who produce and owned by them for their own good, the simplest method to distribute its benefits is in higher prices. So that the second principle of rural coöperation is, that if the cooperative union have any profit to be distributed it shall be distributed, as prices are, according to the quantity of business done. Each person bringing milk, or bringing pork, or bringing grain, shall be paid a share of the profit according to the quantities he brings to the union.

The third principle, not so easily described, has to do with liability. In some form or other coöperative unions are underwritten by the individuals entering into the union. Each man must make himself liable for debts and for obligations of the union, and frequently the tendency is to approach unlimited liability more nearly than joint stock organization does. Among the very poor farmers of Ireland, unlimited liability is possible. The Raiffeissen banks are of this type and they have been of extraordinary value in lending money to a depressed people, so poor that they are willing to underwrite the debts of the coöperative credit association, through which alone they can borrow money. By this method of securing credit, countrymen who could not borrow $10 anywhere are able, through underwriting the debts of an association formed by them, to borrow on their collective credit an amount that not all of them acting independently could secure in fractional parts. This money they are able to lend for described uses to one another, and by this means improvements are made possible that without it could never even be attempted.

There is a fourth principle in coöperation, namely the cooperative spirit, and here the church and the school are mighty factors. For, as I said before, the spirit which is longing for church federation and school consolidation is the same moving spirit that hopes for the economic organization of farmers. The church must put its sanction upon the obligation of a farmer to his neighbors. It must condemn the old individual competitive spirit. It must teach the virtues of obedience, sub

ordination, the obligations of leadership, the control of honor, truthfulness, loyalty to verbal contracts and the nobility of self-sacrifice in the interest of the community. This coöperative spirit is the ethical form of the whole process. Coöperation is not merely for the sake of making money, but it has to do with the conscience; it is a form of discipline for the will.

I believe, therefore, that the future of the country church and the possibility of developing a system of rural schools adequate to the needs of the American people are dependent upon coöperative organization of the farmer. By this means an income will be secured adequate to the support of social institutions, and by the same means a spirit will be cultivated by which a new rural civilization will be made possible.

THE FEDERAL FARM-LOAN ACT1

ROBERT J. BULKLEY

THE American farmer has had a harder time to get credit and has had to pay more interest on his loans than the American business man or the European farmer. This is not altogether due to his inability to give good security, nor to any doubt about his ultimate ability to pay his debts, but is principally because he has wanted the use of money for longer periods than the commercial banks like to lend it and because rural credits have not been organized in such a way as to suit the convenience of the long-time investor, or to provide adequately for the safety of his investment. This condition has been recognized for several years and diligent efforts have been made to provide a remedy.

I

Conditions are unsatisfactory in respect to both land-mortgage, long-term, and personal short-term credit, but the former is generally conceded to be the more fundamental and important problem. Notwithstanding all difficulties, the farmer has succeeded in getting a good deal of money on mortgage security. The total is estimated at more than 3 billion dollars. Much of this amount is loaned at reasonable rates, but in many sections interest is unreasonably and unnecessarily high, and, for the most part, the loans are made for relatively short terms three to five years.

This condition is shown by the study which was made of the subject for the Department of Agriculture under the direction 1 Copyright. Reprinted from The Journal of Political Economy by permission of the University of Chicago Press.

of Mr. C. W. Thompson. Mr. Thompson sent a set of questions to five representative farmers in each county of the United States, another to the country banks, another to agricultural agents, and still another to the thirty thousand local crop correspondents who report regularly to the Bureau of Crop Estimates in the Department of Agriculture. The replies were grouped geographically and the results were tabulated to show the average interest rates and the average commission paid on farm mortgages in the different sections of each state in the Union.

Only in New York, New Jersey, and Pennsylvania does the average interest rate fall close to 6 per cent, and the commission makes the average total cost of loans from one half of 1 per cent to I per cent higher. Interest rates on farm mortgages are generally somewhat more than 6 per cent in Delaware, Maryland, Virginia, West Virginia, and North Carolina. Even in New England, where capital is abundant, farm-loan rates average over 6 per cent. The averages are from 6 to 8 per cent in Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa, Missouri, and Kentucky; and from 8 to 10 per cent, with a few districts reporting as high as II and a fraction, in Nebraska, Kansas, and South Dakota in the Middle West, in South Carolina, Georgia, Florida, Alabama, Mississippi, Tennessee, Arkansas, and Louisiana in the South, and in Washington, Oregon, California, Arizona, and Utah in the Far West. Most of the farmmortgage rates in Texas are more than 10 per cent, and this is true also in North Dakota, Montana, Idaho, Wyoming, Colorado, and New Mexico. In Oklahoma the conditions reported were the worst of all, not a single section of the state reporting as low an average rate as 10 per cent and one section averaging as high as 14 per cent. In some parts of Oklahoma the addition of commission charges to the interest rate brings the total cost to the farmer above 19 per cent. This figure being an average for a considerable part of the state, it follows that there must be many cases in which the cost is even more exorbitant.

Very little of the farm-mortgage business is done on the amortization plan, and some of the institutions operating on that plan compel the repayment of principal in rather too short a time. As the amortization-plan business is an insignificant part of the whole, renewals are necessarily frequent, with the attendant commission charges and other costs. It is obvious that notwithstanding the fact that large amounts are already loaned on farm mortgages and that many cases can be cited in which the interest charges are not unreasonable, there is nevertheless a big national problem to be solved in improving and extending agricultural land-mortgage credit.

It is a problem in which the nation is even more vitally interested than the farmer himself, for availability of funds at reasonable rates is an encouragement to the farmer to improve his lands and so increase his yield of foods. The farmer's temptation to "rob the soil" which might be another's after the old-fashioned three-year or five-year mortgage should fall due does not exist under the long-term, non-callable, amortization-plan mortgage which gives the farmer a satisfactory sense of permanence in his land ownership and makes him the most interested and diligent conservator of his soil. Such a change in attitude interests and benefits us all, for it is certain to increase our national agricultural productiveness.

But improvement of farm lands and increase of food supply are not the only important changes which may be brought about by improved rural credits. We may also expect that better credit facilities will increase the number of independent home-owners working their own lands and reduce the number, or at least reduce the proportion, of tenants laboring on the lands of absentee landlords. This would surely represent an advance, for in this country of ours there is already enough absentee landlordism on the farm to give us very serious cause for apprehension. We may hope, too, that improvement in rural credits will tend noticeably to check the drift of population to great cities, which, it is generally recognized, has gone too far for the good of the country.