot cotton goes down and the price of futures goes up, what would be the result? The cotton merchant would make on both. On the other hand, if the price of cotton goes up and the price of futures goes down, the merchant loses on both transactions. The spinner or manufacturer may do his own hedg- ing, and then buy his own cotton in the open market as he needs it. A hedge is not always a protection. It frequently acts as a boomerang to the hedger. But it offers sufficient guarantee under ordinary circumstances to induce a great number of cotton buyers to use it when they are carrying cotton which they have not sold, or when preparing to fill orders which they have sold. A wide market furnished hedgers by the exchange is made possible by customers of the exchange who have nothing involved but their margins. So one of the main functions of the exchange as now operated is to furnish speculators a place to win or lose in a game of chance on marginal risks. To all intents and purposes the interest of this class of ex- change patrons is the same as the interest of the pa- trons of the "bucket shop." A bucket shop is an office set up by one who takes the quotations of the exchanges as a basis and oper- ates by taking the bets of all customers whether they are on the bull or bear side of the market. Nothing is contemplated being delivered or called for delivery. It is purely a gamble on the fluctuations of the market. 86 Markets and Rural Economics The bucket shop manager takes chances on there being more losers than winners among his customers. Mar- gins are staked by the bucket shop patron the same as when dealing on the exchange. Nothing is af- fected in price by the bucket shop, as it has no con- nection whatever with dealing in any commodity, ex- cept to use future quotations as a basis for betting. Bucket shops have been outlawed in recent years throughout the country. Each contract bought or sold on the cotton ex- change calls for the delivery of the cotton, and can be enforced. The contracts are held to be valid. This would give the buyers a chance to put the short sellers in a hole were it not for the rules governing exchange deliveries. When cotton is contracted for on the ex- change it is simply cotton grade has nothing to do with it. A buyer cannot contract for a specific grade or quality of cotton. Contracts are all based on "middling. 11 You buy, say, one hundred bales, basis middling, to be delivered at a specified date at a speci- fied price. The seller does not have to deliver mid- dling or any other specific grade. He has the option of selecting any grade or grades he chooses within the limit of eighteen, and tender it on the contract. If he does not want to deliver at all he is certain to select such cotton as cannot be used by the purchaser to an advantage, and thereby avoids being called on for the spot cotton. On the New York Exchange the differ- ences in value between the various grades are fixed by a board which meets at stated intervals. The New Orleans Cotton Exchange settles the differences on the commercial basis, i. e., on the commercial value of each grade at the time of delivery. The New York plan gives the seller a still greater advantage when called on to deliver, as he can pick out the grade least Markets and Rural Economics 87 in demand and of least relative value at the time of delivery. All of which means that an exchange is not primarily a spot cotton market. In fact it is conceded that not ten per cent, of the sales are ever delivered. The practice of giving through bills of lading has also operated to eliminate the cotton exchanges as spot cotton markets. It is no longer necessary that there be a midway station where buyer and seller meet to see the cotton and do their trading. Hun- dreds of millions of dollars' worth of cotton are bought by foreign mills without the purchaser ever seeing the seller or ever seeing the cotton till it ar- rives at the purchaser's warehouse. It is bought on grade, staple and spinning qualities, the seller guaran- teeing it to come true to contract. Often there is a battle royal on the exchange be- tween the bulls and bears, when millions of dollars are involved, and whichever way the tide turns means enormous profit or loss to the contending parties. We read in the market reports of u bear raids" and '"bull campaigns." A few times it has happened that men with enormous capital at their command have quietly "cornered" both the future and spot markets, and then proceeded to make demand for spot delivery on their exchange contracts. The bull campaigners were prepared for this emergency and accepted all that was tendered. When this supply kept in New York for the purpose was exhausted, good cotton had to be secured by the sellers to fill their contracts. So the sellers of exchange contracts had to go to the very ones to whom they were bound to deliver and first buy the spot cotton and deliver it right back to them on the exchange contracts. Under this pres- sure cotton has been bought in Europe and brought back to New York to tender on "short" contracts. 88 Markets and Rural Economics When the top is reached, and reaction sets in, the only way the bulls can save themselves is to turn bears and hammer the future market as low as pos- sible while they pocket margin forfeits as the price slips downward notch by notch. Suppose the short sellers cannot get the cotton at all; how can they be forced to deliver? That is cared for by the broker "covering" for his client before the margin is exhausted. This process lessens the num- ber carrying the load, but it is the only way of keeping solvency of operators. "Scalpers" go in and out of the market the same day. If a broker gets an order from a customer and takes it himself, instead of offering it across the pit, he is said to "bucket" the order, because he thus assumes the same attitude toward his customer that the keeper of a bucket shop does. This is forbidden by the rules of the exchange, and should a broker be found guilty of practicing it, he would be expelled from the ex- change. The expenses of the exchanges of the country are not definitely known. A conservative estimate of the commission charges on the transactions of the New York Cotton Exchange places the amount at $10,- 000,000 a year. The commissions are $15 a hundred bales to those who are not members of the exchange $7.50 to get in and $7.50 to get out. The com- missions of members are half that of non-members. But to offset this it is shown that not all the sales on the exchanges are bona fide transactions, yielding these regular commissions. There are what is called "matched sales" and "washed sales," and a process that is called "wringing out," all of which yield no Markets and Rural Economics 89 commissions except what is paid the floor broker for his wage service. "Matched sales" or "washed sales" are those where a member of the exchange, or a combination of them, have a private understanding, and go to one set of brokers and order them to sell a certain amount of cotton, at a given price, and then go to another set of brokers and order them to buy the same quantity of cotton at the same price. The purpose to be served in a plot like this would be to make a u bear raid." Suppose a coterie of men find out on a certain day that they are badly oversold, say, a million bales; and that if they can make a decline on that of a cent a pound they can clean up $f each re- serve bank, were unsuccessful. As "prime commercial paper" was to be discounted Markets and Rural Economics 249 at the reserve banks for the member banks, quite a discussion at once arose as to what should be included under this term. It was only after a hard fight in the Banking and Currency committee of the House, led by Henry of Texas, Neely of Kansas, and Ragsdale of South Carolina, that paper based on the dynamic wealth of the farm non-perishable crops on the way to market was definitely named as coming under the list of acceptable securities. With the commercial banks the question hinged upon what on its face appears to be a mere matter of form. Shall the reserve banks recognize and rediscount for the banks the common promissory notes, which a merchant makes and discounts with his local banker, when he desires to buy goods, or shall it be the "prime bill" or the "acceptance" which is used in less than three per cent, of credit transac- tions in the United States (although it is the rule in Europe), and which represents credit extended at the other end of wholesale merchandising, being ne- gotiated by the jobber or wholesaler instead of by the retailer? So that either the great turnover trade shall be supported by credit extended by the local banks to retailers upon the local bankers' judgment of the character and responsibility of the merchants, or that the wholesalers and jobbers should have to assume responsibility for the merchants to whom they sell goods, and negotiate for necessary credit with the larger city banks. It was a question calling for a ruling from the federal reserve board. Ours is a composite system of finance gradually developed, and reflecting features of various Euro- pean systems, but better adapted to American needs than any other we have ever had, and superior as a compact organic whole to that of any other country. 250 Markets and Rural Economics We have the central bank idea exemplified in Ger- many, France, Russia, and England. They are pri- vately owned but under the control of the govern- ments. The writer's views as written before the Federal Reserve Act was drafted were as follows: Our financial legislation should accomplish the fol- lowing ends: 1. Prevent a money trust. 2. Prevent financial panics. 3. Uniform treatment of discounts with inde- pendence of individual banks. 4. Elasticity of supply adjusted to seasonal de- mands, but not for exchange speculation. 5. Elasticity of reserves and absolute security of deposits. 6. Abolition of holding companies in the banking business. 7. Authorization of national banks to do (i) a commercial banking business, (2) a savings bank business, (3) a trust company business the various accounts to be segregated. 8. The cooperation of all banks through zone clearing houses, incorporated and under the super- vision of the national government the same to be clearing centers for their respective banking units. 9. A free check system among the banks of each clearing-house zone as a banking unit. 10. Provide for acceptance of time bills of ex- change to create a discount market at home and abroad. IT. Secure better banking facilities with other countries to aid in extending foreign trade. 12. Furnish the means of investing savings in convertible securities instead of depositing in Savings Markets and Rural Economics 251 banks or investing in foreign securities, and to ac- commodate small amounts for investment as well as large amounts. 13. Provide for land banks, to issue non-taxable bonds secured by real estate leasehold or mortgage upon improved lands occupied by the owner. 14. Needed changes in our postal savings bank laws to avoid concentrating deposits out of district in which they are deposited. 15. Abolition of all banknotes based on national bonds. 1 6. All money to be a full legal tender for all debts, public and private, and receivable for all debts, dues and demands of the government. 17. Gold, silver, and their certificates, and treas- ury notes, subsidiary and minor coins to constitute all varieties of money. 1 8. International check, interchangeable for money in any country. BANKING SYSTEM OF THE UNITED STATES, 1913 i- 1 Definition: A system established for the cus- tody, loan exchange, and issue of money; and to facilitate credit and commercial exchange. 2-1 Explication: 1-2 Kinds of banks, 1-3 National Banks, 1-4 Those that issue money; 2-4 Those that do not; 2-3 State banks; 3-3 Private banks. 2-2 Powers and privileges : 1-3 Of National banks 1-4 To issue money, 252 Markets and Rural Economics 2-4 To rediscount, 3-4 To receive deposits, 5-4 To buy and sell gold and silver bul- lion, bills of exchange, etc. 4-4 To make loans on any security except real estate. 2-3 Of State banks. 1-4 To rediscount, 2-4 To receive deposits, 3-4 To make loans on any kind of security. 3-3 Of Private banks. Powers unlimited except not allowed to issue notes. MONETARY SYSTEM OF THE UNITED STATES, 1913 i- 1 Definition: A system by which the Govern- ment issues and regulates a cir- culating medium. 2-1 Explication: 1-2 Kinds of money 1-3 Gold, 2-3 Gold certificates, 3-3 Silver, 4-3 Silver certificates, 5-3 Nickel, 6-3 Copper, 7-3 Treasury notes; two kinds, 8-3 Greenback, 9-3 Bank notes. 2-2 Quantity of money 1-3 All kinds, according to Comptroller of Currency, $3,720,000,000, June 30, 1913. 1-4 Gold coin, $614,478,201; Gold certifi- cates, $1,021,457,879, November i, Markets and Rural Economics 253 2-4 Silver dollars, $74,012,052; Silver cer- tificates, $480,079,731; 3-4 Subsidiary coin, $160,486,188; 4-4 Treasury notes, 1890, $82,583,874; 5-4 Greenback, $341,401,413; 6-4 Bank notes, $722,615,240; (Total $3,417, 109, 678.) 3-2 Quality of money: 1-3 Legal tender 1-4 Gold coin, at its nominal or face value for all debts, public and private, when not below the standard weight and limit of tolerance prescribed by law; and when below such standard and limit of tolerance it is legal tender in proportion to its weight. 2-4 Standard silver dollars, at their nominal or face value in payment of all debts, public and private, without regard to the amount, except where otherwise expressly stipulated in the contract. 2-3 Limited legal tender 1-4 Subsidiary silver, for amounts not ex- ceeding $10 in any one payment. 2-4 Treasury notes of the act of July 14, 1890, are legal tender for all debts public and private, except where other- wise expressly stipulated in the con- tract. 3-4 United States notes, for all debts pub- lic and private, except duties on im- ports and interest on the public debt. 4-4 The minor coins of nickel and copper, to the extent of 25 cents. 3-3 Non-legal tender 254 Markets and Rural Economics 1-4 Gold certificates, silver certificates, and national-bank notes, but both classes of certificates are receivable for all public dues, while national-bank notes are receivable for all public dues ex- cept duties on imports, and may be paid out by the Government for all salaries and other debts and demands owing by the United States to in- dividuals, corporations, and associa- tions within the U. S., except interest on the public debt and in redemption of the national cur- rency. All national banks are required by law to receive the notes of other national banks at par. 2-4 Foreign coins. FEDERAL RESERVE ACT i-i Definition: An act providing for mobility and elasticity of currency to facili- tate commercial, industrial and agricultural transactions. 2-1 Explication: 1-2 Federal Reserve District. 1-3 Number 1-4 Not less than eight. 2-4 Not more than 12. 2-3 Amount of business determines district. 2-2 Federal Reserve Advisory Council. 1-3 Membership 1-4 One councilman from each Reserve Dis- trict. 2-4 Elected by Directors of Reserve Board. 2-3 Powers 1-4 Meet four times annually. Markets and Rural Economics 255 2-4 Confer with Federal Reserve Board; 3-4 To make representations on matters in jurisdiction of Reserve Board. 4-4 To call for information, and make recommendation on 1-5 Discount rates; 2-5 Note issue; 3-5 Reserves 3-2 FEDERAL RESERVE BOARD: 1-3 Members 1-4 Secretary of the Treasury, 2-4 Comptroller of Currency. 3-4 Five appointees of the President of the United States. 2-3 Powers 1-4 To examine books, and publish statements of Reserve* and Member-bank. 2-4 To permit or require one Federal Reserve Bank to rediscount paper of another. 3-4 To suspend reserve requirements 1-5 For 30 days, ^-5 For renewal of 15 days, 3-5 To fix a tax upon reserve falls below requirements. 4-4 To supervise and regulate issue and retire- ment of notes; 5-4 To add to number of reserve city, and cen- tral reserve city banks ;t *The terms, "Federal Reserve Bank," "Regional Reserve Bank," and "Zone Bank," used in this work are held to be synonymous and interchangeable. tThere are three central reserve cities and forty-eight reserve cities. 256 Markets and Rural Economics 6-4 To suspend or remove officers of Federal Reserve Bank. 7-4 To require the writing oft the books of worthless accounts; 8-4 To suspend operations of Federal Reserve Bank for violation of rules; 9-4 To require bonds of Federal Reserve Agents ; 10-4 To supervise Federal Reserve Banks. 11-4 To grant National banks right to become trustees, administrators, etc. 12-4 To employ Attorneys, experts, etc., to con- duct business of Board. 4-2 FEDERAL RESERVE BANKS : 1-3 Organization 1-4 Name includes name of city where located. (Note as Federal Reserve Bank of Chicago.) 2-4 Five eligible banks, selected by Reserve Board, may organize a Federal Reserve Bank. 3-4 Members and stockholders 1-5 Membership required of all National banks. 2-5 All eligible authorized to apply for membership. (Note: Any bank that has sufficient paid-up capital to become a National bank is eligible.) 3-5 If member banks are unable to hold enough stock to operate a Federal Re- serve Bank; 1-6 Stock, to the limit of $2^,000 to each purchaser, may be sold to public. Markets and Rural Economics 257 2-6 (If stock still insufficient to operate bank) Stock may be allotted to United States, and paid for at par out of U. S. Treasury. 4-5 Stock not held by member banks car- ries no voting power. 5-5 Stockholders are responsible for amount of stock at par plus purchase price of same. 4-4 Capitalization 1-5 Minimum capital, $4,000,000. 2-5 Member banks must take stock (to be paid for in gold or gold certificates) to the amount of 6 per cent, of their capital and surplus. 5-4 Powers and Privileges 1-5 To adopt and use corporate seal; 2-5 To have succession for 20 years; 3-5 To make contracts; 4-5 To sue and be sued; complain and de- fend in courts; 5-5 To appoint officers and employees not specified by act; 6-5 To make by-laws; 7-5 To do banking within prescribed limits; 8-5 To deposit bonds and receive blank cir- culating notes ; 9-5 To receive deposits from member banks and U. S. Government; 10-5 To discount notes, drafts, and bills of exchange of commercial, and indus- trial transactions of go-day maturity; 11-5 To discount bills of exchange based on agricultural transactions, or live stock, 6 months before maturity. (To a 258 Markets and Rural Economics limited per cent, of capital stock, fixed by Federal Reserve board.) 12-5 To discount acceptances based on ex- ports and imports; 13-5 To buy and sell cable transfers, bankers' acceptances, bills of exchange eligible for discount in Federal Reserve Banks. 14-5 To deal in gold coin or bullion; 15-5 To buy and sell bonds, notes, revenue bonds and warrants of U. S. 16-5 To purchase from member banks, bills of exchange; 17-5 To act as fiscal agent for Government. 6-4 Management; Board of 9 Directors; 1-5 Three directors representing stockhold- holding banks; 2-5 Three directors representing agricul- tural or other industrial pursuits: 3-5 Three directors elected by Federal Re- serve Board. 7-4 Reserves (Federal Reserve Bank.) T ~5 35 P er cen t. against the deposits; 2-5 40 per cent, against notes in circulation; 8-4 Division on Earnings 1-5 Six per cent, per annum dividend, on paid in stock, to stockholders; 2-5 One-half of other earnings paid to sur- plus until it is 40 per cent, of paid-in capital stock; 3-5 Rest of earnings paid to U. S. Govt. as Franchise Tax. 9-4 Federal Reserve Bank Examinations : 1-5 Comptroller of currency appoints ex- aminer; Markets and Rural Economics 259 2-5 Examines bank once each year. 3-5 On application of 10 member banks Federal Reserve Board may order special examination. 10-4 Branch offices 1-5 Federal Reserve Banks may establish in its district; 2-5 Management 7 Directors : 1-6 Four directors selected by Federal Reserve Bank; 2-6 Three directors selected by Federal Reserve Board. 5-2 MEMBER BANKS 1-3 Reserves 1-4 Banks not in reserve or central reserve city 1-5 Must hold 12 per cent, of demand de- posits;* 2-5 Must hold 5 per cent, of time deposits.* 3-5 One-third of reserves to be held in member banks own vaults; 4-5 Five-twelfths of reserves to be held in Federal Reserve Banks; 6-5 Remainder at option of member bank. 2-4 Reserve City Banks must hold-in reserve 1-5 15 per cent, of demand deposits; 2-5 5 per cent, of time deposits; 3-5 One-third in its own vaults; 4-5 Two-fifths in Federal Reserve Bank; 5-5 Remainder optional. *Demand deposits within the meaning of this act comprise all deposits payable within 30 days ; and time deposits, all deposits payable after 30 days. 260 Markets and Rural Economics 3-4 Central Reserve City Banks must hold in reserve 1-5 1 8 per cent, of demand deposits; 2-5 5 per cent, of time deposits; 3-5 One-third of this reserve to be held in its own vaults; 4-5 Seven-eighteenths in Federal Reserve Bank; 5-5 Remainder Optional. 2-3 Loans on Farm Lands 1-4 To run not more than 5 years. 2-4 Limited to not more than 50 per cent, of land values; 3-4 Such loans not to exceed 25 per cent, of demand deposits, or one-third of time deposits of bank. 3-3 Examinations : 1-4 Comptroller of Currency appoints exam- iners; 2-4 Must be examined twice each year. 3-4 Federal Reserve Bank, with approval of Federal Reserve Board, may order spe- cial examination of member bank at any time. 4-3 Foreign Branches 1-4 Any National bank with $1,000,000 capital may establish a foreign branch; 2-4 Foreign Branch will be fiscal agent of the U. S. Government. Markets and Rural Economics 261 PER CAPITA OF MONEY IN THE PRINCIPAL COUNTRIES OF THE WORLD Taken from Report of Comptroller of the Currency for year 1911 Uncoverec 1 Per ( Capita Countries Paper Gold Silver Paper Total United States . $784,600 $18.35 $7.83 $8.41 $34.59 Austria Hungaria . . . . 143,500 7.07 2.56 2.84 12.47 Belgium . 135,300 3.33 2.05 18.53 23.91 British Empire : Australia 46.30 2.33 46.63 Canada 76,800 17.45 1.08 12.39 30.92 United Kingdom . . . 115,200 14.44 2.60 2.56 19.60 India 38,900 0.05 0.49 0.13 0.67 South Africa 8.38 2.56 10.94 *Straits Settlements . 7,500 1.37 23.44 4.69 29.50 Bulgaria 9,800 1.53 1.20 2.45 5.18 Cuba 20.00 2.38 22.38 Denmark 13,500 14.04 2.96 5.00 22.00 Egypt 6,700 16.19 1.40 0.59 18.18 Finland 11,500 2.45 0.17 3.96 6.58 France . 223,000 23.67 10.47 5.67 39.71 Germany . 276,100 2.93 3.83 4.34 11.10 Greece 24,600 8.31 1.15 9.46 18.92 Haiti 8,200 0.87 1.67 5.46 8.00 Italy :... . 182,300 7.79 0.71 5.38 13.88 Japan 89,300 1.36 2.36 1.69 5.41 Mexico 51,200 2.10 4.12 3.76 9.98 Netherlands 60,300 11.97 5.74 10.39 28.10 Norway 5,400 6.00 1.48 2.35 9.83 Portugal 72,600 1.59 6.89 13.44 21.92 Roumania 38,100 2.90 0.03 5.60 8.53 Russia 6.24 0.51 6.75 Servia 5,300 1.82 0.54 1.89 4.25 Siam 2,100 0.01 7.06 0.30 7.36 South American States: Argentina . 487,800 36.21 1.34 69.69 107.24 Bolivia 4,000 1.09 0.22 1.73 3.04 Brazil 4.80 1.22 6.02 Chile 53,400 0.15 0.80 15.26 16.20 Colombia . tio,ooo 2.33 2.33 Ecuador 2,000 3.00 6.87 1.33 5.20 British 500 0.33 1.33 1.67 3.33 Dutch 200 1.00 3.00 2.00 6.00 French 600 1.00 1.00 6.00 8.00 Paraguay 33,000 0.38 41.25 41.63 Peru 2.71 0.53 3.24 Uruguay 1,700 14.09 3.91 1.55 19.55 Venezuela 4,300 1.27 4.42 1.65 7.34 Spain 76,000 5.42 8.82 3.85 18.09 Sweden 32,400 4.59 1.59 6.00 12.18 Switzerland 25,400 19.60 4.09 7.70 31.39 Turkey 5.50 1.10 6.60 JCentral Amer. States. 14,500 0.30 1.01 2.74 4.05 Total .$3,127,600 $6.40 $2.52 $3.03 $11.95 * Includes Straits Settlements, the Malay States, and Johore. t Except Costa Rica and British Honduras (Gold standard countries), t This amount has been reduced to a gold basis: that is 100 pesos equal 1 United States gold dollar. 262 Markets and Rural Economics LESSON XXXIX 1. What touches markets and prosperity at more points than any other agency? 2. Name some of the faults of our banking system sought to be remedied by the Federal Reserve act? 3. What can you say of the bank failures since the Civil War? 4. What of centralization of money and credits? 5. What is real money? 6. What is redemption money? 7. What is fiat money? 8. What is credit money? 9. What is uncovered paper? 10. What is uncovered money? 1 1. What is receivable money? 12. How many kinds of money have we, and the amounts of each? 13. What is asset currency? 14. What principles are in the new law that found no favor for years among our dominant financiers? i <;. In discussions on the new law, what were some of the pivotal points of difference? 1 6. What is prime commercial paper? 17. Where does the farmer come in on this new law? 1 8. What controversy arose among business men concerning commercial paper? 19. Give some of the things our financial system should secure. LESSON XL i. Give the main features of our banking systems which our federal reserve act repealed. Markets and Rural Economics 263 2. What are the differences between the powers and privileges of State banks and National banks? 3. What kinds of corporations does the National Government charter, and what kinds do the States charter? 4. Is there any difference between being chartered and being incorporated? 5. Can anyone run a private bank who wants to and has capital? 6. Are private banks chartered? 7. What is a trust company? 8. What does the national constitution mean when it says that "Congress shall have power to coin money and to regulate the value thereof? 9. Give the names, amounts, and legal tender qualities of our various kinds of money. 10. Have we any kind of money that is a full legal tender for all debts, public and private, receivable for all debts, dues and demands of the government, at its face value ? LESSON XLI 1. What is the name of the new financial law? 2. What are some of its ostensible purposes? 3. What is meant by "Federal reverse bank"; "Federal reserve district"; "Reserve city"; "Central reserve city" ? 4. Is it optional, or obligatory, for national banks to become stockholders in the federal reserve bank? 5. How about State banks becoming members? 6. What are the requirements as to capitalization? Who may deposit? 7. What are the powers and privileges of the Fed- eral reserve bank? 264 Markets and Rural Economics 8. What has the Government as security behind its banknotes furnished the Federal reserve banks? 9. How is a Federal reserve bank organized and controlled ? 10. What are the functions of the Federal Reserve Board? 11. Who besides banks might be stockholders in the Federal reserve banks ? 12. How are the earnings divided? 13. How about branch officers? 14. What are the requirements in the reserves of the various banks ? 15. How about loans on real estate? 1 6. How about foreign branches? 17. What country has the largest amount of money per capita? 1 8. What country has the least amount i 19. What country has no metal money? 20. What countries have no uncovered paper money ? CHAPTER XXVIII RURAL CREDITS IN THE UNITED STATES So long as we have the gold standard the only way the farmer can get connection with gold-covered cur- rency subject to rural credit call is to tie up with a re- gional bank by owning a national bank. A rural credit bill for short time credit should provide for the Farmers' Cooperative bank to join the Federal Re- serve Union. The currency, backed by the gold re- serve, which the commercial bank now has provided, is beyond the reach of the farmer without this con- nection. The prices of commodities of the world do not now function in terms of gold except relatively. Exchange value, based on use, tilts the beam of mar- kets regardless of metal barter. The United States Commission, appointed by Con- gress to study rural credits in Europe in 1913 (and accompanied the American commission which studied organized agriculture in all its phases) prepared a bill for the establishing of a system of rural credits in the United States. This bill was introduced into both houses of Congress and referred to sub-committees on Banking and Currency during the session of 1914. Extensive hearings were held, and representative men from all over the country came before the joint com- mittee to present their views. Very naturally, the bill formulated by the United States Commission became the storm center of the discussion. 266 Markets and Rural Economics SOME OF ITS FEATURES 1. It provided for a commissioner of farm land banks to be at the head of a bureau of land banks in the department of the Treasury. 2. Also for the granting of federal charters to na- tional farm land banks. 3. The State laws must provide for simplified land- title transfers, registration and conveyance and fore- closing of mortgages; 4. For amortization in payment of debt. 7. For co-operative banks. 5. For a land bank to be founded by ten persons. 4. For amortization in payment of debt. 8. With minimum capital stock of $10,000. 9. Said banks to receive deposits to an amount not to exceed one-half of paid up capital and surplus; postals savings to the same extent. 10. To loan on farm lands in the State. 11. To make loans upon farm lands anywhere within the State in which such national farm-land bank is operated, provided (a) That such loans are made for not more than thirty-five years; (b) That such loans are secured by a first mort- gage or deed of trust on farm lands; (c) That such loans shall be made for any of the following purposes : (i) To complete the purchase of the agricultural lands mortgaged; (ii) To improve and equip such lands for agri- cultural purposes; (iii) To pay and discharge debts secured by mort- gages or deeds of trust on said lands: (d) That such loans do not exceed fifty per centum in amount in the case of improved farm land, and Markets and Rural Economics 267 do not exceed forty per centum in amount in other cases of the value of the said lands, to be determined by an appraisal as provided in this act. (e) That every such farm-land loan contain a mandatory provision for the amortization of such loan, or reduction of same by annual or semi-annual payments on account of principal: Provided, That the loan extends over a period exceeding five years. (f) That every such loan may be paid off in whole or in part by the borrower, in acordance with rules to be prescribed by the commissioner of farm-land banks, at any interest period, after such loan has con- tinued for five years, by the payment of the whole or a part of such loan, with interest to such date, after crediting the amortization payments on the same as when they were made. 12. To issue, sell, and trade in its own collateral trust bonds, which shall be known and described as "national land-bank bonds," secured by the deposit, as elsewhere provided, of first mortgages or first deeds of trust (and of notes or bonds secured thereby) , in an amount equal at least to the face value of the national land-bank bonds so issued and sold by the said bank: Provided 1 i ) That the rate of interest upon the farm-land loans evidenced by the 'mortgages or deeds of trust held by the bank as security for its own national land- bank bonds shall not exceed the rate of interest paid on such national land-bank bonds by more than one per centum annually upon the amount unpaid on the loan, which said one per centum shall cover all charges of administration. (2) That all national land-bank bonds issued by the said bank shall be payable on a date specified and shall be subject to call at par, at any interest period, 268 Markets and Rural Economics after the date of issue, or after a specified time, by such proper notice and advertisement as may be pro- vided by the commissioner of farm-land banks. (3) That such national land-bank bonds shall be always protected by the deposit, as security therefor, of at least an equal amount in face value of first mort- gage or first deed of trust farm loans (and of notes or bonds secured thereby) , maturing not less than five years after their date. (4) That as the amortization payments are cred- ited upon the first mortgage or first deed of trust farm loans so deposited as security, the national land-bank bonds issued by the bank and secured thereby shall be called and paid, or purchased in the open market and retired, to the extent of the credits made upon such first mortgage or first deed of trust farm loans held as security for the same, under rules and regulations made by the commissioner of farm-land banks. (5) That the first mortgage or first deed of trust farm loans (and the notes and bonds secured thereby) held as security for such national land-bank bonds shall at times be in the joint possession and under the joint control of the said bank and of the Federal fiduciary agent hereinafter provided for, and that a register of such first mortgages or first deeds of trust shall be at all times kept by the bank, entries or can- cellations in which shall only be made with the ap- proval in writing of such Federal fiduciary agent. (6) That no national land-bank bond shall be is- sued against any mortgage, deed of trust (or notes or bonds secured thereby) which falls due earlier than five years after its date. ********** 13. To use its capital stock, surplus, and deposits as a revolving fund for the temporary purchase or Markets and Rural Economics 269 holding of such first mortgage or first deed of trust farm loans; or to use the same for the purpose of buying in its national land-bank bonds and holding them temporarily, so as to maintain the price of the same; or to loan its capital and surplus on first mortgages or first deeds of trust for a period not ex- ceeding five years, Provided, that not to exceed fifty per centum of such capital and surplus may be perm- anently invested on such national land-bank bonds and in first mortgage or first deed-of-trust farm loans, and the remainder of the capital and surplus can be permanently invested only in United States Govern- ment bonds, in the bonds of the State in which such bank is operated, or in such other securities as may be authorized by the commissioner of farm-land banks. 14. To buy and sell gold and silver coin and bul- lion; to collect notes, drafts, and bills of exchange; to discount commercial and other 'short-term paper and deal in national land-bank bonds of other farm-land banks with its deposits; to keep reciprocal accounts with other banks; to rediscount its commercial and other short-term paper with other banks; and to carry on a general banking business so far as its current deposits are concerned. Provided that such deposits do not exceed fifty per centum of its capital and surplus, except as elsewhere herein specified, Pro- vided, however, That farm-land banks, cooperative, may for and with their stockholders also do and trans- act the business now possessed and exercised by na- tional banks under the laws of the United States, under such rules and regulations as may be prescribed bv the commissioner of farm-land banks. 270 Markets and Rural Economics SPECIFIC LIMITATIONS Every national farm-land bank shall be subject to the following specific limitations: (a) The amount of national land-bank bonds that may be issued and outstanding at any one time by such national farm-land bank shall not exceed fifteen times its capital and accumulated surplus. (b) The charges of administration imposed by such national farm-land bank upon the borrower for handling such loan shall not in each instance exceed an annual charge of one per centum upon the amount unpaid on loan. (c) The payments to be made annually, or semi- annually, by the borrower shall in all cases be suffi- cient to pay the interest charge upon the loan, the ad- ministration charges of the bank, and an amortization payment sufficient to retire and pay off the amount of the principal borrowed (as evidenced by the face of said first mortgage or first deed of trust and the notes or bonds secured thereby), at its maturity. (d) No national farm-land bank shall at any time loan any money upon the faith or credit, or upon the assignment, of its own stock, or of the stock of any othei national farm-land bank; nor shall any national i arm-land bank loan to, or on the credit of any one in- dividual or institution, either on the security of land or on any other security, an amount in excess of twenty per centum of the sum of its then paid-in cap- ital and surplus. ********** Eighth. But no national farm land bank shall transact any business except such as is incidentally and necessary preliminary to its organization until it has Markets and Rural Economics 271 been authorized to commence business by the commis- sioner of farm-land banks. HOLDINGS OF REAL ESTATE ;"- Sec. 17. That a national farm-land bank may pur- chase, hold, and convey real estate for the following purposes and for no other: First. Such as shall be necssary for its immediate accommodation in the transaction of its business. Second. Such as shall be mortgaged to it by way of security for loans made by it, as elsewhere herein provided. Third. Such as shall be conveyed to it in satisfac- tion of debts contracted in the course of business deal- ings. Fourth. Such as it shall purchase at sale under judgments, decrees, or mortgages or deeds of trust, held by the bank, or shall purchase to secure debts due to it. But no such bank shall hold the title and possession of any real estate conveyed to or purchased by it to secure any debts due to it for a longer period than five years. EXEMPTION FROM TAXATION Sec. 1 8. That every national farm-land bank in- corporated under the terms of this act and the cap- ital stock and surplus therein and income derived^ therefrom and the mortgages and deeds of trust (and the notes and bonds secured thereby) held by said bank and the national land-bank bonds issued by the same shall be exempt from Federal, State, 272 Markets and Rural Economics and local taxation, except in resepect to taxes upon real estate. * * * * # * * * * * LIABILITY OF STOCKHOLDERS Sec. 31. That the shareholders of every national farm-land bank, shall be held individually respon- sible, equally and ratably and not one for another, for all contracts, debts, and engagements of such banks, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares, unless, in the case of national farm-land banks cooperative, by a two- thirds vote of the stockholders a larger liability shall be undertaken. PRIVILEGES GRANTED TO NATIONAL FARM-LAND BANKS Sec. 34. That the national land-bank bonds of any national farm-land bank shall be available for the following purposes : First. As security for the deposit of postal sav- ings funds in such national farm-land banks and all other banks authorized to receive such deposits. Second. As a legal investment for time deposits of national banking associations, as provided in the Federal reserve act and for the funds accumulated in savings banks. Third. As a legal investment for trust funds and estates upon the charge of or administered by any of the courts of the United States. Fourth. As a security for loans from national Markets and Rural Economics 273 banking associations to national farm-land banks or to individuals, for not exceeding five years, to an amount aggregating not over twenty-five per centum of the capital and surplus or to one-third of the time deposits of the national banking association making such loan. Such loans to be made and held by the national banking association making the same as be- ing within the provisions of section 24 of the Fed- eral reserve act, so as to permit national banking as- sociations to lend to national farm-land banks, on their obligations secured by their national land-bank bonds, in place of making the loan directly on farm lands, as provided for in said section. CRITICISM 1 i ) The provision for little local banks with no connection with each other or with any other banks, and with no aid from the United States or State governments, to be organized and empowered to appraise the land of its members, hold mortgages thereon and issue bonds and market them as best they could was certainly a weak feature of the law. (2) There was indefinite provision for the liquida- tion of these local banks. As the loans could run for 35 years, how could they liquidate when there was no provision for the distribution of the loans among other units or the taking of them over by a State unit acting as a regional head? (3) They were disconnected so as to compete with each other, which might easily take the form of over-appraisement but were handicapped in compe- tition with other banks in being limited in the amount of deposit they could receive and in the kind of loans could make. 274 Markets and Rural Economics (4) On the point of creating confidence in the buyers of the bonds, the advantage of the State sys- tem is apparent. With the local unit standing along through a serious stress, say from drought, flood or insect ravages, the props fall from under; whereas with the state unit the combined strength of all the local units can tide the local over the stress and keep its bond obligation at par. (5) Bonds should be marketed only by the State organization, for the reason that if the locals could market independently, as the bill provided, and the investing public got the idea that the State unit was marketing only those bonds which the locals could not place, it would throw suspicion on the issue. (6) Local appraisement in this case has a pre- mium on exaggeration which a state appraisement would not show. (7) The marketing of the securities is left in the bill to the local bank. Even States have trouble marketing bonds. What could the average fiduciary agent in a little local bank as is provided for in the bill do in the broad world market trying to sell bonds of an unknown value, backed by a concern that could never be widely known and by men without legal knowledge or business experience? (8) The bill did not provide for standardizing the issue of these banks; the method of establishing sinking funds or the rates of interest. (9) No kind of rural credit can answer the pur- pose that is not founded on the co-operative prin- ciple. We do not need other schemes for joint stock, profit seeking, commercial banks. (10) In the event of selling mortgaged property, the bank should have the option of passing on the Markets and Rural Economics 275 purchaser, or requiring the payment of the mort- gage. ( 1 1 ) The federal reserve banks should be al- lowed to buy and sell these debenture bonds without guaranteeing them. (12) As to relative expense of operating the sys- tem under state divisions or the independent local system, it is clear that the locals would have to con- tribute in proportion to the volume of business fur- nished by each to the support of the central organ- ization, but the State system would obviate the ne- cessity for the local fiduciary agent and evidently the marketing of bonds could be carried on much cheaper by one office for the State than by each bank independently, and inspection charges be reduced. It will be noted that this bill asks for government loans. It provides for the using of government sav- ings deposits and other government-controlled money. It is hardly consistent to oppose government loans to farmers and advocate government loans to farm-land banks at 2^ per cent., and allow the bank to loan it to the farmer at "the prevailing rate." These farm- land banks under its provisions can be started by any- body and they would be dominated by the lender and not by the borrower. The Supreme Court of the United States has declared that, when a bank receives money on deposit, it assumes all the responsibility of a debtor: so that the deposit by the government is equivalent to a loan. A strictly land-bank business requires unrecallable loans; so that if these land banks were permitted to receive unlimited deposits they would need to be allowed to make recallable loans. It is not probable that money would come to the borrower at as low interest under a farm-land bank as from direct government loans, but the development 276 Markets and Rural Economics of initiative through the cooperation and business manipulation necessary to secure cooperative credit is worth considering. And the charge of government favoritism in making direct loans only to a special class would be obviated. The bank must either be so small that the over- head charges are practically nil or it must be large enough for its profits to cover considerable overhead charges. Evidently one so small as to escape ex- penses would be handicapped in marketing its bonds. Whatever is done with regard to long time loans on land there needs also to be a personal credit short time system, with savings and open account features. The money the farmer deposits in a commercial bank is loaned to commercial business and not to agricul- ture. What is needed is a system of revolving agri- cultural cash and credit that stays with agriculture. It has been suggested that a rural credit system should be established on a modified building and loan association plan. There are but few parts of the country that would use the building and loan idea. It gets its capital from the members by a system of dues. If he pays in a while and allows his payments to lapse he loses what he has paid. It is the old insurance idea. Payments required of a farmer oftener than once a year are not suited for farm credit. The country is already over-organized by fraternities re- quiring the payment of heavy dues. It is also true that the mortgage basis for farm loans would be handicapped in some states by laws that the people will not repeal. Ever since the days of the Republic the State of Texas has had an organic pro- vision prohibiting the mortgaging of a homestead even though the husband and wife sign it. A Markets and Rural Economics 277 vendor's lien is the nearest approach to a mortgage that can be had on a homestead. If government aid is given it could take the form of an endowment loan, to be repaid by amortization. The legitimate function of money is to facilitate transfer of title. The legitimate end of finance is to facilitate production and distribution. When pros- tituted to other purposes it becomes a tyrant. This country has shown the greatest industrial and com- mercial development ever seen in the history of the world. Finance and commerce have joined hands and worked together with a consummate skill. Agricul- ture has stood aloof and paid the penalty of its isola- tion. We have also developed a system of financial banking which is superceding commercial banking. The manufacture and sale of securities has grown to be an "industry" in the line of trust promotions. Plants are merged into an over-capitalized concern which is made to absorb the mass of securities by holding out prospects of large profits. When the investing public has purchased these securities they are then anxious for the trust to make good the prom- ise of profits, and by this means a constantly in- creasing number of citizens become accomplices in monopoly and foes of trust legislation, and work against the common weal, to make good the over- capitalized stock. The earnings of the company are capitalized until a trust, originally half water, may get to be worth dollar for dollar at physical valua- tion for the entire stock issued. With the good money thus obtained by these promoters the security sellers get a fresh grip on the country's solid resources. It must be borne in mind that it is only when a business has control of the market that over-capitalization 278 Markets and Rural Economics makes for higher prices, for without monopoly com- petition would cut out the profits on fictitious stocks. The largest banks, trust companies and insurance companies have massed capital under one manage- ment to be employed, not as the servant of commerce and to facilitate exchange, but to subordinate com- mercial demands and to finance corporate securities controlled by the interlocking directorates. Through all the plans proposed by the bills that had been introduced and widely discussed prior to 1913, and all the recommendations of the Monetary Commission, and all the plans advocated by the Na- tional Citizens' League for the Promotion of Sound Banking, we looked in vain for anything covering the needs of the farmer on the following points : 1 i ) Time exchange extending for a year, so as to help him perform the carrying function in the mar- keting of his crops. ( 2 ) Long-time loans suitable for poor men to buy land and pay for it by amortization, thereby checking tenancy and promoting home ownership. (3) Providing for the loaning of postal savings de- posits in the vicinity of the deposits for agricultural purposes. (4) Providing debentures for investment that will encourage home ownership versus absentee land- lordism. Cooperative banking should recognize each factor necessary for its successful operation. These factors are: (i) Stockholder, (2) deposi- tor, (3) borrower, and if subsidized by the Govern- ment, (4) the State or National Government fur- nishing part of the funds. The banks of the United States have been run for stockholders and not for the service of the people. Commercial banking is a Markets and Rural Economics 279 profession and not a mere means to an end, and that end the service of business, as it should be. Each depositor in the land reserve bank whether individual or bank, or other corporation over a pre- scribed amount should have one vote; the borrow- ers from each local bank through which loans are- secured have one vote; each stockholder one vote, and if the Government has an interest it should have a vote for each interest in proportion to all the other interests concerned. The mortgages upon the prop- erty of the borrower are pooled into one individual security for all the bonds the land-bank issues, and it will be to their interest to have it operated on the soundest basis and in the safest manner. Experience has shown that the only practical meth- od for a farmer to pay a loan secured by his land is by amortization. The annual sum paid by the bor- rower to be composed of the interest, the prorate of the cost of the business, and an installment on the principal. By this process the amount of interest de- creases and the amortization item increases till the debt is extinguished, the percentage of the capital to be paid each year depending on the term of the loan. The land bank markets land bonds secured by its mortgages at whatever they will bring in the open market in the form of debentures suitable for small purchasers as well as large ones. The annual payments upon the principal earn in- terest in the land bank or save interest when used to buy in and retire bonds, so the borrower gets the benefit. The borrower should also participate in all the earnings of the land bank in profits above sur- plus. The larger the amortization and the lower 280 Markets and Rural Economics the rate of interest the sooner will the annuity liqui- land-bank at par. This would have a tendency to date the debt. It could be provided that borrowers may pay their land debts either in money or the debentures of the maintain the price of the bonds at face value. They could be registered or coupon bonds, as the investor preferred, as is now the case with postal savings bonds. Each bank should act as an agency for buy- ing and selling these bonds. Each bond is secured by all the assets of the land bank reserve, surplus and mortgages held. No bond is to be issued against any specific mortgage, but all are pooled as security for all outstanding bonds. One of the curses of American agriculture is ab- sentee, landlordism and tenancy. Farmers who ac- cumulate a competency, and, for one reason or an- other, move to the towns or cities and rent their farms can not keep their farms as productive as they left them, in as good repair, and get a net increase from the investment. It takes all of the rent to keep the farm and its improvements in proper repair. This leads to deterioration of most farms cultivated by others than the owners. If there were safe invest- ments, paying a reasonable per cent., that was safe and unquestionable, requiring no attention or worry, these absentee landlords would sell their farms to the homeless and invest the money in the land-bank bonds. But they would prefer having cash for the farms and not wait for slow payment from the purchaser. This implies the need of a plan whereby the purchaser by paying, say, one-fourth of the purchase price, can have the land-bank pay the other three-fourths of its debentures and allow the purchaser the regular terms Markets and Rural Economics 281 to liquidate the debt by amortizat'on direct to the bank. Why not have mortgage credit banks dealing direct with farmers individually? Because it would be a case of bargain-driving be- tween individual farmers and individual banks. The movement in the early eighties for mortgage banks set on foot by bankers ended disastrously. On this point Ambassador Myron T. Herrick said, on the 1 1 th of September, 1912: "I think it would be most unfortunate if, after the public has awakened to an interest in this matter, ill- considered organizations 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 authoratitive warning be made on this point." Why not use land bonds as a basis for an issue of money? Bond-secured currency has never been a success. Credit currency needs quick convertibility. Every effort to base credit currency on land or to overissue mortgage securities or to put mortgages in advance of the development of a region has resulted in a dis- astrous failure. We have examples in the John Law French assignats, based on untold natural wealth of French possessions; in the Cedula or Argentine land debentures, and kindred experiences. Let's get a few fundamentals: Question : What are the purposes of rural credits ? Answer: (i) To bring into existence a banking and currency system that is as well adapted to agri- culture as our present banking and currency is to a commercial business: (a) by extension of time on land payments so as to allow liquidations by small 282 Markets and Rural Economics installments; (b) by making available in open account funds for agricultural operations below the average profits in farming; (c) by enabling farmers to finance cooperative marketing. (2) For the financial and social betterment of country life, that over-urbanization may be checked and tenancy changed to home-ownership. Question: How many kinds of rural credit? Answer: Two kinds with subdivisions of each: (i) Long-time land loans: (a) for purpose of pur- chase; (b) for purpose of production or improve- ment. (2) Short-term loans on personal security; (a) for productive purposes; (b) for other purposes. Question : What are the possible sources of money supply ? Answer: Three: (a) by subvention ; (b) by bonds or debentures; (c) by deposits and shares. Question: What are the functions of rural cred- its? Answer: (i) To aid in mobilizing security; (2) to furnish an adequate means of rediscounting agri- cultural paper at cost. > All long-time credits are based on land, which in- volves the mortgaging of the land that bonds may be issued on the collective guarantee of the mort- gages held in pool. Is bonding dangerous? Quite a number of people are shocked at the thought of making it easy for one to go in debt on easy terms, and that, too, by abolish- ing exemptions. Moralize against debt all we will, it is quite evident that those who have succeeded in floating the heaviest debts have gathered the harvest. It all depends upon the relation of the cost of the debt to the profits of the business. Markets and Rural Economics 283 The farmers owe about $3,000,000,000, of which $2,000,000,000 is backed up by farm mortgages al- ready. The public debt of all the nations of the earth is estimated by the Bureau of Universal Statistics at $42,960,000,000. The public, corporate and pri- vate debts of the United States are estimated at $80,000,000,000. From returns made directly to the Wall Street' Journal by the various treasurers it is shown that the governmental expenditures in all the States has risen from $189,000,000 in 1901 to $423,000,000,000 in 1911. At a similar rate of increase the country and municipal taxes rose from $912,000,000 in 1901 to $2,082,000,000 in 1911, making a total for State and local purposes of $2,505,000,000. Add to this the expense of the federal government of $650,000,000 and we have for yearly governmental expenditures alone the stupendous sum of $3,155,000,000. Most all of our big corporations and trusts are heavily bonded, or mortgaged, or both. The most prosperous farm district of the United States is heavily mort- gaged. The most important agricultural section of the United States is the Upper Mississippi Valley. In the States that would be touched by a circle of ^oo miles' radius, with center at Chicago, is found 23 billion out of the 40 billion dollars of all farm prop- erty in 1910 and ^3 per cent, of all the improved farm land in the United States. These States raise considerably over half of the live stock in the United States and $1,800,000,000 out of the $2,700,000,000 worth of cereals. To express this in percentages this area contains 57.7 per cent, of the value of all farm property, 60.7 per cent, of the value of all farm lands, 51.3 per cent, of all the cereals as measured by value. If we exclude cotton, as confined to the 284 Markets and Rural Economics Southern territory by climatic conditions, the over- whelming predominance of this section would be even more evident. Nor is this domination declining with the development of other sections of the country. On the contrary, it gathered to itself 60 per cent, of the value added to farm property during the last decade. Eighteen of the leading insurance companies of the United States have loaned on farm mortgages in the various States the sum of $414,000,000. Of this sum the State of Iowa has absorbed more than one-fourth or 25.5 per cent; Kansas is using 8.8 per cent.; Nebraska, 9.8 per cent.; Missouri 8.6 per cent.; Minnesota, Indiana and Illinois, 7.1 per cent, each. The farmers in these states have been able to make more than the interest charge on their debts. If a rural credit system is established perhaps more of these mortgages will be shifted to the land bank. Then, the insurance companies would invest in the bonds instead of holding the mortgages direct. Peo- ple who own farms but have moved to town, for one reason or another, and live on the rent from the land, would be inclined to sell the land and invest in land bonds rather than see the land depreciate in value because of neglect by renters. Credit is a good thing for those who know how to use it so is a buzz-saw. It is an instrument of destruction when improperly used. It may be a means of securing ownership or it may be the means of losing ownership. To make a system of rural credits worth while and avoid disastrous results two things must be well guarded : ( i ) The borrower must be protected from the aggressions of the lender in terms and rates. (2) The lender must be protected from improvident Markets and Rural Economics 285 borrowers. Experience has taught that the best way to safeguard loans is to restrict them to realty invest- ments and productive purposes. Experience has also taught that the best way to insure the borrower against extortion is to have him own and control his own lending institution, as is done in the cooperative banks of Europe. There is only one other way, and that is, for the Government to take charge of the loaning and make a flat rate as low as it can float its own bonds, plus a fraction of a per cent, to cover cost of administration. Where this has been under- taken by Governments it has been to help agriculture by indulging farmers in the purchase of land or for farm development. This method appeals very much to farmers, as it allows each to deal individually with the source of the loan and avoids the necessity for mutual groups acting together to secure the loan. It unifies the interest rate more effectively than can be done by any other means. But for the Government to step down and do this for one class and for no other class will very naturally cause to be raised a strenuous protest on the part of those of other classes and vocations. Especially is this true in a republic where paternalism for a class is contrary to the spirit of republican institutions. In the language of the National Secretary of the Farmers' Union, Mr. A. C. Davis, I will say: "It is not so much the getting of cheap money that will count, as it is the use to which it is put. The greatest benefit that has come to the European farmer is not cheap money, but the cooperative method through which he has secured cheap money. "The mere fact that an individual can walk up to a government official and secure a loan for a long time at a low rate of interest will count for very little in 286 Markets and Rural Economics solving the rural problem unless he and others like him combine the sums thus obtained to finance the production and sale of the farm crops. So long as we allow private greed to monopolize our business, we can expect to be manipulated as easily with money at 4 per cent, as at any higher rate which we may now be paying. Monied interests will adjust them- selves accordingly, and there you are. Labor people need expect no benefit from a rural credit system un- less farmers use the money to eliminate unnecssary middlemen and sell more directly to consumers. Cheap money will not be a guarantee of prices to farmers, and that is the thing that makes for loss or for profit. Prices can be so manipulated that though you could borrow without paying any interest it would avail nothing." But I am solicitous for those whom this scheme would not reach. Is there no record in the annals of history where Government went to the relief of the lowly? Can the Government afford to set the example by doing such a thing ? I consider Mr. H. W. Wolf the greatest living authority on rural credits,, and in his address before the American and United States commissions at Dub- lin, in speaking of personal credit banks, he said: U I do not think the Government should interfere in their work, and to show what State interference will do I want to tell you what happened to a Prussian Raiffeisen bank through State interference. In 1895 a State-endowed bank was formed in Prussia to finance a cooperative credit society. Up to that time the Raiffeisen unions had been solvent. In 1895, when this bank was formed, they said, u No; we don't want any assistance; we have money enough, and we ask you for nothing." However, the financial peo- Markets and Rural Economics 287 pie brought pressure to bear, and eventually they en- tered negotiations, and consequently they rather over- rated the amount of money at their command, and a few years later found themselves in a very serious difficulty. They had speculated and had some pretty hard times. They got out of it only by rather heroic methods, and I do not think there will be any losses in the end, for the contributions of the other societies will be repaid. Now that these Raiffeisen institu- tions are free from State aid they are doing well again. u Go about it privately and you will find that even the Imperial Federation, in Prussia, which relies on State advance, is heavily impoverished with the in- terference it has to submit to. For what the State gives it asks about ten times the amount in return. " The head of this union complained to me, in 1898, u We can not stand it any longer." There followed rebellion; and when the State wanted to tighten the strings the unions grew very restless and said, u We will make ourselves independent. We have 150,000 pounds, and will throw off this Government yoke." The only banking aid they had open to them was the State banks, so they went to the Raiffeisen Union to try and make its society the collective agencies for its own work, and in return to act as agent for them and cash their bills; but the Raiffeisen societies would not consent to this. Then they went to an ordinary joint-stock bank, one of the largest in Germany. This institution does not tie them to exclusive business; and to both parties this is a far more satisfactory arrangement. Even the tradesmen societies, which have been favored in every respect, openly say they would like to break with the State. "In France you have seen the system of the Credit 288 Markets and Rural Economics Agricole; there is unrest, and the result of the State aid has not been what they had expected. I under- stand that you have visited some of the French banks, where they really have accumulated a reserve fund. That is what State aid is intended for; but only in one or two districts has it actually been done. A select committee of the French Chamber of Deputies, reporting recently on credit to be given to the trading classes, points out that in agricultural banks supported by the State in France the people did not repay as they should. The money being advanced by the State according to this report, some of the people did not expect to have to pay it back." It takes $1,750,000,000 annually to move three of our staple crops, viz., cotton, $1,000,000,000; wheat, $650,000,000; tobacco, $100,000,000. (Corn is not moved bodily by money as the articles here named.) The value of the crops marketed by the farmers is something over $6,000,000,000, or about twice the amount of the entire money of the country. So if it were paid in cash the farmers would pocket every dollar of money in the country once and the most of it again every year. If farming is to hold its own with other vocations in the modern struggle of busi- ness the first fundamental idea for farmers to get into their minds is that they, through their own co- operative organizations, must control the entire busi- ness connected with agriculture. Agriculture should finance itself and do its own distributing. Rural cred- its is a means to an end. There are countries without rural credits that have prospered by cooperative agri- culture but their commercial banking and currency fa- cilities were adjusted to agriculture and commerce alike. This has not been done with us and is not likely to be done from the nature and conditions of American banking. Markets and Rural Economics 289 But Mr. Wolf is not opposed to Governments doing as Denmark is doing. On page 551 of the report of the American Commission in a statement of Denmark's method: u By Mr. Waage. I shall give you a report of the small farmers' Credit in this country under the con- trol of the Government and aided by the Govern- ment loans. In 1899 the Government called this system into existence first, for a period of five years and later renewed for five or ten years. The State has put at the disposal of the people who want to start small farms some millions of crowns ; it started with 2,000,000, and now it has been increased to 4,000,000 per year at 3 per cent. The loans the Gov- ernment has granted in this way amount to 25,000,- ooo crowns." The Government puts up nine dollars to one of the farmer. Neither does Mr. Wolf oppose the policy of Eng- land in her dealings with the Irish peasants, in helping them become home owners. On page 865 of the Report of the American and United States Commis- sion we find the following : u Some of the facts elicited are as follows: The estates commission of three members, appointed for life, had its origin in the Windham Act of 1902, dealing with the division and purchase of estates by tenants. This commission now handles about 8,- 000,000 pounds per year, all used for the purchase and division of estates. u These estates may be purchased at a voluntary sale from the owners or (within the area of the con- gested districts board) the sale may be made on com- pulsion. At present the sales are almost all volun- tary. Since its inception the estates commission has 290 Markets and Rural Economics purchased and resold about 8,000,000 acres, valued at 90,000,000 pounds. u The congested districts board is a larger commis- sion, also nominated by the Government, and has for its object the division and sale of estates in nine west- ern counties of Ireland, where the congestion of tenants was such that the cottager was unable to make a living on his small parcel of ground. This board has purchased land worth perhaps 3,000,000 pounds, of which it has sold about 1,000,000 pounds to date. u The procedure is about as follows: a large estate, perhaps entirely in pasture land, is put up for sale. The officials appraise it with reference to its pro- ductiveness. If the price asked by the owner is sat- isfactory the estate is purchased, and the owner paid in Government land, scrip, or stock bearing 3 per cent, interest. Hitherto the voluntary seller has been given a bonus of 12 per cent, of the purchase price, but this bonus seems to have been withdrawn re- cently. "Estates sold under compulsion the Government must pay for in cash. As a matter of fact, there are three methods of payment for land: (a) in stock, the usual and immediate payment method; (b) in cash, an option which is rarely resorted to, since the prospective seller must in this case await his turn, for cash sales are often very long delayed; (c) or partly in cash and partly in scrip. u Once purchased, the estate is divided into tracts of 25 or 30 acres; line walls are built if necessary, a house is constructed at a cost of about 200 pounds, and the place is sold to a tenant, preferably a former tenant on the estate, sometimes a purchaser from some other district. Since there are frequently 2$ to 40 applicants for each holding it is not difficult to Markets and Rural Economics 291 find honest, capable, industrious purchasers. Very often an estate is purchased by the tenants thereon by mutual agreement with their former landlord as to purchase price. The Government buys the estate, pays the landlord in stock or scrip, and sells it in small holdings to the tenants, who thus become the debtors of the State. u The small holder, who may have no capital and seldom has enough to stock the holding pays at present 3 per cent, interest on the purchase price and one-half of i per cent, amortization, or a total of 3^ per cent., payable in semi-annual installments. This rate amortizes the debt in about 62 years. The purchaser is given a title to the land, pays taxes on it, and may transfer his equity at any time he chooses. "Out of the 90,000,000 pounds sold the failures to pay the installments promptly have been incon- siderable. In the county of Cork the defaults have been nil. In case of default or failure the installments are paid out of the county exchequer, hence the tend- ency to pay promptly is warmly applauded and the slow payer is frowned upon. The results of this sys- tem seem to be excellent." We find on page 662 the following from Mr. Dop, vice-president of the International Institute of Agri- culture : "Agricultural Credit in France is cheap; and this, in my opinion, is one of its most important features. "The problem of how to discount agricultural paper at the lowest possible rate is the real difficulty in any agricultural credit system. To rescue the farmer from the evils of mortgage credit, often from the bondage of usury, and to secure him loans at a lower rate of interest than is usually required by ordinary banks would seem to be a difficult and even an im- 292 Markets and Rural Economics possible task. Yet the problem has been solved in France in a most practical and profitable manner, as the rate of interest charged the farmer varies from 2 to 5 per cent., according to the length of time for which the loan is made. u To organize agricultural credit so that it may be adaptable to all the requirements, to all the needs, to all the incidents which may arise in the complex busi- ness of the farming industry is an ideal which it would seem difficult to attain without derogating from the basic principles and without weakening the very foundations on which the edifice of rural wealth re- poses. Yet this seeming impossibility has been ren- dered possible, thanks to the good will and the ability of our legislators, and thanks more especially to the suppleness of the organization which they have built up to meet the varied needs of our farmers. " Mr. Wolf, on Cooperative Banking (page 244) says: u Another most successful offshoot of the landschaft system is the Boden Credit Institute of Hungary, which has to some extent been based upon the pos- session of an independent capital figuring as a re- serve fund. In addition to the 1,000,000 crowns (something over 40,000 pounds) granted by the Gov- ernment, 209 founders subscribed collectively 13,900 pounds, with liability for nine times the same amount, held in reserve. This seems to have been considered necessary for making the institution go on new, un- tried ground. " I respectfully submit that no cooperative institu- tion for providing cheap money on farm lands would be able to start off of its own initiative without the help of some outside capital furnished by the State, or by individuals, to enable it to make a start. Markets and Rural Economics 293 Wolf further says: "Gone it certainly has, and that exceedingly well. So well as, in course of time, to suggest the forma- tion of a similar institute for mortgage loans for peasant lands. The Boden Credit Institute is intended for large properties only. It grants no loans below the amount of 2,000 crowns (or $400) ; and the ma- jority of its advances to landowners are above that amount. " On page 249, Wolf says : "The Government institutions have plainly done good, and have, above all things, achieved their par- ticular purpose of bringing appropriate assistance to the small agriculturist." On page 50, Wolf says: "The Government institutions have certainly suc- ceeded exceedingly well better than our own joint- stock companies formed for the same purpose, and that without loss to the taxpayer." Wolf (p. 253) says: "The State-endowed institutions then have, on the whole, not a bad record to exhibit. They have placed money within the reach of the peasant proprietor, who was previously too small for the savings banks, which are abroad the great purveyors of mortgage money, to look at, since his business was, in each in- dividual case, only petty and troublesome; who, fur- thermore, if not too small, was at any rate too dis- tant from the pay office of the landschaften to deal with, and who was deemed altogether unworthy of the notice of the joint-stock mortgage banks. They have done this in an efficient, appropriate way by stationing their officers in every district and making application, valuation, and borrowing decidedly easier for those peasantry." 294 Markets and Rural Economics On page 256, Wolf says: "They are borrowers' institutions. They may be regarded as landschaften with the cramping and ham- pering features of those institutions removed. They are borrowers' institutions, which admit any agricul- tural borrowers as members who desire to become so in their district. In respect to one point, they have departed rather materially from the principle of the landschaften. Persons desirous of furthering the movement are eligible as well, and many of them do take shares. In Saxony such members are required to be either agriculturists or land-owners. The idea of proceeding without a command of ready cash ap- pears to have presented itself to the originator of this modern movement as so inconsistent with business principles that in both of the two countries to provide the first working funds an advance from the Govern- ment was accepted. "In the Saxony society it amounted to 37,500 pounds, and was paid off within four years. In the Bavarian society it was considerable, beginning with 50,000 pounds, advanced free of interest, and an- other 50,000 pounds, since increased to 200,000 pounds, advanced at 3 per cent, interest." On page 258, Wolf says: "Absence of funds of their own w r ould place such institutions at the mercy of the confraternity of bank- ers. With money in their pockets, the societies are able to meet such machinations, and to regulate the supply of the market so as to keep it absolutely at a steady quotation, which is not only desirable in itself and certainly benefits their credit, but it is an addi- tional specially important to their members." Cahill, on page 21, mentions, as one of the char- acteristic features of the State, provincial, and dis- Markets and Rural Economics 295 trict mortgage banks "a certain decentralization of business by the utilization of local officials." And, on page 30, Cahill says: "The organization of the latter," meaning the joint-stock land-mortgage banks, u was not capable of sufficient decentralization consistent with adequate re- turns upon the expenses incurred by the maintenance of local representatives or offices necessary for such business. In the case of the other banks which limit their operations to a province or a small district, adequate knowledge of intending borrowers and su- pervision over mortgaged estates is more easily se- cured, and the general expenses of administration are reduced by the fact that their administration, apart from those actually in permanent office employment, is largely honorary; nor were the land-mortgage banks inclined to seek such business." 1890 New Zealand was the worst bankrupt coun- try on earth. A population of three-quarters of a million had a public debt of two hundred millions of dollars. In a total area of sixty-six millions of acres, one hundred and eleven persons and corporations held seventeen millions of acres, while much of the re- mainder was held in large bodies. In that thinly settled country emigration had set in, and in one year some twenty thousand persons emigrated to Australia and other countries. The government has broken up many of the large landed estates, paying the owners the market value, and then selling the lands to farmers on all the time they want up to thirty-six years, with interest around 4 per cent, per annum. If the farmers lack working capital, it is loaned them on easy terms, with interest rates not over 4% per cent, per annum. 296 Markets and Rural Economics The population has increased in twenty years (1890-1910) from 750,000 to 1,070,000. Of the 66,000,000 acres in the country, over 14,000,000 acres were privately owned in 1910. It is to-day the wealthiest country per capita in the world, and its wealth is more widely distributed among the people than any others, except possibly Switzerland and Denmark. In 1910 its foreign trade was one hundred and ninety-six millions of dollars, or $183 per capita. The same per capita rate in the United States would give us a foreign trade of seventeen billions of dollars, or about three hundred per cent, more than we had. If Monarchies and Republics in other parts of the world can step down from their lofty perch and do these things, and we can not, which do you suppose will appeal to the people of this class as the better government for them? It is not philanthropy; it is not charity; it is not giving anything to anybody; it is statesmanship. However, we all know that to go into reckless loans loosely administered would result in a calamity. We should not develop a hot-house nursery for the incapable, neither should we ignore and neglect so important a part of our population as those who pro- duce half the food and the raw material for the rai- ment that is produced in the United States. Every other bite you eat comes from the bounty of their hands; every other article of raiment you use comes from the sweat of their brows. Need of laborers. If some one should say that we would have no laborers if they were allowed to own land of their own, I will say that when I hear of the dearth of labor I rejoice; for I know that means that all who are worthy are employed. But Markets and Rural Economics 297 when I hear of millions out of work I am alarmed: I know there is wretchedness and danger. Old Rome used to try to solve the unemployed problem by using them in the cities on public works and private ex- travagance, with feasts and amusements thrown in. We all know how much of a remedy that was. Source of Funds. If the Government should ad- vance money, how should it be obtained? That de- pends upon whether we have sufficient money to an- swer the demand or not. It can be secured by de- posits from the Treasury, by selling bonds, or by the issue of Treasury notes in like manner as is provided under the new banking and currency act which is to answer the needs of purely commercial business. Class Legislation. We expect the charge of class legislation is to be presented. It all depends on what we define as class legislation. If it means legisla- tion that is for one class at the expense or to the injury of another, then this is not class legislation. If class legislation means legislation that favors one class without injury to another, this is class legisla- tion. If class legislation means legislation that ben- efits one class with indirect benefits to another, then it is class legislation. I wonder how many laws are on the statute books that do not come under the head of class legislation under such constructions. LESSON XLII 1. What is meant by the "Gold Standard ?" 2. What is the process of rediscounting commer- cial paper through a Federal reserve bank? 3. Unless the farmer owns banks that belong to the Federal reserve union, how many tolls will he have to pay on the money which the government issues to 298 Markets and Rural Economics regional banks when he rediscounts his agricultural paper to secure it? 4. Give the leading features of the rural credits bill prepared by the United States Commission ap- pointed to investigate rural credit abroad in 1913? 5. In what ways was it similar to the European system, and in what ways did it differ from all of them? 6. What is the legitimate function of money? 7. What is "financial banking"? 8. Name four things which rural credits should give that no bill drafted and no report of any public committee on finance ever proposed prior to 1913 ? 9. Is there a bank anywhere that allows depositors a vote in its management? 10. Form an amortization table to show how it operates. 1 1. Tell something of the failure of land mortgage banks. 12. Give the fundamentals of rural credits. LESSON XLIII 1. Do our public expenditures about equal our volume of money? 2. What is the most prosperous agricultural sec- tion of the United States? 3. How do you account for it? 4. Why do eighteen of our largest insurance com- panies loan one fourth of all they place in land mort- gages in one State? 5. Would safe debenture investments tend to cause absentee landlords to sell to renters ? 6. What is the position of Mr. H. W. Wolf on Markets and Rural Economics 299 the subject of government aid to short-time personal credit banks, and what are his reasons? 7. How would rural credits help the farmer to re- tain and keep revolving in the country the money his crops bring ? 8. What is the policy of Denmark in helping rent- ers become home-owners ? 9. What is England doing for the Irish peasants? 10. What is the Hungarian method of land banks? 11. What of German provinces? 12. What can you say of the conduct of Nfew Zea- land on this subject? CHAPTER XXIX COST OF LIVING There are a few cardinal fundamentals in Economics : 1 i ) There is no end to the useful work that needs to be done. (2) Cost is relative, and prices and cost of living are distinctly different things. (3) The human species can exist on a very small margin of supply, yet can consume, or use, an unlim- ited amount of things desirable, measured by the power to produce. It is quite possible for the people of a community to produce more of certain commodities than it can consume. It is quite possible for people engaged in a certain line of industry to produce more than can be marketed at a fair price. But it is impossible for mankind to produce more than it can profitably use and enjoy under a high standard of civilization, provided the industries are properly proportioned among the various departments of human activity. The difficult thing is to secure the proper adjustment. There is not a time when labor could not be profitably used in manufacturing, in improvement of farms, building roads, providing drainage, irrigation for production, sanitation, con- structing, beautifying, etc. Markets and Rural Economics 301 Idle labor is a sign of maladjustment of industry. Revolutions are the landmarks of bad statesmanship. Lack of employment results from dearth of money with which to pay for service of lack of demand for service. The condition of labor being plentiful and service being needed, and yet idle hands being in abundance, indicates an unwillingness of the workers to accept the wages offered and the unwillingness of the employers to give the wages demanded. Dearth of money may result from lack of sufficient volume of money in circulation, or from a concen- tration of money in certain places, and consequently the idleness of hands in the communities drawn on for cash. The margin upon which people can exist and the amount they will consume if they possess the money necessary, determines the demand. The constancy of employment of all manual and brain workers determines the bountifulness of production. The power to consume determines the demand, and the price regulates the amount that can be profitably marketed. Price is relative. It is quoted in terms of dollars. High price of articles of commerce or of service means low price of money. If things we buy are cheap, money is dear. If the price of money is low, the price of everything measured by it is high. Legitimate cost is cost of economical production and economical distribution. All other expenses are useless and constitute a parasitic tax on the energies of mankind. The purchasing power of labor is the only stand- ard by which to judge fluctuations in price. When prices of commodities go up and remunera- tion for work goes up at the same rate the cost of living is not increased. 302 Markets and Rural Economics When prices of commodities go down and re- numeration for work goes down at the same rate the cost of living is not decreased. When prices of commodities remain the same and renumeration for work increases the cost of living is lowered. When prices of commodities remain the same and renumeration for work decreases the cost of living is raised. Prices and renumeration for work, on the whole, go up or down as the volume of money increases or diminishes. High-cost living or low-cost living is not determined by the general level of prices. It is de- termined by the purchasing power of labor, and not by the purchasing power of the money paid to labor. Let us consult the government reports for a moment and see how many hours those engaged in different occupations work to earn one dollar. These figures are estimates based on the average wages paid on the farm, and the average paid to workers in the other vocations mentioned, without any line of distinction being drawn between wages and salaries. Neither is there any cognizance taken of the difference in the cost of living on the farm and in the towns and cities. Mechanic working on plows, hoes, har- vesters and reapers 3 hours Wagon and harness makers 3% hours Railroad employees engaged in transport- ing products of the farm to market. . . 2% hours Farmers, based on farm values, 1911.. . .10 hours To make this clearer, the mechanic who works in factories making the plows, hoes, harvesters and other implements that the farmers use, to earn one dollar works three hours. The automobile, wagon- and harness-maker, for the farmer's use, works 31/0 Markets and Rural Economics 303 hours. The railroad employee who runs the trains which haul the products of these farmers to market works 2^/2 hours to earn one dollar. The farmer, who does all the work of producing, takes all the risk of drought and other hazards that go with farm- ing, works 10 hours to earn one dollar. Is such a division indicative of equity? The market cost of living affects the farmer least of all classes, for the reason that he produces so large a part of his living at home. True, the cost of production determines the cost of living, but this item does not reach the farmer so acutely as it does the urban laborer who must purchase in the open market everything he uses with the wages he secures. The effect of an increase in the volume of money is to raise the general level of commercial values, and vice versa. Wages and salaries soon follow, but do not go up or down simultaneously with the rise or fall of commodity prices. As the increasing supply of the life blood of commerce enters the channels of trade it stimulates business and accelerates the move- ments of material progress. And the reverse effect follows a withdrawing of money from circulation. The advantages of increasing prices to the producer due to an increasing volume of money is not offset by an equal disadvantage to the consumer, as in the case when artificial causes raise prices to the con- sumer without any corresponding advantage to the producer. The causes of the high price of living are three : 1 i ) Increase in money supply and credits. (2) Monopoly extortion. (3) Economic waste. The first leads to higher standards of living, and 304 Markets and Rural Economics operates to increase prices to the producer, the dis- tributer and consumer. Just where the benefits derived from an increase of money supply reaches the point of diminishing returns is specifically indeterminate. The increased activities resulting from a gradually expanding sys- tem of credits based on money and tangible wealth have made this country's progress the marvel of the centuries. While the constant need for readjustment of wages and salaries to changing price-levels in- evitably lead to hardship to certain individuals, it has nothing charged to it so disastrous as results from the reverse process decreasing money volume, de- creasing credit, and decreasing industrial activity. The power to consume is gauged by the remuneration received for labor and its products. The purchasing power of the remuneration must keep pace with the inflation of values or the point of diminishing returns is reached. The complaint of high cost is world-wide. Every nation is experiencing in varying degrees the same process. So there must be a world influence as well as a national influence effecting an upward trend of commercial values. The World's Stock of Gold. In 1 890 the world's stock of gold was $7,966,000,000 In 1900 " " " " " " 10,000,000,000 In 1905 " " " " " " 11,000,000,000 In 1910 " " " " " " 13,800,000,000 (N. B. "Stock" does not mean "coin.") The gold money in Europe and the United States in 1910 was $5,850,000,000. All kinds of money in the same countries in 1910 totaled $12,827,000,000. Markets and Rural Economics 305 Commercial agencies have worked out what is termed an "Approximate Price Index," which is the totals of the prices by the pound of 96 articles of general consumption. That Price Index showed for 1895, 6.8; 1901, 7.5; 1904, 7.9; 1907, 8.9; 1910, 9.2; 1912, 10. The world's stock of gold coin in 1893 was $3,- 900,000,000; the heritage of four centuries of min- ing. The world's production of gold from 1893-1910 was $5,152,000,000, the work of seventeen years. One dollar would purchase, in 1910, as compared to 1896, 48c worth; in foods other than meats, 65C worth; in all other commodities, 67C worth; in all commodities, 6oc worth. A great deal of this rise has taken place in the process of distribution. Mr. Alfred L. Webb, stew- ard of the Ringling Brothers' Circus for fifteen years, says: "It costs me only one cent more for each per- son in serving a meal for the circus than it did four- teen years ago. I know from the running expenses of my home that the cost of living has increased about fifty per cent. But the circus escapes because we cut out the middleman." ECONOMIC WASTE The causes of the high cost of living are many under the division of Economic Waste. This waste is due to two causes: (i) crude methods; (2) para- sites. Under crude methods may be classed all wasted energies used in ( i ) doing foolish things because of bad judgment; (2) doing with crude or inadequate tools or machinery, and therefore getting poor re- turns for the energy exerted. 306 Markets and Rural Economics Under parasites there are two divisions: (i) the idle parasite, and (2) the industrious parasite. Under idle parasite are two divisions : ( i ) the idle from choice; (2) the idle from inability to work. This second class has two divisions : ( i ) those unable to work for lack of employment; (2) those unable to work because of physical inability. The industrial parasite is the one doing some- thing that is unnecessary, something that can be done away with, or that is a mere duplication of what another is doing in the same way when either could, do all that is necessary in that business at that place. This latter class is by far the greatest burden now being carried by the working men and the working women of the world. LESSON XLIV Name three fundamental principles in economics. Is it possible for man to get done all the work that he wants to have done? Of what is voluntary idleness a sign? What determines demand? What determines the bountifulness of production? What regulates the amount that can be profitably marketed? What is the relationship between the price of money and the price of commodities? What is legitimate cost? What is the only true standard by which to judge fluctuations in price? Illustrate. By what is the cost of living determined? LESSON XLV State the number of hours it takes a man to earn a dollar at different kinds of work. Markets and Rural Economics 307 Why does the market cost of living affect the farmer least of all? What are the causes for high price of living? Explain how the first operates. What has been the record of the world's stock of gold? What is an "approximate price index? 1 ' What is the difference between "stock" and "coin"? What can you say as to the changes in the pur- chasing value of a dollar? What two causes result in economic waste? Name the subdivisions of each. What would you suggest as a remedy? CHAPTER XXX COST OF LIVING, CONTINUED Among the things that produce both idle and in- dustrious parasites may be mentioned the following: 1 . Over-capitalization. 2. Monopoly. 3. Capitalized earnings. 4. Wasteful methods of distribution. 5. Excessive government tax. 6. Excessive Fraternal tax. 7. Individual extravagance (bad habits). 8. Growth of cities at expense of country. 9. Interest burden paid by industry. 10. Credit buying (and piece-meal buying by tele phone). Each and all of these lead to parasitism, and, taken with this waste of natural resources through ignor- ance or neglect, completes the agencies contributing to high cost of living, and unnecessary labor. OVER-CAPITALIZATION Capital stock is the amount allowed to be issued or sold to. stockholders. It is supposed to cover three kinds of assets: (i) cash; (2) real property; (3) possibilities and good will. Over-capitalization means the capitalization of intangible property. Shares covering this intangible assumption of future wealth do not cost anything and are usually appro- priated by the promoters or sold at a great discount to induce people to take stock in the hope of un- earned dividends. Conservative estimates place over-capitalized stock Markets and Rural Economics 309 that has been floated in this country and outstand- ing today at $30,000,000,000. On this stock, divi- dends of about $1,500,000,000 each year are being paid, amounting to about $18 a person or nearly $100.00 to each family of the nation. This com- mercial tax can come from but one or both of two sources: from the producer, in low prices or wages; and from the consumer by high prices. The over- capitalization of an industry means the capitaliza- tion of intangible property and "good will" with the payment of unearned dividends. The dividends are earned in the commercial sense, but not in the sense of just recompense being given by the original pos- sessor of the watered stock. If the earnings of the company are capitalized until watered stock has phys- ical value behind it worth face value, the possessor is in very much the same attitude toward the public that the land speculator is who has "grown" rich by unearned increment, or appreciation of land values. The impossibility of paying dividends on counter- feit capital and maintaining a company against a competitor not over-capitalized is evident, unless the over-capitalized company has the advantage of po- sition, franchise, commercial or financial monopoly. This directs our attention to the subject of how mo- nopolies are secured and maintained. In a minority report of the Steel Trust Investi- gating Committee of Congress, the Committee's in- vestigation revealed that directors of the United States steel corporation, through stock ownership and places on the directorates of the great railway systems of the United States have a controlling voice in nearly 55 per cent, of the railroads of the country, according to a statistical study prepared for the Stan- ley Steel Investigating Committee of the House. 3io Markets and Rural Economics "By means of interlocking directorates 18 financial institutions in New York, Chicago, and Bos- ton are dominant factors in the management of 134 corporations with an aggregate capital of $25,325,- 000,000. "The partners and directors of these 18 insti- tutions hold 38 5 directorships in 41 banks and trust companies with deposits of $2,834,000,000, and they represent through their own institutions the manage- ment of $25,325,000,000. They hold 155 director- ships in 31 railroads having a total capitalization of $12,193,000,000; 50 directorships in n insurance companies with total assets of $2,646,000,000; 98 directorships in 28 producing and trading companies with a total capitalization of $3,583,000,000, to say nothing of the various public utilities corporations with annual gross earnings of $428,000,000. "Five of these 18 institutions J. P. Morgan & Company; the Guaranty Trust Company; the Bank- ers' Trust Company; the First National Bank; and the National City Bank through 344 interlocking directors, have tentacled allied corporations with re- sources of $22,24^,000,000." The practice of capitalizing the earnings of cor- porations has covered up the tracks of graft in the march of monopolization. When earnings are invested in more property or in improvements instead of being distributed as divi- dends it eliminates the water and fills in with sub- stantial wealth the vacuum of over-capitalized stock. When the stockholders get restive for more of the emoluments of prosperous business the company may declare a dividend in the form of additional stock. This allows the earnings to remain in the treasury for capital stock uses. It also pacifies the stockhold- Markets and Rural Economics 311 er, who feels that he has a stronger pull on the com- pany, that will increase his income; but as it does not increase the earning power above what it would be without the issuing of treasury stock in this man- ner, merely lowers the rate of dividends due the stockholders, and helps to appease the wrath of the public who pay the profits, as the financial reports of the company will thus show a lower rate of divi- dends to the stockholders. Sometimes all this is avoided by "cutting a melon" paying out undivided profits in a lump sum, not as dividends, but as special apportionment of accumulated surplus. The great majority of corporations and companies do not earn for their owners such enormous dividends as to ex- cite the cupidity or envy of the public. Many go to the wall and others drag along, paying little or no profit to their owners. It is the big corporation with a monopoly that can show such phenomenal business success. The burden of over-capitalization comes in the form of increased cost of service in the case of rail- roads; increased cost of articles of necessity and luxuries, in the case of manufactories; increased cost in the price of merchandise in the case of commer- cial companies, and so on through the list of corpo- rate companies handling the material necessities of life. No one who produces can avoid contributing to this counterfeit capital and live under our modern civilization. In March, 1913, Congress passed a law authoriz- ing the Inter-State Commerce Commission to make a physical valuation of the railroad, telegraph and telephone companies. Senator La Follette worked for this measure for seven years. The terms of as- certaining this valuation are : 312 Markets and Rural Economics 1 i ) Original cost. (2) Cost of present duplication. (3) Other values and elements of value in- tangible values. The wheels of progress move forward and read- justments have to be made regardless of the incon- veniencies such readjustments may involve. LESSON XLVI Name the causes of economic parasites. What is capital stock supposed to cover? What is over-capitalization? What is its purpose? What was the estimated amount of over-capitalized stock in the United States in 1913? How much tribute were the people paying on this capital? How can an over-capitalized company compete with an under-capitalized company in the same business and with equal opportunities in the trade? What did the report of the Steel Trust Investiga- tion Committee of Congress reveal with regard to in- terlocking directorates? How may watered stock become prime stock with full physical value behind it? What is "unearned increment?'' When did Congress take steps to ascertain the phys- ical value of railroads, telegraph and telephone com- panies? CHAPTER XXXI COST OF LIVING, CONCLUDED Excessive taxes are a fruitful source of expense. Governments are used by self-seeking place hunters as a legitimate prey, as a source of support. These place hunters and hangers-on have influence and do not hesitate to use it. Officials are often forced under conditional duress to support appropriations that they inwardly oppose. They have to succumb to the pres- sure or be eliminated and relieved of public duty. In no instance is this more flagrantly exemplified than in the extravagance shown in pension appropriations. The "pork barrel" method of cross-lifting to get cer- tain measures through has cost many millions to the taxpayers in both state and national legislation. Ap- proximately one-half of the national expense is for war and the concomitants of war. There is scarcely a department of the government that is not run at a waste of money as compared to what would be expended if the same work were under the direction of a corporation. The standard of living of individuals and com- munities is as a rule regulated by the power to con- sume, which is measured by the amount of money, or its equivalents, that is handled. As more money has been added to circulation, and the consuming power augmented, the standard of living has been raised. An increased demand stimulates the price, 314 Markets and Rural Economics which in turn, other things being equal, stimulates production. The increased demand has been for manufactured products more than for agricultural products. This called for more urban labor, which was drawn from the country, having a tendency to reduce the power to produce agricultural products. The demand for food products is not increased by one leaving the farm and going to the city, but the de- mand on the ones left on the farm is greater. Such increased demand on the farmer is to his advantage, as it makes for high prices of farm products. The raising of the standard of living on the farm is to the advantage of the city laborer as it creates a mar- ket for his products. Just where the line of extravagance begins and ends will never be settled. From the very nature of human nature it is impossible of settlement. People without taste for music, art or literature would count it inexcusable extravagance to indulge in the purchase of any of the thousand and one things which are bought and enjoyed by people of culture and taste, and are considered by them as necessities. There are a few things which cost large sums of money in the aggregate, generally agreed to be pure extrava- gant indulgences, and which have been handed down from generation to generation, with here and there an addition of a new one, to add to the useless bur- dens of the world. We have other burdens to carry which some would class as necessary and therefore not agree for their listing as extravagances. I refer to our fraternal taxes. Agreeing that fraternal dues and fees go to a good purpose we are beyond question surfeited with fraternities and overloaded with the tax necessary to maintain them. They do duplicating work and fill Markets and Rural Economics 315 similar offices in the structure of society. Our insur- ance bills, both life and fire, are heavier than they ought to be. They duplicate work and expenses and are therefore far more expensive than good economics would justify, or the people themselves would toler- ate, if the same tax were levied arbitrarily and used for the same purpose. Dr. F. K. Hoffman, of the Prudential Life Insur- ance Company, says that the 33,000,000 persons gainfully employed as wage earners sustain an an- nual loss of $366,000,000 in wages because of sick- ness; and for medical expense $248,000,000, one- third of which is preventable. There are constantly 3,000,000 people seriously ill in the United States. We sustain an appalling loss in the way of physical sin, costing hundreds of millions annually in cash and untold misery, physical pain, mental anguish and heart-aches as the retributive wages of immoralities. The Interstate Commerce Commission report for 1910 showed 1000 killed and 14,000 injured by railroads, and 7400 killed and 80,000 injured in in- dustries. From 1890 to 1910 there were 29,000 fatal accidents in mining in the United States. RECAPITULATION We have as agencies for price-raising: Increased supply of gold. Increased consumption per capita. Lessened cereal production per capita. Trust monopoly and control of prices. Earnings on over-capitalized corporations. Tribute to parasitism. These are capable of manv sub-divisions. There are other sources of expense which are not 316 Markets and Rural Economics new, and therefore cannot be cited as the cause for increased prices, but merely add to the load the race is staggering under with its need for all possible use of its energies for the production of necessities and the higher development of civilization. To tabulate some of the items of expense which it is our duty to eliminate we give the following con- servative estimate : Dividends on over-capitalization. . . .$1,500,000,000 Unnecessary expense in distribution. 1,500,000,000 Excessive interest on money 200,000,000 Excessive price due to credit buying. . . 200,000,000 Total $3,400,000,000 To extend the list, including items springing from personal habit, we have as heavy sums the following : Liquors $1,700,000,000 Tobacco 800,000,000 Coffee 66,000,000 Tea 16,000,000 Prostitution estimated 300,000,000 Total $2,882,000,000 It matters not whether the cost of living comes high or low, all the above could be lopped off, and won- ders in the way of useful expenditures could be per- formed with the enormous amount of capital now wasted. We should not lose sight of the fact that, although increased gold supply is the one world-wide cause of cheapening the powers of gold and enhancing the price of commodities, it is also a fact that a very respectable minority of commodities do not show material advances, and some are even lower today than in the very depressing year of 1896. Nor does Markets and Rural Economics 317 the theory that trust-control regulates price prove in- fallible, when we find that the greatest relative ad- vances have come to products of nature, as distin- guished from products presumably more susceptible of artificial price regulation. Increasing price may indi- cate inadequate production or extravagant consump- tion. Decreasing price may mean bountiful produc- tion or under-consumption. Nevertheless, the only way in which all things can rise in price simultaneous- ly, even though some rise faster than others, is through a relative increase in the supply of that which measures all price- money. The prices of commodities of international trade are set on the international market basis, with tariff deflections included. We have $35.00 per capita, but when we sell to Japan it is on a $5.41 per capita basis. England has $19.60 per capita, but sells and buys millions annually in India on a yo-cent per cap- ita basis. Argentina has $107.24 per capita, but sells beef to Austria with $12.47 P er capita. The cost of distribution and the power to consume deter- mine the trade routes of world-commerce. The com- merce of the world in 1913 amounted to $40,600,- 000,000; transported by 55,802 sailing ships, 47,714 steamers, and by trains operating on 625,000 miles of railways. LESSON XLVII Why do we have excessive taxes ? What is "pork barrel" legislation? For what purpose does a greater portion of national revenue go than for any other purpose ? Why has increased demand been for manufactured articles more than for agricultural products? 318 Markets and Rural Economics What has been the result? What can you say of the line of extravagance? Name some taxes we impose on ourselves, which we would not tolerate were they imposed by the gov- ernment. What of our number of killed and injured? Name half a dozen causes for high prices. Name some business items of expense which we might eliminate. Name some individual expenses which we might eliminate and be the better off thereby. What is the one agency that rules in general price- making? CHAPTER XXXII THEORIES OF REFORM We will consider for a while the theories advanced for the solution of our social problems. If we as a nation are too indolent or ignorant to do some good hard thinking, we will have to pay the penalty and a severe one. Two main attitudes are taken by social thinkers in regard to economic tendencies at the present time. Some think that the basis and structure of society will endure indefinitely, with incident changes and im- provements within conservative limits. Prof. Richard T. Ely and Benjamin Kidd voice this doctrine in their standard works. On the other side are arranged thinkers who look for fundamental changes in the not distant future. Phis side has different schools of economic doctrine, each of which has gained no little prestige. There is the individualism of Herbert Spencer, the philo- sophical anarchism of Kropotkin, the single tax of Henry George and the socialism of Karl Marx. It is but voicing the unthinking popular impression to say that the present order of society will endure for aye. But thinkers all admit that the cooperative tendencies, under the direction of capital, are mak- ing for a metamorphosis of the whole economic struc- ture. The popular conception is that the present is but 320 Markets and Rural Economics the inevitable and natural result of the past, and the future will take care of itself without worrying over it. Competition under private ownership has had a full test, and we have its fruition all around us. It is highly satisfactory to the lucky few, and taken for granted as a matter of course by the majority, just as was slavery in the years gone by. It is within the pervue of statesmanship to direct the future instead of allowing the laissez faire to rule. It is the pride of thinking manhood to help direct. The following is from u Science History of the Uni- verse/ 5 Vol. 10: u Prof. Ely conceives society as fun- damentally competitive and based on private owner- ship in capital yet as modified by increasing coopera- tive tendencies. It is interesting to contrast his views with the three modern theories or schools which aim to subvert the very foundations of the present social structure. These are, broadly speaking, anarchism, the single tax, and socialism. 'Anarchism' is derived from two Greek words meaning 'without govern- ment' ; it wants to get rid of government altogether. There are two schools of anarchism the individual- ists and the communists. The first would preserve competition and private property in capital, the sec- ond would abolish both. u The single tax would preserve competition and private property in the instrument of production, but would abolish private property in land. "Socialism would inaugurate an era of universal cooperation, in which land and the instruments of production would alike be owned and administered by the community collectively. ANARCHISM "The popular hatred and misunderstanding of an- Markets and Rural Economics 321 archism are undoubtedly due to the acts of violence and assassination associated with it. But anarchy properly understood is a serious philosophy with a serious mission. It aims to eliminate government in the interest of freedom; it would carry the idea of freedom to its logical ultimate in the economic field. Many modern thinkers of world influence have im- bibed the anarchist spirit. Herbert Spencer, at the beginning of his career, taught that 'government is essentially immoral,' and that the individual has 'the right to ignore the state.' In his later writings he modified these extreme conclusions, but the tendency of his argument was always anti-governmental. He makes biology teach the folly of state intervention. He would put a veto on 'all public action which ab- stracts from some men part of the advantages which they have earned.' In harmony with this attitude, Spencer opposed compulsory education, public libra- ries, factory legislation, the establishment of state telegraphy and many other similar innovations. The collectivist trend was in a direction exactly opposite to that which he conceived as healthy development. He looked upon socialism as the 'coming slavery.' "From Spencer's position it is but a short step to anarchism as defined by its advocates. Kropotkin, the ablest living exponent of the communist school of anarchists, asserts that the coming society will be based on common ownership, not only of capital, but also of the materials for consumption. 'People have tried to make a distinction between the capital that serves for the production of goods, and that which satisfies the wants of life, and have said that ma- chines, factories, raw materials, the means of trans- portation and the land are destined to become the property of the community, while dwellings, finished products, clothing and provisions will remain private 322 Markets and Rural Economics property. This distinction is erroneous and impracti- cable. The house that shelters us, the coal and gas that we burn, the nutriment that our body burns up, the clothing that covers us, the book from which we draw instructions, are all essential to our existence, and are just as necessary for successful production and for the further development of mankind as are ma- chines, factories, raw materials and other factors of production. With private property in the former goods, there would still remain inequality, oppression, and exploitation. u The individuals of this free society will be asso- ciated in communes. They will take upon themselves duties to their group, which on its part will engage to do certain things for them. The communes will also link and intertwine, but always of their own free will. In short, the world of Kropotkin's ideal would be a federation of communes, based on voluntary agreement, without governmental coercion of any sort. u There is nothing in anarchism necessarily conflict- ing with the 'single tax' doctrines propounded by Henry George in 'Progress and Poverty,' and it is worth noting that here again Herbert Spencer, in his earlier days, gave countenance to theories similar to those held by Henry George." (First advocated by Patric Dove. Parenthesis ours.) SINGLE TAX u The keynote is struck in 'Progress and Poverty' in the following passage : 'The association of pov- erty with progress is the great enigma of our times. It is the central fact from which spring industrial, social, and political difficulties that perplex the world, and in which statesmanship, philanthropy and educa- tion grapple in vain.' Mr. George goes on to argue: Markets and Rural Economics 323 'The reason why, in spite of the increase of produc- tive power, wages constantly tend to a minimum which will give but a bare living, is that, with increase of productive power rent tends to even greater increase, thus producing a constant tendency to the forcing down of wages/ He states his remedy as follows : 'There is but one way to remove an evil and that is to remove the cause. Poverty deepens as wealth in- creases, and wages are forced down while produc- tive power grows, because land, which is the source of all wealth and the field of all labor, is monopo- lized- To extirpate poverty, to make wages what justice demands they should be, the full earnings of the laborer, we must therefore substitute for the in- dividual ownership of land a common ownership. Nothing else will go to the cause of the evil, in nothing else is there the slightest hope. This, then, is the remedy for the unjust and unequal distribution of wealth apparent in modern civilization and for all the evils which flow from it. We must make land common property.' u The method by which Mr. George proposes to make land common property is the single tax. 'I do not propose,' he says, 'either to purchase or confis- cate property in land. The first would be unjust and the second needless. Let the individuals who now own it still retain, if they want to, possession of what they are pleased to call their land. Let them buy and sell and bequest and devise it. It is not necessary to confiscate land, it is only necessary to confiscate rent. We already take rent in taxation. We have only to make some changes in our mode of taxation to take it all. In this way the state may become the universal landlord without calling herself so, and without assuming a single new function.' 324 Markets and Rural Economics "Henry George's revolutionary proposal found sup- porters all over the world. Tolstoy was one of his converts. While the 'single tax' as George advo- cated it has not been adopted by any country, its underlying principles have influenced profoundly the policy of nations. SOCIALISM "The third system of social theory proposing fun- damental changes is socialism, and Karl Marx was its first great exponent. Before his time socialistic doctrines were Utopian and nebulous. He coordi- nated them into a science. His work, 'Das Kapital,' has become one of the landmarks of economic thought. The two great discoveries of Marx were 'surplus value' and 'economic determinism.' By the first he meant the 'surplus' which the wageworker creates, but for which he receives no return. Most social students acknowledge that the workers have never, in any age, received the full value of their product. Slavery and serfdom were alike based on the spoliation of the worker. Henry George traced his spoliation to the private ownership of land. Marx took the position that since the inauguration of the capitalistic era, capital, in the largest sense, is the instrument of spoliation. "Marx's second discovery, sometimes called the 'materialist conception of history,' was based on his recognition of the overwhelming influence exerted by economic motives on human progress. No other econ- omist or sociologist has sufficiently recognized this influence. "Socialistic ideas have found expression through a multitude of other thinkers. There are several Markets and Rural Economics 325 groups of socialists, divided by differences of opinion in regard to theories and methods. But all are united in the belief that the present competitive order of society based on private ownership of capital is about to be superseded in the process of evolution by a co- operative commonwealth, based on public ownership of land and the instruments of production and dis- tribution." SYNDICALISM The word "Syndicalism" is from "syndicat," the French term for a trade union. It is the term of the revolutionary economists, who contend that social rev- olution must come through the direct action of the labor unions. The Socialists look to the abolition of capitalism by political action; syndicalists seek to bring it about by taking over the industries the workers in each trade assuming ownership and con- trol of the material of life in the trade. Syndicalism thrives in Italy, not in the overcrowded cities among clans of the outlaw type, but among the farmers. 200,000 acres have passed into the hands of farm laborers organized into agricultural syndi- cates. It is also taking hold among the industrial laborers. The Industrial Union of Italian Railway- men has as its motto: "The Railways for the Rail- waymen." In November, 1910, the first conference of English Syndicalists showed that 60,000 workers were repre- sented. These members have vastly increased since that date. It was at the Lawrence strike that Syndicalism first appeared in America, because of the fact that some of the strike leaders were imbued with the radical philosophy. 326 Markets and Rural Economics Craft Unionism received great impetus in the eighties under the Knights of Labor, and extended to the development of the American Federation of Labor. Class-conscious vocationalism has been gain- ing ground under the influence of economic condi- tions. Finding support among socialist workingmen, the idea of Industrial Unionism was combined with the Socialist conception, and a theory resembling French Syndicalism was the result. In 1905 the In- ternational Workers of the World made this theory the basis of their program. The Syndicalists extend the meaning of labor to include all who do useful w r ork for society; their idea is to transform society into a federation of self-gov- erning producing groups, working together for the benefit of all, with instruments belonging to society as a whole and under the supreme control of the community. Proposals for the political and industrial reorgani- zation of society are many, and each has its ardent advocates and defenders. Barring such mild modi- fications as are from time to time proposed by the leading political parties, we have : Anarchism. Abolition of government; substitution of individual independence or the voluntary commune. Communism. Abolition of private ownership of wealth; substitution of collective ownership of both social and private wealth. Socialism. The socializing of all capital used in the production of wealth; the continuation of private ownership of certain private property; democratic form of government, and the extension of its func- tions to the operating and owning of all industries, the same as it does the post-office. Syndicalism. The vocational organization of so- Markets and Rural Economics 327 ciety, and those in each vocation owning all the ma- terial of that vocation as common property. Government ownership of public utilities. This is the first step toward socialism. We have already socialized the money function, the army and navy, the public schools, public roads, public parks, the post- office, etc., and to extend this principle to all depart- ments of activity would be to socialize society. The arbitrary governmental control of corporations is be- ing tested as a substitute for social assumption of ownership. Single Tax. This is a proposal to exempt all per- sonal property and commercial business from taxes and place all taxes on land values, take the rent and allow the individual to retain ownership if he chooses. Voluntary Cooperation. This is urged as the only sound economic principle for the operation of the com- plex activities of modern civilized society. Its advo- cates claim that it avoids the coercive tyranny of a governmental bureauocracy, the "pull' and graft in- cident to government operation, the spoiling of the u spirit of the shop" manifested under individual in- itiative and control, does not assume responsibility for the trifling but leaves him to his own rewards by the process of elimination, and yet withal obtains the advantages of collective activity and the economic savings sought under Socialism. LESSON XLVIII What is a school of thought? What is an economic tendency? What two main branches of economic thought are in the field of economic thought? What two schools of anarchy are there ? 328 Markets and Rural Economics Define the philosophy of Herbert Spencer. Define the Anarchy of Kropotkin. Define single tax as promulgated by Henry George. What is the ultimate aim of single tax? Define Socialism. What is the philosophy of Socialism ? What is the ultimate aim of Socialism? What is Syndicalism? What is the difference between Syndicalism and government ownership of public utilities? What is Communism? What is Individualism? What is Republicanism? What is Democracy? CHAPTER XXXIII HOME OWNERSHIP Home ownership among farmers is impossible if individuals and corporations are allowed to monopo- lize all the valuable lands. Alien ownership should be prohibited. There should be a system of limitation to land- holding by individuals and corporations. In Denmark 89 per cent, are home-owners. In Germany 87 per cent, of the land is tilled by owners. In Great Britain 87 per cent, is tilled by tenants. Fifty-four foreign corporations and individuals own an area in the United States exceeding the combined areas of the States of New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New Jer- sey and Delaware. The holdings of sixty-three owners, individuals and corporations in the United States exceed the com- bined areas of the German Empire, Denmark, Bel- gium, Holland and Switzerland. The same capitalists that own the great cotton mills of Europe and America are buying the finest cotton lands of the South, and having them worked by ne- groes and cheap, degraded foreign labor. And these captains of industry are the ones that are making such a stir about the need of immigration in the South. Those who want cheap labor to work in competition 33 Markets and Rural Economics with the self-respecting American white labor are the ones behind the various big conventions that are be- ing held at various points throughout the country to encourage immigration. They already own six mil- lion acres. There has been created, therefore, not only the framework of an enormous timber monopoly, but also an equally sinister land concentration in extensive sec- tions. This involves also a great wealth in minerals. The Southern Pacific has 4,381,000 acres in northern California and western Oregon, and, with the Union Pacific, which controls it, millions of acres elsewhere. (The Government, however, is now suing to annul title to the Southern Pacific lands in Oregon for non- compliance with the terms of the original grants.) The Northern Pacific owns 3,017,000 acres of tim- ber land and millions more of untimbered land. The Weyerhauser Timber Company owns 1,945,000 acres. In Florida, five holders have 4,600,000 acres, and the 187 largest timber-holders have over 15,800,- ooo acres, nearly one-half the land area of the State. In the whole investigation area the 1,802 largest holders of timber have, together, 88,979,000 acres (not including Northern Pacific and Southern Pacific lands in untimbered regions) ; which would make an average holding of 49,000 acres, or 77 square miles. Finally, to timber concentration and to land con- centration is added in our most important timber sec- tions, a closely connected railroad domination. The formidable possibilities of this combination in the Pacific-Northwest and elsewhere are of the gravest public importance. Ancient Italy was a country of small farmers. The u rich men and money lenders/' as Plutarch calls them, made loans to the agricultural people at ruin- Markets and Rural Economics 331 ous rates of interest, secured by mortgages on their little farms. In time, these mortgages were closed and the owners ejected. The lands became the prop- erty of the great landlords, who cultivated them with white slave labor, the captives sent home by the Roman armies from foreign countries. These cap- tive slaves, being the property of the government, were sold to u the rich men and money lenders," who used them to dispossess the farmers whose sons were fighting the battles of Rome. This condition of things naturally paralyzed the patriotism of the young soldiers, whose parents were driven from their homes, and did more than any other one thing to cut the foundations from under the Roman Republic. In one of the great speeches made by Tiberius Grach- chus, to the people, he said: "You are made to be- lieve that you are fighting for your altars and your homes, when, really, you have no altars and no homes. " Tiberius was murdered for his boldness by the hirelings of the landlords, and so was Caius, his brother, who followed in his footsteps. The Latin writer, Pliny, observed IQOO years ago, that large estates had been the ruin of Italy and were then ruining the provinces, and nineteen centuries since Pliny have only added constantly increasing strength to his doctrine. Two-thirds of the lands of United Kingdom is held by 10,911 owners. One-half is owned by ^,408 pro- prietors, and the rest is owned by 1,162,722 owners, averaging 17 acres each. Twelve land-owners have 1,068,833 acres out of the total of 72,117,766 acres. A few decades ago statistics showed that $2$ peers owned one-fifth of all the land of the country. The average Duke owned 142,264 acres; the aver- age Marquis 47,500 acres; the average Earl 30,217 33 2 Markets and Rural Economics acres; and the average Baron, 14,152 acres. Today four-fifths of the land of England is owned by less than ten thousand people, who form a huge land mo- nopoly, with the holdings of the great peers as the centre and the point of resistance. This monopoly of the land has been an unmiti- gated curse to England. Year by year the popula- tion of the rural districts falls. The young country- men, with no chance of acquiring land, with no chance of earning a decent living or even of maintaining in- dependence, flock to the cities in shoals. Agriculture is deserted. The crops lessen decade by decade, while more and more the country becomes dependent upon foreign food. There are much less than half as many agricultural laborers in the United Kingdom today as there were sixty years ago. The holdings of the Lords and of their wealthy landlord allies surround the towns and prevent their growth, and individual Peers own dozens of parishes, including every build- ing lot, and every house. The Marquis of Anglesey is the owner of about 40,000 acres of land; 80 people own one-half of Scotland and 710 people one-fourth of England and Wales. "According to the returns of 1872, 2,250 persons owned half the enclosed land of England and Wales, while nine-tenths of Scotland was owned by 1,700 people and two-thirds of Ireland by 1,942 peo- ple." And the situation seems not to have changed materially since that time, except in Ireland. In Great Britain, in 1910, "28, 238, 44 <; acres under crops and erass were occupied by tenants and 3,907,- 48 < acres by owners" over seven-eighths by tenants and less than one-eighth by owners. The home-owning farmers of the continent are out- stripping the English farmer. Markets and Rural Economics 333 England realizes this, and English landlordism is doomed. The only question is as to how it shall be executed how it shall meet a fate it has long and richly merited. Richard Cobden said a long time ago: "The condition of the English peasantry has no parallel on the face of the earth. There is no other country in the world where you will not find men holding the plow and turning the furrow on their own free-holdings. " Cobden's greatest service to England, of course, was securing the repeal of the taxes on food, but he said before he died, "You who shall liberate the land will do more for your country than we have done in the liberation of its commerce." Other issues, how- ever, have engaged the public attention since Cobden's time, and the great estates have continued the stum- bling block in the way of English progress. Six or seven centuries ago England's population was a mere fraction of its present volume. There was plenty of land for everybody, and acreage possessed no great value. In the Middle Ages money was scarce, and, therefore, endowed with far greater pur- chasing power than today. It was during these periods that sundry British families acquired vast tracts of land by purchase, as a reward for service rendered their monarchs, or in recognition of military valor. David Lloyd-George became Chancellor of the Ex- chequer, and in 1912 began the work of reconstruct- ing the English system of taxation. The effrontery, the ridiculous, cold-blooded audacity of taxing blocks of the highest-priced business shops in London upon their value when the land was a pasture insulted his intelligence. At last, the rich man must contribute his just share 334 Markets and Rural Economics to the support of the nation. He must value his land at its true worth. Lloyd-George is England's man of the hour idol to the people pest to the idle. He symbolizes the world's new era. The day of the privileged few is past. The feudalism of the Middle Ages was founded on land monopoly. The modern feudalism of capital is not confined to nor dependent on land monopoly, but it is a powerful auxiliary to it and getting to be more so every day. We are sitting still and allowing this process of monopolization of land to go right on unmolested, with too little interest to take cognizance of it, much less to try to stop it. Every State Legislature and each Congress should be besieged by a committee of farmers asking for laws to prevent monopolization. Past experience has been that it takes a war and a state of desperation to arouse the people to demand the law that will abolish unlimited ownership of the earth. It took the armies of Napoleon to bring Ger- many to her senses. After the peace of Tilsit in 1 807 the great feudal estates were divided into small es- tates, and parceled out among the peasant farmers on long term loans, at a low rate of interest. It took the horrible reign of terror to break up landlord tyr- anny in France. There is an apparent exception in the case of Ireland. But it is a case of economic co- ercion instead of being forced at the point of the bayonet. By parliamentary enactment England has virtually dispossessed the landlords of Ireland and created a fund of $660,000,000, since increased to near $2,000,000,000, by means of which the Irish farmers may purchase on easy terms their own farms. Four hundred million dollars' worth have thus been Markets and Rural Economics 335 divided and restored to the Irish farmers. This en- actment was wrung from Parliament by the desertion of Ireland by her people. Since 1846 Ireland has lost more than half her population. In the last sixty years Great Britain has lost by emigration more of her people than the present population of Scotland and Ireland combined. We are losing 100,000 a year of our people by emigration to Canada. The most of them are sturdy American farmers; and the main incentive is land. In Ireland absentee landlordism was in vogue so long that it undermined thrift, energy and initiative. It was mainly responsible for the ruinous emigration which drained the country of its best blood. In 1841 the island had a population of 8,000,000, and in 1912 it had only 4,000,000. Since the great famine of 1 846-^47, when the potato crop failed, a vast tide of emigration flowed to America and to other parts of the world. Agricultural and rural life in Ireland has been much improved by the system of land purchase intro- duced under the Act of Parliament, in 1885, and by supplemental acts, enabling tenants to borrow 7 money on Government credit for the purchase of farms. The installment payments of these loans are spread over 50 or 60 years, on such terms that the annual amount required to cover both interest and sinking fund is less than the rent formerly paid. Under these acts the Government has already ad- vanced more than $486,650,000, and in the course of another 30 years a large part of the Irish farmers should own their farms free from any charge. In twenty-five years Ireland has changed from a tenant- farmer country to a country of home-owning farmers. The new (1912) statistics show 350,000 holdings bought, to 250,000 tenanted. 336 Markets and Rural Economics Not only was it provided by law some years ago that the tenant might acquire land at a price fixed by the local authorities as correct, and one hundred million pounds advanced or loaned to tenants wish- ing to buy, but the British Government appropriated $60,000,000 outright to cover the difference^ between what lands might appear to be worth and what ten- ants could afford to pay. There is a provision that the Government may advance the full purchase on condition that they re- pay 3 1 /4% a Y ear f r sixty-eight and one-half years, 2% P er cent, of this 3^ being used to cover interest, and the balance as a sinking fund to pay off the in- vestment itself. At the end of the sixty-eight years they or their heirs will own the land outright, with- out paying more perhaps than they would otherwise have had to pay for rent alone. These things have been done for the homeless in a monarchial country. I wonder if any one will claim that we need no check on landlordism in this country? Or, are we ready to accept a condition of tenantry and peasantry in this country as inevitable? In 1900, 35.3 per cent, of the farms of the United States were tenant farms. In 1910 the percentage had risen to 37.1 per cent. Take Tennessee, Kentucky, Alabama, Mississippi, Louisiana, Arkansas, Texas, and Oklahoma in a group and look what we find: In 30 years tenant farms have increased from 36.2 to 57*7 per cent. And the percentage runs highest in white sections, such as the eastern parts of Oklahoma and the black lands of Texas. In Arkansas there were, in 1880, the goodly number of 29,188 tenant farms, but in 1910 there were 107,226 tenant farms just half Markets and Rural Economics 337 the total number. During the same period the num- ber of tenant farms in Louisiana increased from 35.2 t 55-3 P er cent. During the same period tenant farms increased in Texas from 37.6 per cent, on 5,- 468, to 53 per cent, on 219,575 farms. From 1900 to 1910 Texas added to her population 44,115 ten- ants and 20,354 farm-owners. During the same dec- ade Oklahoma tenants increased from 47,250 (or 43.8 percent.) to 104,137 (or 54.8 percent.). How can market conditions be improved without concert of action? How can concert of action be secured with a shifting tenantry? We need a revo- lution in our rural credits, and in our system of land taxation. Suppose you swap places with landlord and tenant, what would result? The renter would be doing just what the landlord is doing, and the land- lord just what the renter is doing. Neither is any better or worse than the other by nature. A certain percentage of the renters may be less enterprising or thrifty than the average landowner, but this does not change the problem. Land is high ; measured by the purchasing power of wages on the farm, it is out of reach. Bonanza farming is coming more and more into use. The advantages gained by the operation of a large farm under skilled management and ample cap- ital are apparent. Better machinery, better stock, labor secured on the lowest market, bulk purchase and bulk sale, and expert knowledge in directing, make the bonanza farm a winner as compared with the small farm, poorly equipped and operated. Swamps are drained by corporations and thousands of acres brought under cultivation which otherwise could not be utilized. Corporations carry out irriga- tion projects which could not otherwise be handled. 33 S Markets and Rural Economics / Conveniences are provided on the bonanza farm that the average farm cannot afford. On the other hand the fact that labor is secured on the market of the lowest bidder results in segre- gating those types least fitted for a progressive, en- lightened citizenship. Society drifts back on the feud- alistic basis, and the ideal home, which is the anchor of the Republic and the hope of the world, becomes a rare exception and not the rule. Possibly the greatest events in the world's history are immigrations in search of land and opportuni- ties. The emigration of the Jews from Egypt was in search of land. The emigration from Asia to Greece and Rome was in search of land. The emi- gration during the Dark Ages 1000 years when the world slept was from Northern Europe to Britain, and was perhaps the most important event of those ages; and the emigration of the northwestern Euro- peans to the Americas, Australia, and South Africa was of course the most important event within the meaning of modern history, and it seems we have about settled up all the lands of the world, and civ- ilization has got to make a stand where it is. Every condition is a prophecy of something that is to follow. It can not be otherwise, and it is within the purview of statesmanship to interpret the effect of conditions. Coming direct to the civic and moral effects of indiscriminate immigration and mixing of races, I wish to say that we have learned that the buying of labor in the cheapest market is a poor device for which civilization pays in the maintenance of under- bred, under-nourished, and under-educated children, and the expense of combating crime and diseases that these cheap human products ignorantly spread Markets and Rural Economics 339 throughout society is the poorest investment possible. Prof. John R. Commons, of the University ot Wisconsin, and with the United States Industrial Commission during its recent extensive investigations, says, in his book, u Races of Immigrants" : "It is in the large foreign cities of the North that popular government, as your Teutonic forefathers conceived it, has been displaced by the despotic boss, and a profound distrust of democracy has taken hold of the educated and property-holding classes who fashion public opinion." In the language of Hugh Chalmers : U A great many people seem to think that popu- lation is everything in a city. I venture to say that there is not a city in the United States but what would be better off without ten per cent, of its population. Numbers do not make quality." During 12 years there came to the United States enough Italians to people five cities like Rome; enough Greeks to people two cities like Athens; more Poles than there are in Warsaw ; more Scandinavians than there are in Stockholm; more Magyars than in Kronstadt, and more Finns than in Viborg. Italy's contribution to American immigration, of nearly two and a quarter million souls, stands out as a marked feature of immigration history. Nearly nine-tenths of these came from southern Italy. The people of northern and southern Italy speak such varying dialects that they scarcely can converse with one another. In some parts of southern Italy more than three-fourths of the people are illiterates. Rosco, the Italian statistician, admits that Italy leads all the nations in the number of crimes against the person. Niceforo, the Italian sociologist, declares that the inhabitants of northern Italy possess all the qualifi- 34 Markets and Rural Economics cations for good citizenship, but that the south Italian is an individualist, having little adaptability to highly organized society. A condition once existed in Rome which was a prophecy of her decline and fall and the wreck of civilization, followed by a thousand years which his- torians now designate as the u Dark Ages." The conquering armies of Rome paved the way for slaves to be sent back to Rome to till the lands, which led to the eviction of the farmer classes. This drove the independent farmer to vassalage, from vas- salage to vagrancy, from vagrancy to beggarism, and from beggarism to desperation. When he was crushed the monied oligarchy stood absolutely su- preme. The shrewd Roman capitalists viewed his interests just as those modern captains of industry who think of nothing but gain view the labor prob- lem today. It was plain to the Roman employer that the labor of eastern slaves made bigger profits to him than that of his original vassals. And on that basis extensive traffic in Asiatic slaves began. Still the slight cost of these throngs of misery did not appease his greed entirely. Paid militia were sent to invade Macedonia and the East, bringing back, besides the material treasures of conquest, hordes of these victims. And with this wide adoption of Asiatic slaves, competition at Rome reached a point of dan- gerous enormity. No Roman economist would em- ploy a fellow-countryman when his labor could not maintain a parity of profit with that of his numerous and newly-acquired slaves. Since employment could not be obtained, hundreds were driven to crime the record of the idle poor of all countries. The arenas of the amphitheaters were filled with crowds of desperate gladiators, and the rabble was constantly Markets and Rural Economics 341 swelled by it at the capital city and were used by the demagogues to further their interests. A condition once existed in France that was a prophecy of the reign of terror, when France mur- dered her own citizens and disturbed the peace of the world, but its statesmen did not see it. The in- exorable law of cause and effect will have its way. We do not escape its penalties by ignoring it, either as individuals or as nations. France paid the debt to the last, full measure. Baptized in fire and blood, she arose, after many a struggle and groan, a republic. This would have been impossible had her citizenship been mongrelized as had been the citizenship of Rome. A condition once existed in England that was a prophecy of Cromwell marching into Parliament fol- lowed bv his soldiers and thundering to that august body: "There is not a crime in the calendar of which you are not guilty get out!" and Parliament was dissolved. Later on the laws passed by Parliament, at the request of the English manufacturers and merchants, were a prophecy of Cornwallis handing his sword to Washington at Yorktown, but they did not see it. England thus threw away a pearl richer than all her tribe because of the short-sighted statesmanship of her lawmakers. It was put in our national Constitution that the slave trade should not be abolished before 1808. As a result every slaveship that was fanned across the Atlantic Ocean was a prophecy of Sherman's march to the sea, four years of civil strife, millions of wealth destroyed, and thousands of as brave soldiers as ever answered the call to arms were sacrificed; but the people of that day did not realize it and the penalty has been paid. 34 2 Markets and Rural Economics In the question under consideration we are faced with a problem calling for the best statesmanship of the age. Shall we not learn a lesson from the past, and refuse to be guided by the same selfish interest that led these other nations to such calamities? If this enormous undesirable immigration continues, and if it is really as undesirable as the Immigration Com- mission states in its exhaustive report, and as the Commissioner General says in his annual reports, it is a prophecy of something that will follow that is ap- palling to contemplate. There is such a thing as a people being unable to maintain the civilization which is given them, or which they inherit. The American Indian was unable to sustain the civilization that the white man pre- sented him. We all know the result. The negro was transplanted from Africa here into the bosom of civil- ization, and he, left alone, would not carry forward the white man's burden. The Hindoo has not taken up with alacrity the civilization brought him by his British rulers. The Chinese are only beginning to imitate European civilization. It is unfortunate that these things are true. Perhaps we feel that we are encroaching upon a sentiment in denying the immi- gration of any people who desire to come here, be- cause our ancestors came here from somewhere, but when either sentiment or greed are allowed to control our policies on this subject civilization will pay the penalty and we will be responsible. The greatest work of civilization is to render it possible to develop the highest type of men and wom- en, and reach the highest possible standard of civili- zation. This cannot be done by intermixing the bet- ter elements of the race with the lower types, or the best specimen with the lower specimen of any race. Neither can it be done when the higher types have Markets and Rural Economics 343 to carry the burden of the lower types. Nor can it be done by the higher types or specimens leaning on the lower for support. This is akin to leaning on nature for support in the profligate tropics it ener- vates and weakens initiative. Approximate segrega- tion is the only hope for the noblest development of the superior race. LESSON XLIX How does the percentage of home-owners stand in Denmark, Germany, Great Britain? What can you say of the tendency to land monop- oly in this country? How about the timber monopoly? What does Plutarch say about ancient Italy? What was the language of Tiberius Gracchus on this subject? What does Pliny say concerning conditions? What can you say of land monopoly in Great Britain? What did Richard Cobden say on this point? What has been the effect on English progress? What can you say of the work of David Lloyd- George ? What is being done for Ireland's landless? What broke feudal landlordism in Germany? What broke feudal landlordism in France? LESSON L What of the tendency toward tenancy in the United States? Were -you to swap places with the landlord and the tenants, what would result? 344 Markets and Rural Economics What can you say of bonanza farming? State its advantages and disadvantages. What have been the greatest events in the world's history? How are future events mirrored in the present? What of the industrial, moral, and social effects of indiscriminate immigration of all races and na- tionalities? What are the views of Prof. John R. Commons? Of Hugh Chalmers? What of the class of immigrants pouring into the country now? What conditions were prophetic of Rome's fall? Of France's Reign of Terror? Of England's revolution under Cromwell? Of England's American Revolution? Of our Civil War? What do our conditions portend? CHAPTER XXXIV THE FARMER AND THE SOIL How can the highest development of the best types of races be secured? Farmers, huntsmen and fishermen have fed the human race, and a great part of the animals, since the morning creation, and will continue to do so till the crack of doom. Man's existence on the earth depends on his ability to make the soil yield him a subsistence. Civilization is dependent on man's ability to wring from nature more than a subsistence. Man cannot rise above the crudities of barbarism without a surplus production. In no department of human endeavor has the strug- gle been longer, harder and slower of accomplish- ment than in the mastery of the soil. The relationship of fertility, season, climate and cultivation determines the production. Scientific agri- culture is of recent date. Millions of farmers do not yet practice it. The continents of the earth are solemn reminders of man's improvidence with the soil. Countries once fertile, populous and prosperous are long since bar- ren, and give meager support to a sparse population. Egypt once had three times the population she now has; Thebes, Luxor, Memphis, Alexandria and Cairo were great cities in the Valley of the Nile; only Cairo 346 Markets and Rural Economics is left, and it is not nearly what it might be. But for the periodic floods of the Nile, Egypt would have been barren long ago. Goshen is not what it was when Israel dwelt there. Western Asia used to support its teeming millions, and had flourishing cities, both inland and on the shores of the seas. In the valleys of the Euphrates and Tigris rivers flourished Babylon and Ninevah, queen cities of the East. But even the roving Bedouin will not pitch his tent on the ruins of Babylon, and Ninevah is no more. Jerusalem, the city of Israel's glory, Caesarea, Sidon, Tyre, Damascus, Ephesus, and other cities of the Levant, drew their support from this region, which has deteriorated as though there were a curse upon the country. Destruction of the forest and bad farming has done its work and its power to produce is irretrievably lost. Greece, Italy, Northern Africa, India, and China have the same story of ruthless destruction of for- ests and lack of conservation of the soil resulting in barrenness, gullies, waste lands, quick drainage and flooded river valleys, drowning thousands and work- ing havoc to millions of acres of farm lands. Greece has no rivers to overflow, but her mountains and hills are bare, and Greece is but a skeleton of her former self. Italy furnishes a terrible example of how a country can deteriorate both in soil and citizenship as under a blight, a ghastly relic of her former rich- ness and intellectual greatness. The land of Carth- age, that disputed so long the mastery of the world with Rome, has little to remind us of its former opu- lence and wonderful resources. Thousands of lives have been lost in the floods of China because of the quick drainage of her lands, caused by denuding the country of all its timber and the crude agriculture Markets and Rural Economics 347 that fails to sink the water where it falls. In India more people starve every year than in all the rest of the world together. Though both India and China support teeming populations it is on so low a standard of living that it is impossible for the people to ever rise to a high standard of civilization. Wasteful methods of agriculture were halted in France, Germany, the Netherlands, Denmark and in Britain. In the United States the most wasteful methods were followed for a hundred years, with frightful results. A virgin forest was destroyed as if it were an enemy to the race. Go from Maine to Mississippi, along the Atlantic slope, and you will see millions and millions of acres that attest the reck- lessness with which the American farmer has treated the soil. Other regions show the same. Quick drainage in the Mississippi Valley results in floods and much destruction during the spring rains. But a halt has been called, and scientific agriculture is doing wonders in the way of production and con- servation. A farm hand in some States produces sev- eral times as much as he does in other States. This is due to several causes: fertility of the soil, number of acres that can be cultivated, and character of crops raised. Year after year the percentage of the population that are farmers is less and less. While this places a greater responsibility on the field laborer, to feed the millions in other vocations, it at the same time gives the farmer additional power over the human family. There is no difference in the inborn selfish- ness of people following different callings. The farm- er is selfish enough to make use of this new power if he only realized that he had it. Mutual bickerings and jealousies and strife keep the rural population from ruling the earth. 348 Markets and Rural Economics Twelve and a half million field hands make it pos- sible to feed and clothe ninety million people at home and millions beyond the seas. With the very key to the life and death of the rest of the world there is nothing to hinder these workers of the soil from being absolute masters of the world ! The only rea- son they are not is because they are not agreed among themselves. At the beginning of this government nine-tenths of the people lived on farms. Today a strike on the part of one-tenth of the population (who work in the fields) during the four months in the Spring would produce a famine that would starve millions of peo- ple and send prices skyward. The actual farming class constitutes about three- tenths of the population, and it owns about one-fifth of the aggregate wealth. But only a part of them own this percentage, as millions of them have prac- tically nothing. Half of them have no homes, but hire, rent, or crop from year to year. Where will it^all end? Let him be industrious or indolent, thrifty or thrift- less, honest or dishonest, progressive or unprogress- ive, intelligent or ignorant, the farmer is the de- pendence of the human race for its existence. Whether the soil be fertile or poor, whether it be hills and mountains or plains and valleys, whether timber lands or prairies, whether covered with the snows of winter or forever wrapt in the sunshine of the tropics, it is the source of wealth and man's de- pendence for greater possibilities in the future. To ignore the farmer and his welfare is an economic crime sure of punishment. To neglect the soil is to throw away the richest heritage of the race. Agricultural colleges are doing great work, but they reach only a small percentage of the farmers. Markets and Rural Economics 349 It is like publishing text books and educating teachers, and then not bringing them and the students together. Demonstration work is the next step in the direc- tion of preparing the farmer for his task of master- ing the elements of nature, and bringing to the aid of industry the accumulated experience of years of investigation and experiments. The whole of society is vitally concerned, and niggardliness here is short- sightedness, which will react on all. Progress can- not be sustained in business or public economics with- out prosperity on the farm, and it behooves the state to take greater interest in this department for the ulti- mate welfare of all classes. THE MOST IMPORTANT PRODUCT OF THE FARM The farmer's business is called agriculture, which means land culture. But by an extension of the use of the word it has grown to include stock culture, hor- ticulture, and the general culture of things produced on the farm. It is worth while to improve corn, cotton, potatoes, cabbages, oats, wheat, grass, cows, sheep, horses, swine, etc. It is worth while to get the best labor-saving and work-doing machinery; it is worth while to adopt the best methods of dairying, of sow- ing, reaping and doing the general work of the farm; it is worth while to know as much as possible about scientific agriculture, and to acquire skill in the art of applying scientific principles to farming; it is worth while to improve the soil and render it easy to pro- duce a superabundance of all that man needs to grow from the earth. But there is something far more worth while than all the above combined the production and culture of Young America the boys and girls of the farm. The farmer ought to take more pride in himself than in his stock. He ought to see to it that he and 35 Markets and Rural Economics his wife and his children improve faster than his farm or his domestic animals. While he enriches his land he should enrich his mind. The best products are in the house and they should receive the most care, time, and labor. The farm and its equipments are for the benefit of the dwellers in the house and not an end themselves. They are merely helps for the family, a means to and end always, and ' not an end to be sought, just for its own sake. If the family become slaves to the farm and its stock, the slavery is unprofitable and the drama a pathetic one. Many a farmer mortgages himself to his farm and works for it through life with no view of his own improvement. His only dream is to im- prove the farm and get as much profit out of it as possible. Many a farmer's family are drudges to make the farm profitable without any view to making it merely a physical basis for intellectual develop- ment, by producing enough to enable the family to have leisure time in which to improve the mind and become intelligent citizens. The finest fields are those of the household, and yet they are often the ones most neglected. The world needs more rich farmer minds. Of all the things that the farmer cultivates, he needs cultivation most, and is the most susceptible of improvement. The great men of the world made themselves so by dreaming while at work, and in spare time putting the dream into effect. It has always been so, and must necessarily be so for all time to come. The food question is a great one. It is great be- cause it is a means to an end, and the end is the sustenance of the human race, primarily, and its proper use is a great factor in preserving the health of the world's inhabitants. Man is first an eater, Markets and Rural Economics 351 and the first requirement he must supply by his own exertion is food. Life is dependent upon it, and health upon its proper use. The best medicine is right eating. Health is force the friend of energy, happiness, thrift and work. It is estimated that three million years of life are wasted every year in the United States through serious illness, most of which is preventable ; that the average expenditure for each family for illness and death is $27.00 per annum. It is the office of the human stomach and brain to transmute food into thoughts, energy, character. However earthly all this may sound, and however much it may grate on our feelings to realize, the fact stands. But this transmutation is brought about not by stom- ach food alone. The brain must be fed the same as the stomach. Feeding the brain is as necessary to the mind as feeding the stomach is to the body. The body is of no importance except to be used by the mind. It is a difficult task to educate a family of children in letters on the farm while all the care and work of the farm are on the members. To help out this difficulty, schools are established where all the children of the neighborhood are taught by those especially qualified for the task. The children of the farmer's home, who go out from his household to supply the villages and cities with a healthy, brainy, hearty population, are infin- itely more important than all other products. How many fine boys and girls go from the farms into the schools and colleges to become teachers, professional men and women, clerks, nurses, telegraphers, artists, journalists, authors, engineers, merchants, bankers, railroad men and government employees ! The farm has furnished: 35 2 Markets and Rural Economics Ninety-two per cent, of our presidents. Ninety-one per cent, of our governors. Eighty-three per cent, of our cabinet officers. Seventy per cent, of our senators. Sixty-four per cent, of our congressmen. Fifty-five per cent, of our railroad presidents. Men and women are the chief products of the world; all things else are of little importance, except as a means of race production and improvement. To raise a lot of children who have no ambition, aspiration or purpose; no taste, no culture, no refine- ment; no energy, capacity, or talent, is to be unfortu- nate. A family of bright children is the greatest possible legacy to leave in the world. A farm home should be as attractive as a city home. It will have to be if the boy or girl that is really worth while is to be expected to remain on the farm. A farm home without a library is a burlesque on civil- ization. A neglected mind is a greater misfortune than a neglected farm. Fd rather add convolutions to the brain of a stu- dent than to reclaim a sea of gullies. I'd rather in- spire a noble purpose in one young man or woman with the quality of perseverance that leads to accom- plishment than to accumulate a million and die with the scorn of the world as my recompense. I'd rather see a generation of people untrammeled and uncon- taminated with the sins of their parents than to see every acre of the earth as rich as the valley of the Nile I He who grows a new idea destined to take a tear from the cheek of unpaid toil or strike a crime from the calendar of law is worth more to the world than he who makes a thousand grains grow where one grew or who accumulates untold millions. He who forges a new thought at the furnace of Markets and Rural Economics 353 intellect, that goes ringing through the ages to broad- en the minds of coming generations, performs a greater service for mankind than he who lays his hand on the finances of a nation and dictates panics to a hemisphere. To save one great life from being the victim of some physical or moral blight is a sublimer service to render the race than to make a desert blossom as the rose. The only time I feel worthy of the proud title of man is when I am willing to work for the happiness of others, who may never know that I ever lived. LESSON LI Upon what does man's existence on earth depend? What is surplus production? What determines production? What evidence of improvident farming in Asia? In Africa? In Greece? In Rome? In China? In India? In the United States? Where has improvident farming been halted? Whence the source of man's support in all ages? What can you say of the work of Agricultural Colleges and the demonstration work? Can permanent prosperity exist without prosperity on the farm? LESSON LII What is the most important product of the farm? Which should be of the most concern on the farm? Where should the best product of the farm be found ? Is there such a thing as a farmer being a slave to his farm? 354 Markets and Rural Economics How should a farm be considered? Where are the fields of most importance? How have men become great? How much is estimated as lost annually in the United States through illness? How are thoughts, energy, character, supported and developed? Of what use is the body? Why were schools founded? Give the percentages of places of high positions which have been filled by farmers. What can you say of a farm home without a library? What can you say of a farm home with a neglected mind? Who is the greatest benefactor of the human race? When is one really worthy of the proud title of Man? APPENDIX GENERAL FORM FOR COOPERATIVE MARKETING ASSOCIATION SECTION i NAME This association shall be known as the ( County Fruit Association) incorporated under the laws of the State of Its place of business shall be in the (City of ) * NOTE. The name should indicate the territory cov- ered and the class of products handled. Thus, "The Maine Potato Shippers' Exchange," 'The Richmond Egg Circle," etc. Practically every association should be incorporated under the laws of the State where it is located. SECTION 2 OBJECTS The objects of this association shall be to encourage better and more economical methods of production and distribution; to secure better results in grading, packing, marketing, standardizing, and advertising our products; to buy supplies in a cooperative way; to rent, buy, build, own, sell and control such build- ings and other real and personal property as mav be *A11 matter appearing in parenthesis is simply suggestive, and is to be altered to suit the best interests of each individual association. 356 Markets and Rural Economics needed in the business; to cultivate the cooperative spirit in the community and to perform any other work which may tend to the betterment of the mem- bers and the uplift of the neighborhood. NOTE. Make the objects as definite as possible, but it is also well to include a "blanket," which will cover any future efforts of the association. SECTION 3 MEMBERSHIP All eligible and accepted members shall sign these rules, and contribute their share of capital stock or other regular investment prescribed. NOTE. There may be conditions where it would be wise to limit membership to those who have been recom- mended by the Directors or who have received a two-thirds vote of the members present at any meeting. It is doubtful if "chronic kickers" should ever be admitted. The admission of merchants, bankers, etc., is almost invariably bad policy, not because they are not good men but their membership is incongruous in these associations. SECTION 4 MEETINGS 1. The annual meeting of the association shall be held on the in each year. Notice of such meeting shall be given each member in writing by the Secretary, and by publication in the local paper if convenient less than (one week) previous to the date of meeting. NOTE. The annual meeting should be held as soon after the close of the year's main business, as will allow for the settlement of all accounts, auditing the books and the prepara- tion of the annual reports of the officers. 2. Special meetings may be called at any time by the President. He shall call such meetings^whenever members shall in writing so request. A notice of such special meeting shall be sent to each member at least (five) 5 days before the date of said meeting, which notice shall give the nature of the business to be transacted. A similar notice shall be given for all adjourned meetings. Markets and Rural Economics 357 SECTION 5 QUORUM (One-fifth) the members in good standing shall constitute a quorum for the transaction of business at any meeting. SECTION 6 OFFICERS 1. At each meeting a Board of Directors shall be elected. A President, Vice-President, and Secretary-Treasurer shall be chosen by the Directors from among themselves at the first Board meeting after the annual meeting. They shall also choose two auditors from the members if available. All officers shall be elected by ballot and shall perform the usual work of such officers. (Four) Directors shall con- stitute a quorum at any Board meeting. 2. The Board shall employ a Business Manager, who shall have charge of the business of the Asso- ciation, under the direction of the Board, who shall fix his compensation. NOTE. In a large organization it would be well to unite the Office Manager, Secretary and Treasurer in one person, as frequent audits and* counter signature of checks, vouchers, etc., would serve as a sufficient check. The com- bining of these in one individual centers all the office work and tends to greater efficiency. 3. All officers, who may handle any of the funds or other property of the Association, shall give a surety bond in excess of the funds which they are liable to handle at any one time. The cost of such bonds shall be paid for by the Association. SECTION 7 CAPITAL STOCK i. The capital stock of this association shall be . . divided into . . shares Markets and Rural Economics of each. No member shall hold more than (ten) per cent, of the outstanding stock of the association. 2. Transfers of shares shall only be made upon the books of the association when the stockholder is clear from all indebtedness to the association. 3. A stockholder, desiring to dispose of his shares, must first offer them to the association, through the Board of Directors, at market value. NOTE. This provision, if desired, must be provided for in the articles of incorporation, to make it legal. To allow outsiders to purchase association stock might transfer the control of the organization to those who are opposed to its continuance. NOTE ON CAPITAL STOCK. In case the business of an association is such as to only require a small amount of money and that only for a short time during each year, it may not be necessary to have any capital stock. Annual dues may be collected. The following plan has in such cases worked well, where the local banks are prepared and willing to make such loans. Where this plan is adopted the follow- ing will take the place of the preceding section: SECTION 7 FINANCING 1. At the time of uniting with the association and at the end of each three years after the in- corporation of the association, each member shall give a promissory note, payable on demand to the association. This note shall be for the sum of ($25.00) and an additional ($1.00) for each and every acre of crops, to be marketed through the association, then owned by the member. But in no case shall this note be for a less sum than ($35.00). When a new note is given, the old one shall be cancelled and returned to the maker. 2. These notes shall be the property of the asso- ciation and shall be used by the Directors as col- Markets and Rural Economics 359 lateral security with which to borrow needed money for the association's business. Whenever these notes are deposited as security for a loan, all of the mem- bers shall individually share the liability in propor- tion to the face value of their respective notes. 3. Each member shall pay an annual membership fee of $2.00 payable January i. 4. The capital and credit thus obtained shall be used as directed by the stockholders in regular or called session. SECTION 8 GRADING AND INSPECTING 1. All goods produced for sale by the members shall be delivered to the association as directed by the Manager, in prime condition for grading, pack- ing and shipping. All grading and packing done on the grower's premises must be in accordance with the rules of the association and subject to such inspection as may be established by the Directors. 2. All produce for shipment shall be inspected before shipment, and if any produce is not of good quality and in good condition for shipping, such pro- duce shall be sorted or otherwise prepared for ship- ment, at the expense of the party to whom such produce belongs. 3. All brands, labels, trade marks, etc., shall be registered and become the property of the associa- tion and they shall be only attached to such grades as shall be ordered by the Board of Directors. SECTION 9 DUTIES AND RIGHTS OF MEMBERS i. A member shall have the right to give away or retain for his own use such of his farm products 360 Markets and Rural Economics as he may wish, but he shall not make sale of crops, promised to the association, to any outside parties, except any product not accepted by the association. 2. In case any member is offered a price in excess of the price then obtainable by the association, said member shall turn said bid over to the association for filling from said member's goods. NOTE. Some such provision is necessary, to prevent an outside disgruntled dealer from making a false bid, to test a member's loyalty and arouse dissension, with the idea of disrupting the organization. Allowing the organization to handle this bid compels the mischiefmaker to "put up or shut up"; the grower gets the boosted price, if the bidder does not back down, and the organization handles the deal and so is strengthened rather than injured. One or two such experiences has usually discouraged this very common form of outside interference. 3. Each member shall have a number or mark, which shall be permanently stamped on every sack, box, barrel, crate, basket, or other package shipped by him through the association. Any loss occasioned by improper packing or grading shall be charged to the member whose mark is found on said package. NOTE. Products packed on the grower's premises should be inspected as they are being packed, by an associa- tion inspector. He may be employed and paid by the grower to assist in packing, but he must be held accountable alone to the association for his inspection work. His own private mark should be placed upon each package he packed or inspected and he should be held jointly responsible with the grower for the pack, as it may be disclosed in the final market, ordinary deterioration excepted. 4. Each member of the association shall have one vote and only one; providing all claims and dues against said member have been .fully paid. No proxies shall be allowed. NOTE. In a stock company which is organized to earn profits on the money invested in the business, a member votes in proportion to the number of shares he holds. But the true cooperative association is based on the individual Markets arid Rural Economics 361 member, a number of whom unite to do something in which they have a common interest. In the former money rules; in the latter, men. While there may be cases where the voting power of the members may be made in proportion to the acreage of their products it will generally be found that any attempt to vary the voting power of members will be unwise. The practice of allowing a member to collect the proxies of absent members and vote the same, possibly giving a single member the control of power, is too dangerous a practice to be allowed. In some of the largest non-profit cooperative associations, like the California citrus fruit growers, it has been felt that it was neither fair nor wise to demand that the large pro- ducing members should be held to the same vote as a small producing member, when their responsibility and liability are so unequal. In such a case the voting power of members can be made proportional to the amount of their products or acreage handled through the association. 5. Any member may withdraw from the associa- tion at any time between (the first day of December and the first day of the following April) but all claims of whatsoever nature must first be settled. NOTE. The time of withdrawal should be fixed so as to take effect after the close of a season's business and be- fore another season begins. To permit a member to with- draw during a busy marketing season will result in con- fusion and may seriously handicap the manager in filling his contracts. 6. Any member, feeling that he has a grievance or cause for complaint, may appeal to the Board of Directors, or to. the members at any regularly called meeting. No member shall be temporarily sus- pended or expelled from the benefits of the associa- tion, without first being heard in his own defense, either by the Board of Directors or by the members at a regularly called meeting. SECTION 10 DUTIES AND POWERS OF THE MANAGER The manager shall employ and discharge all labor ; 362 Markets and Rural Economics he shall secure information as to crop and market conditions and furnish same to the members on re- quest. He shall encourage the production of the best varieties of products demanded by the trade. He shall conduct packing schools, in order that grow- ers may become trained in the best methods of grad- ing, packing and labeling their products. He shall enter into contracts for the sale of the association goods. He shall have entire charge of the mar- keting of all association goods, subject only to the action of the Board of Directors and the by-laws and rules of the association. NOTE. The manager is the most important officer and his powers must be limited as little as possible. He cannot be held responsible, if he is to be dictated to at will by each member or the officers are to constantly meddle with his work. This does not imply that the manager should be a dictator. He takes the suggestions of the officers and members and from those of his own experiences, he con- structs a business plan. Whenever a manager loses the con- fidence of the members, he had best be replaced with a manager who possesses that confidence. SECTION n EXPENSES AND PAYMENTS 1. The expenses of operating this association shall be met by a percentage on returns for produce sold by the association or by a fixed price per pack- age, the amount of such charge to be fixed by the Directors. He shall have charge of the grading, packing and inspection of all association products and shall have control of the brands and labels and their use on the as- sociation packages in accordane with the rules of the association. 2. All merchandise purchased by the association for the use of its members shall be paid for in cash by each member on delivery. Markets and Rural Economics 363 NOTE. Any system of extending credit requires large capital and often results in considerable loss. 3. Payment for produce will be made to the ship- pers on the receipt by the association of returns for the sale of their produce, unless otherwise ordered by the full Board of Directors. In making sales all produce of the same grade shall be pooled and all shippers of the same grade shall receive exactly the same price. SECTION 12 DIVIDENDS AND DAMAGES After the season's expenses are paid and the proper sum set aside as a reserve for the depreciation of the association property, the balance of the season's profits shall be divided as follows : 1. The stockholders shall receive (six) per cent, per annum on the par value of their stock. 2. One-half the balance shall be set aside as a surplus fund, to increase the working capital or to finance future improvements until the surplus shall amount to a sum equal to the capital stock; by ma- jority vote of the members it may be made greater. 3. The balance shall be divided among the mem- bers, in proportion to the value of their shipments and purchases made through the association during that season. Provided, that when any member has failed during that season to live up to his agreements, by failing to ship exclusively through the association, or by any other breach of his contract, and provided further that said failure on his part has resulted in a loss or damage to the association, then said defaulting member shall forfeit to the association such a share of his dividends then due as shall reimburse said 364 Markets and Rural Economics association for the loss or damages thus sustained, in lieu of liquidated damages. Or the association may proceed to collect from said defaulting member said damages out of any other of his funds or prop- erty. NOTE. Some courts have held that to require a mem- ber to pay his association a fee for the privilege of selling contracted products to an outside dealer is in restraint of trade, therefore, illegal. While it may not be legal for an association to penalize its members, it may be found that an association can legally provide, as in this last by-law, to collect damages from a defaulting member, when losses or damages have actually resulted from the failure of the mem- ber to live up to his agreements. Some form of binding contract is essential to hold the members of an association together. Many an organization has failed because members were only bound by a gentleman's agreement. A voluntary membership is totally inadequate for a stable and long endur- ing organization. The laws of the state should be studied, so that this by-law for holding the members may be legally drawn. SECTION 13 AUDITING The books and business of the association shall be audited monthly by the auditors selected from the membership. An annual audit shall be made by a certified public accountant previous to the date of the annual meeting, at which meeting said report shall be presented in full. Special audits shall be made upon order of the Board or upon a vote of the mem- bers at any legally called meeting. NOTE. While small associations may not feel the need of such a strict system of investigating the accounts, it will pay to have this work done often and most thoroughly. If the association business is being done carelessly, frequent audits will make it known and better methods may be adopted before any great loss occurs. The cost of an expert ac- countant is more than balanced by the confidence which it gives the members and effectually stopping the criticism of fault finders. Markets and Rural Economics 365 SECTION 14 AMENDMENTS These laws may be amended at any meeting by a two-thirds vote of the members present in the affirma- tive. Notice of such proposed change must be in- cluded in the call for said meeting. Take note of the following and raise cattle and sell them cooperatively. We now consume ninety-one per cent, of our wheat and ninety-eight per cent, of our corn. U. S. wheat acreage, 49 million ac. yield 14 bu. per ac. U. S. corn acreage, 1 14 million ac. yield 26 bu. per ac. U. S. oats acreage, 35 million ac. yield 32 bu. per ac. U. S. produces 20 per cent, of the world's wheat. U. S. produces 75 per cent, of the world's corn. U. S. produces 24 per cent, of the world's oats. U. S. produces 55 per cent, of the world's cotton. In 1906 U. S. cattle exported, 525,000 head. In 1912 U. S. cattle exported, 105,000 head. Decline, 75 per cent, in six years. In 1906, U. S. cattle imported, 16,000 head. In 1912, U. S. cattle imported, 318,000 head. Increase, 2,000 per cent, in six years. In 1907, number of beef cattle, 51,566,000. In 1913, number of beef cattle, 36,030,000. Decline, 30 per cent, in six years. HOW TO ORGANIZE A COOPERATIVE CREAMERY When the farmers of a community decide to take steps toward organizing a Cooperative Creamery or Cheese Factory, it is advisable for them to call for assistance from the State Experiment Station. A man familiar with the work can give valuable advice and information in the way of organizing, lo- cating, building and equipping the factory. FIRST MEETING A temporary chairman and secretary should be elected: The advisability of starting a creamery or cheese factory and the location of same should be discussed: The value of each share should be de- cided upon. If it be deemed advisable to form an association, a committee should be elected to canvass the sur- rounding territory to ascertain if there are a suffi- cient number of stockholders and cows to warrant organizing an association. ORGANIZATION AGREEMENT (To be used at First Meeting) We, the undersigned citizens of County, State of do hereby agree to form ourselves into an association for the purpose of , and to take the number of shares of stock, at the rate of dollars each, and furnish the milk or cream from the number of cows set opposite our names. Provided, however, that if cows and stockholders are not secured be- fore , 19 . . , this agreement shall be null and void. Markets and Rural Economics 367 NAMES SHARES COWS (Heading of Blank for Signatures.) ARTICLES OF INCORPORATION OF CREAMERY We, the undersigned persons, hereby become as- sociated for the purpose of organizing a cooperative association under and pursuant to the laws of the State of for buying, selling, manufac- turing and dealing in milk, cream, ice cream, butter and cheese and generally conducting a creamery busi- ness, with power and authority to do and perform all acts and things usually requisite and necessary in carrying on such business, and have organized by adopting and signing the following articles of incor- poration. ARTICLE I The Name of This Cooperative Association shall be The nature of its business shall be buying, selling, manufacturing and dealing in milk, cream, ice cream, cheese and butter, and handling, managing, owning, operating and con- trolling a creamery or creameries in the usual course of such business, and to do and perform all acts and things usual, requisite and necessary on the prem- ises, and the principal place where the business of said cooperative association shall be transacted is in the , in the County of and State of It shall have all of the power of a body politic, to sue and be sued, own real and personal property and exercise such power as its business demands. ARTICLE II The Time of Commencement of said Cooperative Association shall be the day 368 Markets and Rural Economics of , 19.., and the Pe- riod of its Continuancy shall be twenty years. ARTICLE III The Amount of Capital Stock of Said Cooperative Association shall be dollars, and shall be divided into shares of dol- lars each, and shall be paid at such a time and in such manner as the By-Laws of this Association shall direct. ARTICLE IV The Highest Amount of Indebtedness or Liability which said Cooperative Association shall at any time contract shall not exceed dollars. ARTICLE V The name and residences of the persons forming this Cooperative Association are as follows, to wit: ARTICLE VI The Government of this Cooperative Association and the management of its affairs shall be vested in three or five directors, and the following officers to wit : A President, Vice-President, Secretary and Treas- urer, and such Directors and officers shall be elected by ballot at the annual meeting of the stockholders, which shall be held on the last Tuesday in January of each year. ARTICLE VII The names of the Board of Directors of this Co- operative Association are as follows: Presi- dent, ; Vice-President, Secretary, ; Treasurer, ; Directors ARTICLE VIII The aforesaid Board of Directors shall hold their Markets and Rural Economics 369 respective offices until their successors are elected and qualified. ARTICLE IX This Cooperative Association may be dissolved at any regular or special meeting of the stockholders, provided that two-thirds of such stockholders vote for the dissolution, and each stockholder shall have but one vote in person. ARTICLE X This, certificate of incorporation may be amended at any general meeting of the stockholders or at any special meeting called for that purpose upon ten days' notice to the stockholders. IN TESTIMONY WHEREOF we, the said In- corporators, have hereunto set our hands and seals this day of , A. D. 19 .. IN THE PRESENCE OF State of County of ss. : BE IT REMEMBERED THAT ON THIS day of , A. D. 19 . . , before me a notary public within and for said County, personally appeared to me known to be the persons described in the above and foregoing instrument and whose names are sub- scribed hereto and severally acknowledged that they executed the same freely and voluntarily for the uses and purposes therein expressed. Notary Public. BY-LAWS i. The president shall preside at all meetings of the Association. He shall have power to call special meetings of the Association whenever, in his judg- ment, the business of the Association shall require it. 37 Markets and Rural Economics He shall also, upon a written request of ten stock- holders or three members of the board of directors, call a special meeting. 2. The Vice-President shall perform the duties of the President when the latter is absent or unable to perform the duties of his office. 3. The Secretary shall keep a record of all the meetings of the Association and make and sign all orders upon the Treasurer and pay over to the Treas- urer all money which comes into his possession, tak- ing the Treasurer's receipt therefor. The Secretary shall make a report to the Association at its annual meeting, setting forth in detail the gross amount of milk and cream receipts and the net amount of re- ceipts from products sold and all other receipts, the amount paid out for running expenses,, the sums paid out for milk and cream, and all other matters per- taining to the business of the Association. A like statement shall be made each month and posted con- spicuously in the creamery building at the time of the division of the previous month's receipts afore- said. The Secretary shall give bonds in the sum of dollars, same to be approved by the Board of Directors. 4. The Treasurer shall receive and receipt for all moneys belonging to the Association, and pay out the same only upon orders signed by the Secretary. The Treasurer shall give bond in the sum of dollars, same to be approved by the board of directors. 5. The board of directors shall hold at least one meeting every three months for the purpose of as- certaining the true condition of the affairs of the As- sociation. At the meeting of the board of directors, no other persons shall have the right to vote but the directors, unless in case of a tie, when the President shall be authorized to cast the deciding vote. Markets and Rural Economics 371 6. A sinking fund shall be provided by taking from each pound of butterf at or each hundred pounds of milk delivered, such amount as the stockholders may vote at their annual meeting, such sinking fund to be used only for paying insurance and taxes, buy- ing new machinery, and for erecting new buildings or improvement of buildings; also for advancing money on supplies, and for paying interest and dividend on stock, if any are paid. Provided, however, that such sinking fund may be entirely discontinued for a time if the board of directors shall decide this to be for the best interest of the Association. 7. Each stockholder shall furnish all the milk and cream from the cows he has, all milk and cream to be sound, fresh and unadulterated, and patrons of the Association not stockholders may furnish such amounts of milk or cream as they have. The As- sociation shall receive and sell such milk or cream, manufacture the same into butter, cheese or ice cream, and receive all money from the products, and from money s,o received deduct such a percentage thereof as shall have been agreed upon by the Association, in the by-laws or otherwise, and deduct the running expenses of the creamery, the remainder thereof to be distributed among the stockholders and patrons proportionately to the amount of whole milk or fat furnished by each. 8. All milk or cream shall be delivered at the creamery or cheese factory during the forenoon and at least three times a week; the same to be sweet and in good condition, and if any be found otherwise, the operator shall reject same. The operator shall pre- serve a sample of each delivery of each patron's milk or cream, testing same at proper intervals. 9. Any person sending to the factory any impure 37 2 Markets and Rural Economics or unhealthy milk or cream, or any milk drawn from cows within fifteen days before or five days after giv- ing birth to a calf, shall upon conviction thereof be subject to a fine of five dollars for the first offense, for the second offense ten dollars and for the third offense he or she shall forfeit his stock and mem- bership. 10. Salaries of all officers of this Association shall be fixed by the stockholders, 1 1. The board of directors shall have full author- ity to employ the butter or cheese makers, and all other help needed for the operation of the factory. 12. Whenever, from any cause, a vacancy occurs in any of the offices of the Association, the board of directors shall fill by appointment any such vacancy, and the person so appointed shall hold the office until the next annual meeting of the Association and he shall have the same power and be subject to the same duties and liabilities as the officer regularly appointed. 13. All shares shall be paid for in cash or by bank- able note. When a note is given to the Association for stock, it may be paid by a certain percentage deducted from each pound of butterfat or each hun- dred pounds of milk delivered by the stockholder. Provided, however, that no certificate shall be issued nor any interest paid on any share of stock until it is fully paid. Be it further provided that all stock may be re- tired as fast as money accrued from the sinking fund will allow. All stockholders shall receive six (6) per cent, interest on their stock until it is retired by the Association. 14. Notice of any meeting of the stockholders of the Association shall be posted at the factory bv the Secretary at least ten days before such meeting. Three Markets and Rural Economics 373 days' notice, posted in the same manner, shall be given before any meeting of the board of directors. Any stockholder or patron shall have the privilege to appear before the board at any of their regular meetings to present any grievance or any other matter. 15. Two-thirds of the stockholders shall consti- tute a quorum at any meeting of the Association. A majority of the board shall constitute a quorum at any board meeting. 1 6. If any competitor raises the price of butterfat above its market value, any stockholder shall have the right to sell his milk or cream to such competitor, provided that the cream is first weighed and tested at the factory, and one cent per pound of butterfat is paid to the Association for maintaining the cream- ery. Violation of this section shall render the of- fender liable to the amount of one per cent, of his sales to the competitor against his stock in this com- pany. 17. These by-laws may be amended or changed at any annual meeting of this Association by a two- third majority of the stockholders present and vot- ing thereon. They may also be changed by a two- third majority of the stockholders present at any special meeting of the Association called for such pur- pose. A notice of such meeting, however, shall be mailed to each stockholder at his last known address at least ten days before such meeting. BY-LAWS FOR AN EGG-SHIPPING ASSOCIATION Sec. i. This local association, the Cooperative Poultry and Egg Selling Association, belongs to the General Cooperative Poultry and Egg Selling Asso- ciation, and is subject to the laws of the general Association, which are now in force, or which in the future should be passed for the regulation of each Association. Sec. 2. Application for membership must be made to the directors and on their approval are admitted to membership upon the payment of $1.00, which is to be used for the general expenses. Sec. 3. Members must deliver their eggs to the individual appointed to receive them once each week during the fall and winter months, and twice each week during the summer months. Sec. 4. After the hatching season is over, each member must take away the male bird from the flock and produce infertile eggs. No eggs delivered in winter shall exceed seven days in age and in the sum- mer shall not be more than four days old. Any mem- ber delivering a stale egg is punishable by a fine of $1.00, to be collected by the Directors. This money is to be used for equipment. Repeated offense will make the member subject to dismissal. Sec. 5. The eggs must be collected from the nests every day. Eggs found in nests that have been found and eggs of unknown age must not be delivered to the Association for sale. Artificial eggs must be Markets and Rural Economics 375 used for nest eggs and no eggs must be offered for sale through the association that a hen has covered for one night. Sec. 6. 'Dirty eggs, eggs below the average in size, or abnormal in shape must not be delivered, and the eggs must be kept in a warm room in winter and in a cool dry room in summer, and in delivery must be protected from the direct rays of the sun. Sec. 7. Unless by special permission the members shall not purchase eggs for delivery to the Asso- ciation. Sec. 8. Each member must have a number which is stamped on the top end of each egg. Each mem- ber receives on the payment of dues a stamp and pad, and thirty one-dozen cartons containing the name of the Association on the cover. Eggs are always to be brought in those cartons and in boxes made according to specifications which will be given by the Association. Sec. 9. The receiver of the eggs must notify the member of the eggs brought by him not suitable for shipment and save them for him until the next visit. Sec. 10. All collections must be made by the re- ceiver who is to be allowed one and one-half per cent., or not to exceed this amount for handling the eggs. A triplicate pad with blanks running in con- secutive numbers must be kept by the collector, one sheet must be given in to the customer, one to the bank where the deposits are kept, and the tissue paper sheet in this book must be kept by the collector for his own files. Sec. ii. Notice of the withdrawal must be given to the Directors thirty days in advance and no mem- ber who withdraws shall have any share in the profits or equipment, if the withdrawal takes place before the end of the contract. 376 Markets and Rural Economics Sec. 12. The Board of Directors is composed of three members elected by the Association the chair- man, the secretary and the treasurer. At least two of the directors shall be ladies. It is the duty of the Board to see that all regulations are complied with, find markets, and audit the books. Sec. 13. If for any reason the Association should be dissolved, the surplus that may have occurred and all money derived from the sale of equipment shall be divided among all members in good standing. Sec. 14. The amount of the reserve fund is to be determined by the Board of Directors. Sec. 15. These rules may be changed by a ma- jority vote of the members, provided the change does not conflict with the local association's relation to the general association. ANOTHER GENERAL TYPE OF ORGANIZATION CONSTITUTION Article i Sec. i. The Cooperative Company shall be com- posed of its officers, committee and stockholders, viz. : President, Vice-President, Secretary-Treasurer, Ex- ecutive Committee of five, and stockholders of the Company. Article 2 Sec. i. There shall be elected at each annual meet- ing of the stockholders of this company a President, Vice-President, Secretary-Treasurer, and an Execu- tive Committee of five. Sec. 2. The President shall preside over all meet- ings, and in case of his absence the Vice-President shall preside; but in the absence of both, the members present shall elect a temporary President who shall have all the powers of the President. Sec. 3. The Executive Committee shall have gen- eral management of the Corporate business. It shall elect a manager, prescribe his duties and fix com- pensation. It shall require suitable bonds for the Secretary-Treasurer and the Manager and approve the same. It shall audit the books of the Secretary- Treasurer and the Manager as often as deemed ad- visable and report their findings to the stockholders, with an itemized statement of all receipts and dis- bursements since last annual or called meeting. It Markets and Rural Economics shall have power to remove from position any officer or employee for dishonesty, incompetence, or im- moral conduct, and fill vacancies caused by death, resignation, or removal. BY-LAWS Sec. i. The capital stock shall be $...., divided into shares of $. . . . each; no member shall hold more than .... shares. Each shareholder is en- titled to one vote. Sec. 2. The shareholders at each annual meeting shall elect officers for the ensuing year; said meet- ing shall be held of each year at such place as the Executive Committee may select. All officers shall be elected by ballot. Any shareholder may vote by proxy, provided a written statement to that effect be filed with the Secretary of the meeting, stating whom he has selected to cast his vote. Sec. 3. Six days' notice shall be given in writing by the President before any called meeting. Sec. 4. Any officer or member of the Executive Committee shall be subject to recall at any time by a majority vote of all shareholders of the company. Sec. 5. A special meeting may be called at any time by the President, on proper notice, and shall be called on request of a majority of the Executive Com- mittee or of five per cent, of the shareholders. Sec. 6. The Executive Committee shall have power to set aside, out of any money belonging to the Company, as an emergency fund, a sum not to exceed ten per cent, of the capital stock. Sec. 7. The compensation of all officers shall be fixed by the stockholders at the regular annual meet- ings. Sec. 8. All net earnings of the company, except the emergency fund, shall, on or immediately after Markets and Rural Economics 379 the regular annual meeting, be paid to the share- holders in proportion to shares held by each, until the original amount of shares shall have been refunded; after which each shareholder shall receive not to ex- ceed six per cent, on his share; the remainder of the net earnings shall be paid to those who contribute to the company by patronage, to each in proportion to his patronage provided this payment be made only to members of the Cooperative Company. Sec. 9. There shall be no preferred stock in this company. All stock shall be common. Sec. 10. These By-Laws and the Constitution may be changed, amended or altered, at any time, by a two-thirds vote of all the shareholders at any reg- ular or called meeting, said change not to conflict with the articles of incorporation. To get new members into a cooperative company a good, way is to pay net profits to outsiders just as is paid to members, but pay it in credits on stock till enough is credited to amount to one share. There- after such share is on equal footing with all other shares. At the close of the season you will audit the books and determine the status of the company after a season's business. Take a balance and de- termine net profits. If there are none, then there is nothing to do but call it even and start anew. If a deficit, the next move is to curtail expenses, in- crease business, secure more efficient management, or quit business. But, if there is a profit over actual running expenses, the first thins: is to pav the pre- scribed interest on the capital invested. After this, if there is still a "leaving," provide for deterioration. Then, if there is a net profit, it is to be distributed among the patrons according: to the monev value of the business furnished by each, if he is a member of the 380 Markets and Rural Economics association; if he is not a member give him the same refund, only he is paid in credits on a share of stock till it amounts to a share, and then he gets the overplus in cash the same as any other cash-paying member. If the plant is in debt the credits will be given to each stockholder in additional stock, and the money kept in the treasury to pay off the indebtedness. This capitalizes earnings till the physical indebtedness is liquidated. If all the stock is sold that is needed to be marketed, and new applications are made for shares, it is in the by-laws that those holding the greatest number of shares must sell their excess to the new applicants, provided the applicant is voted to be allowed membership. This could not be seriously objected to, as the cooperative company is not or- ganized primarily to make money for stockholders but to efficiently distribute, purchase, or produce for its members at the least possible cost and the more members the more successful the business. BIBLIOGRAPHY AGRICULTURAL HISTORY Agriculture in the Middle Ages, W. F. Allen. History of the English Landed Interests, R. H. Gar- nier ( London and N. Y. ) . Progress in Agriculture, Charles H. Flint, 1780-1860 in ''Eighty Years' Progress" (N. Y. and Chicago). Economic History of the United States, E. L. Bogart (N'.Y., 1908). The Cotton Industry, M. B. Hammond (N. Y.). Economic History since 1763 (N. Y.). AGRICULTURAL AND INDUSTRIAL PROBLEMS The Modern Farmer in his Business Relations, Ed- ward F. Adams (N. Y., 1892). Farming Corporations, Wilber Aldrich (N. Y., 1892). The Business Side of Agriculture, A. G. L. Roggers (London, 1904). Chapters in Rural Progress, Kenyon L. Butterfield (Chicago, 1908). Rural Wealth and Welfare, G. T. Fairchile (N. Y., 1900). Rural Problems in America, Sir Horace Plunkett (N. Y., 1912). State Socialism and Nationalization of Land, Henry Fawcett. Symposium on the Land Question, J. H. Levy. Social Unrest. 382 Markets and Rural Economics The Menace of Privilege, Henry George (N. Y.). Theory of Industrial Revolution, Adams, 1913. Future of the Working Class, Robt. W. Babson (Bos- ton, 1913). Valuation of Public Utilities. MARKETING Markets for the People, Sullivan (N. Y.). Produce Markets and Marketing, Seibel (Chicago, 1912). How to Make Produce Marketing Profitable, Slocum. AGRICULTURAL ECONOMICS Principles of Rural Economics, T. N. Carver (N. Agricultural Economics, H. C. Taylor (N. Y., 1911). Farm Management, Card (N. Y.). Farm Management, Warren (N, c . Y.). Application of capital to land, Sir Edward West (Bal- timore, 1903). Principles of Agriculture, Albrecht Thaer (N. Y., 1846). Influence of Farm Machinery on Production, H. W. Quaintance (N. Y., 1904). The Influence of Crops upon Business in America, A. P. Andrew (Jou. EC., 1906). Agriculture, W. P. Brooks (Springfield, 1901). Foundations of Scientific Agriculture, Samuel Cooke (London, 1897). Soil Fertility and Permanent Agriculture, C. G. Hop- kins (Boston, 1910). Practical Agriculture, C. C. James (N. Y., 1902). Economic Rurale, E. Jouzier (Paris, 1903). Cyclopedia of American Agriculture, L. H. Baily (N. Y., 1909). COOPERATION History of Cooperation, Holyoke (London, 1906), two vols. Markets and Rural Economics 383 History of Rochdale Pioneers, Holyoke (London, 1900). History of Cooperation in Scotland, Maxwell (Glas- gow, 1910). Fifty Years of Cuthbert's Cooperative Association, Maxwell (Edinburg, 1909). How to Cooperate, Myrick (N. Y., 1910). Industrial Cooperation, Webb (Manchester, 1904). Cooperation at Home and Abroad, Fay (London, 1908). Mutual Aid, Kropotkin (London, 1902). Twenty-eight Years of Copartnership at Guise, Wil- liams (London, 1900). Cooperation, Vols. i, 2, 3, 4 (Minneapolis, 1914). Organized Agriculture, Pratt. Cooperation Among Farmers, Coulter (N. Y., 1911). Cooperative Agriculture, Powell (N. Y., 1913). The New Competition, Eddy. GOVERNMENT DOCUMENTS Hearings on Cotton and Grain Exchanges before Agr. Com. House, 1910. Report on Cotton Exchanges by Commissioner of Cor- porations, 1909. Hearings on Rural Credits 63, Cong. Sec. Session, 1914. Report of the American and U. S. Commissions, Sen- ate Doc. 214, 1913, and the bibliography accom- panying it. Publications of American Academy of Political and Social Science: Commerce and Transportation (January, 1902). Finance (November, 1902). Federal Regulation of Corporations (November, 1905). 384 Markets and Rural Economics Business Management and Finance (January, 1905). Labor and Wages (March, 1909). Stocks and the Stock Market (May, 1910). Banking Problems (November, 1910). American Produce Exchange Markets (September, Country Life (March, 1912). The Cost of Living (July, 1912). The Cost of Food Distribution (December, 1913). The Consumers' Control of Production. Work of the National Consumers' League. Needs for Currency Reform. OPINIONS OF LEADING EDUCATORS, COLLEGES AND UNIVERSITIES We have no separate department dealing with the problem of markets. This is a subject which is pre- sented in the department of Rural Economy. Thus far the subject has been presented only as a part of the general course in Rural Economy, but next year a special course will be given on Marketing and Prices,. This will be open to those students who have had our general course in Rural Economy. In other words, our students who take the course in Marketing and Prices will have had a general course in Rural Economy and previous to that a comprehen- sive course in General Economics. (Signed) C. N. LAUMAN, Department Rural Economy, Cornell University. We have had for some time a course in Agricultural Economics. During the last two years we have had a course in Research and Agricultural problems, and a two-hour course in Markets and Marketing. Under marketing we have differentiated manufactured and agricultural articles with respect to the problems of marketing, closing with a discussion of cooperative marketing. (Signed) A. W. TAYLOR, Department of Economic Science, State College of Washington. 386 Markets and Rural Economics I think an up-to-date course in cooperative market- ing in the high schools would accomplish excellent results, and it is our desire in the near future to in- clude in the high school course in agriculture the important phases in the marketing of farm produce, including cooperative marketing. (Signed) C. S. KNIGHT, Prof, of Agronomy, University of Nevada, Reno, Nevada. Our course in farm management devotes some time to the subject of marketing. Also, in our course of agricultural economics, a portion of the time is taken up with cooperation in agriculture. (Signed) HOMER C. PRICE, Dean, Ohio State University, Columbus, O. It seems to me that in cooperative marketing, as well as packing and grading goods for the markets by a representative body representing a group of farmers, lies the chief success of farming in the future. I believe much can be done in way of extension work along this line, and also much can be done in way of teaching this same work in high schools, especially in what may be considered rural high schools. (Signed) GEO. H. VON TUNGLEN, Dept. Economics and Social Science, Iowa State College, Ames, Iowa. In June, 1913, the University of Louisiana under- took to facilitate the marketing of farm produce to the best advantage by employing an agent to travel over the state and organize shipping clubs. By this means small producers are enabled to pool their prod- Markets and Rural Economics 387 ucts and secure better transportation rates and fa- cilities, as well as bett markets. The University has also assisted, throu i its department of animal industry, in the organization of dairy associations, to enable the dairymen to secure better rates and more careful handling of the milk and cans in transit. (Signed) WM. O. SCROGGS, Department of Economics and Sociology, University of Louisiana, Baton Rouge, La. It seems to me that it might readily find a place in special vocational schools and special secondary schools. (Signed) J. H. SKINNER, Dean, School of Agriculture, Purdue University, Lafayette, Indiana. We have a department of Agricultural Economics at the University of Wisconsin, in which the subject of Markets receives the entire time of one professor and some assistance. (Signed) H.C.TAYLOR, Department of Agricultural Economics, University of Wisconsin, Madison, Wisconsin. I heartily approve of the idea of having coopera- tive marketing taught in the high schools; that is, if suitable teachers can be secured. (Signed) CHAS. C. THATCH, Pres. Alabama Polytechnic Institute, Auburn, Alabama. I believe that cooperative marketing, together with all the phases of the business side of farming, should have a prominent place in a High School. I believe that the only economic and effective solution of the rural problem is through the proper education of the 388 Markets and Rural Economics boys and girls, while it is their business to study and prepare for their life work. It seems to me a great mistake to pour millions of dollars into the education of the men, and only thousands for the education of the boys and girls along the same lines. I believe the order should be reversed. (Signed) J. J. VERNON, Dean, University of Florida, Gainesville, Fla. In this country the whole subject of cooperation is a very important one, including cooperative mar- keting, and I should advocate its teaching in con- nection with the agricultural courses, times and means permitting. (Signed) R. H. FORBES, Director Experiment Station, University of Arizona, Tucson, Arizona. It should of course be a feature of the general course of instruction as, applied to agriculture, live stock, or domestic science. (Signed) ANDREW M. SOULE, President University of Georgia, Athens, Ga. Cooperative marketing might be taught in high schools with advantage to both pupils and commu- nity. (Signed) J. E. KAMMEYER, Prof, of Economics, State Agricultural College, Manhattan, Kansas. The Minnesota College of Agriculture has a divi- sion of Research in Agricultural Economics, which is studying marketing problems and organization among farmers, as Well as other subjects dealing with Markets and Rural Economics 389 rural economics. The course in agricultural eco- nomics that I give is devoted largely to marketing and organization work. A seminar in marketing is also held for advanced students. I have already publicly advocated that the rudiments of cooperation and marketing be taught not only in the high school but in rural schools. I believe it would be a fine scheme. (Signed) L. D. H. WELLS, Chief of Division of Research In Agricultural Economics, University of Minnesota, St. Paul, Minn. I have no hesitation in saying that I feel sure the work of cooperation should be taught in high schools, and for the reason that our graduates are teaching in high schools, this course has been given every mem- ber of the graduating class. (Signed) H. A. MORGAN, Dean, University of Tennessee, Knoxville, Tenn. In agricultural high schools, or in an agricultural course in any high school, it would seem to me that cooperation might well be a part of the work. (Signed) GUY C. SMITH, Prof, of Economics, N'ew Hampshire College, Durham, Nl H. Should the schools have either a well-developed agricultural department, or a commercial and eco- nomic department, the subject might well receive at- tention in that connection. (Signed) C. A. DUNNIWAY, President University of Wyoming, Lamaria, Wy. 39 Markets and Rural Economics I think the fundamental principles of cooperation should be as widely disseminated as possible, and believe the High School would be one effective me- dium. (Signed) H. C. FILLEY, Asst. Prof. Farm Management, University of Nebraska, Lincoln. It seems to me that the whole question of coopera- tion, not only in marketing, but of buying and other neighborhood operations, should be taken up in con- nection with high school economics and high school agriculture. (Signed) L. H. HAWKINS, Specialist in Agricultural Education, University of New York, Albany, N. Y. I believe it would be a most important step in ad- vance to have cooperative marketing taught in the high school. (Signed) WM. R. CAMP, Chief Marketing Division, N. C. Exp. Station, West Raleigh, N. C. I see no reason why some attention might not be given to cooperative marketing in a commercial course. As to whether the subject should be generally intro- duced or not would depend upon our theory as to the function of the High School. The fundamental prin- ciple of cooperative marketing might also properly be taught in connection with a class in economics. (Signed) CHAS. F. WHEELOCK, Asst. Comm. for Secondary Education, University of New York, Albany, N. Y. I firmly believe that this line of work should be taught in our schools. (Signed) M. J. ABBEY, Prof. Agricultural Education, West Va. University, Morgantown, W. Va. Markets and Rural Economics 391 I think we are one of the first, if not the first, college in the country to introduce courses in coopera- tion and marketing in our regular college curriculum. Our course in cooperation was introduced some years ago, and our course in markets more recently. We have a number of vocational agricultural high schools in Massachusetts, and some agricultural departments in ordinary high schools. We also have a very large number of corn and potato clubs. In all of these we think it is advantageous to teach and to practice the principles of cooperative marketing. (Signed) DR. ALEXANDER E. CANCE, Head Department of Agricultural Economics, Agricultural College, Amhurst, Mass. I believe that Cooperative Marketing and all other aspects of rural life should be taught in the high schools. We teach too much about the Agriculture of Vergil and too little about the country life of America in our schools. (Signed) L. L. BERNARD, Departments of History and Social Sciences, University of Florida. We offer a fairly complete course covering the whole field of Agricultural Economics, including and laying dominant stress upon the subjects of Markets and Rural Credits. Our college is attaching great im- portance to these, both from the standpoint of re- search and practical work. (Signed) HECTOR MCPHERSON, Departments of Political Economy and Rural Economics, Oregon Agricultural College, Corvallis, Ore. 39 2 Markets and Rural Economics Lectures on Cooperation and Marketing are given to our secondary students in the School of Agricul- ture. We are in the formative period of this work. We shall soon have a separate department of Rural Economics. I favor the teaching of Cooperative Marketing in the High Schools. If a separate course cannot be given it should be given an important place in the course in economics. (Signed) A. S. HARDING, Prof. Department of History and Political Science, South Dakota State College. SUPERINTENDENTS OF EDUCATION I am sure that in connection with the Commercial Courses of our High Schools it would be very de- sirable to have taught the subject. (Signed) PAYSON SMITH, State Supt. Public Schools, Augusta, Me. It seems to me that it would be an excellent plan to have matters of this kind brought before the pu- pils in our high schools. It would be along the line of practical agriculture, and in Ohio we are giving especial attention to this branch of study. We are teaching it in city and county schools alike. (Signed) FRANK W. MILLER, Supt. Public Instruction, Columbus, O. I think this subject might well be discussed in the Markets and Rural Economics 393 department of Economics or some of the vocational courses in High Schools. (Signed) P. E. McCLENEHAN, 1 Inspector of Secondary Schools, Des Moines, Iowa. It occurs to me that every text book of agriculture that is used in our high schools, should have chap- ters dealing with this subject. Perhaps the subject is of enough importance to constitute a study in itself. (Signed) D. M. BOWEN, Sec'y Board of Educational Administration, Topeka, Kan. 394 Markets and Rural Economics We have a plan by which we hope to teach what we call "Farm Management" in some of our high schools, and part of that course, I take it, is to be along the lines of marketing the products of the farm. (Signed) HAYWARD, High School Inspector, Grand Forks, N. D. I see no reason why the subject should not be given in connection with a course in agriculture. (Signed) R. L. WATTS, Dean and Director, State College, Pa. I wish to say that I am in accord with the sug- gestion of teaching cooperative marketing in the high schools. (Signed) MASON S. STONE, Stipt. Education, Montpelier, Vt. I would think that it could be well taught in con- nection with agriculture and domestic science. (Signed) R. B. TEITRICK, Deputy Supt. Public Instruction, Harrisburg, Pa. I am of the opinion that this should be made a part of the course in Rural Economics which should be taught in every High School. (Signed) MOSIAH HALL, State Inspector of High Schools, Salt Lake City, U. Tt is my judgment that in rural schools with high Markets and Rural Economics 395 school grades the subject of cooperative marketing should be taught, as it is an important phase of rural economy. A. B. MERIDITH, Asst. Comm. of Education, Trenton, N. J. I believe teaching cooperative marketing would be a good thing. The great need of education at the present time is u to hitch up" the school with life. If teaching this subject accomplishes nothing else than interesting the student in the study of economic con- ditions, it would be worth while. (Signed) GRACE M. SHEPHERD, Supt. Public Instruction, Boise, Idaho. I am of the opinion that the subject of cooperative marketing could be taught with profit to groups of high school pupils. I think, however, that it more properly belongs in the vocational school curriculum and in extension work to farmers. After having had some experience in this field it may be that we shall extend it to others in the agricultural field. There would seem to be considerable of an opportunity. (Signed) ROBERT O. SMALL, Deputy Commissioner, Board of Education, Boston, Mass. I am of opinion that it would be well to have this subject taught in high schools. It seems to me it could be taught under the subjects of Economics or Sociology. (Signed) WM. P. EVANS, State Superintendent, Jefferson City, Mo. 396 Markets and Rural Economics It seems to me that cooperative marketing would be a very proper subject for study in the high school, and especially in the high schools, in farming com- munities. It could be included in the course in rural economics if such a course is maintained. It seems to me highly worth while to extend into this important field. (Signed) M. P. S HAWKEY, State Superintendent, Charleston, West Va. The new emphasis that is being put upon the rural school as a community center it seems to me thor- oughly justifies the teaching of cooperative buying and selling, and the inauguration of such study in our county high schools would be a decided step forward and meet a very urgent need. (Signed) WM. F. FEAGIN, State Superintendent, Montgomery, Ala. AMORTIZATION TABLE Amount of Loan $1,000.00 at 5% for Thirty Years Semi- Interest Paid on Expenses Total Amount of Annual at 5% Principal and Semi-annual Principal Periods Profits Payments Still Unpaid I. $25.00 $7.35 $2.65 $35.00 $992.65 2. 24.81 7.54 2.65 35.00 985.11 3. 24.63 7.72 2.65 35.00 977.39 4. 24.43 7.92 2.65 35.00 969.47 5. 24.23 8J2 2.65 35.00 961.35 6. 24.03 8.32 2.65 35.00 953.03 7. 23.83 8.52 2.65 35.00 944.51 8. 23.61 8.74 2.65 35.00 935.77 9. 23.39 8.96 2.65 35.00 9-26.81 10. 23.16 9.19 2.65 35.00 917.62 11. 22.94 9.41 2.65 35.00 908.21 12. 22.70 9.65 2.65 35.00 898.56 13. 22.46 9.89 2.65 35.00 888.67 14. 22.21 10.14 2.65 35.00 878.53 15. 21.96 10.39 2.65 35.00 868.14 16. 21.70 10.65 2.65 35.00 857.49 17. 21.43 10.92 2.65 35.00 846.57 18. 21.16 11.19 2.65 35.00 835.38 19. 20.88 11.47 2.65 35.00 823.91 20. 20.59 11.76 2.65 35.00 812.15 21. 20.30 12.05 2.65 35.00 800.10 22. 20.00 12.35 2.65 35.00 787.75 23. 19.69 12.66 2.65 35.00 775.09 24. 19.37 12.98 2.65 35.00 762.11 25. 19.05 13.30 2.65 35.00 748.81 26. 18.72 13.63 2.65 35.00 735.18 27. 18.37 13.98 2.65 35.00 721.20 28. 18.02 14.33 2.65 35.00 706.87 29. 17.67 14.68 2.65 35.00 692.19 30. 17.30 15.05 2.65 35.00 677.14 31. 16.92 15.43 2.65 35.00 661.71 32. 16.54 15.81 2.65 35.00 645.90 33. 16.14 16.21 2.65 35.00 629.69 34. 15.74 16.61 2.65 35.00 613.08 35. 15.32 17.03 2.65 35.00 596.05 36. 14.90 17.45 2.65 35.00 578.60 37. 14.46 17.89 2.65 35.00 560.71 38. 14.02 18.33 2.65 35.00 542.38 39. 13.55 18.80 2.65 35.00 523.58 40. 13.09 19.26 2.65 35.00 504.32 41. 12.60 19.75 2.65 35.00 484.57 42. 12.11 20.24 2.65 35.00 464.33 43. 11.60 20.75 2.65 35.00 443.58 44. 11.09 21.26 2.65 35.00 422.32 45. 10.56 21.79 2.65 35.00 400.53 46. 10.01 22.34 2.65 35.00 378.19 47. 9.46 22.89 2.65 35.00 355.30 48. 8.88 23.47 2.65 35.00 331.83 49. 8.30 24.05 2.65 35.00 307.78 50. 7.69 24.66 2.65 35.00 283.12 51. 7.08 25.27 2.65 35.00 1 257.85 52. 6.45 25.90 2.65 35.00 231.95 53. 5.80 26.55 2.65 35.00 205.40 54. 5.14 27.21 2.65 35.00 178.19 55. 4.45 27.90 2.65 35.00 150.29 56. 3.76 28.59 2.65 35.00 121.70 57. 3.04 29.31 2.65 35.00 92.39 58. 2.31 30.04 2.65 35.00 62.35 59. 1.56 30.79 2.65 35.00 31.56 60. .79 31.56 2.65 35.00 .00 Totals I $941.00 [$1,000.00 I $159.00 [$2,100.00 397 THIS BOOK IS DUE ON THE LAST DATE STAMPED BELOW AN INITIAL FINE OF 25 CENTS WILL BE ASSESSED FOR FAILURE TO RETURN THIS BOOK ON THE DATE DUE. 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