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Rural Welfare and Farm Labor

Plans for Betterment of Farming Conditions; Effect
on Cost and Extent of Production, Wages and Help

Written for the American Employer

By THOMAS S. SOUTHGATE

Vice-President of the American Commission for the Study of Rural Finance

The great importance of the work and plans outlined in the following article and their bearing on the labor problem and cost of living will be realized at a glance. The author, Mr. Southgate, whose home is in Norfolk, Va., is one of the leading business men of the country. Still young, self-educated, self-made, patriotic and self-confident, for years he has been one of the foremost of those whose hearts and energies are enlisted in the campaign for a "greater nation through a greater South". This is the slogan of the Southern Commercial Congress, of which he is a Second Vice President.-Editor.)

The 1912 assembly of the Southern Commercial Congress which met April 13th in the city of Nashville, Tenn., was wholly devoted to the agricultural recovery and development of the South. Almost every phase of this great subject was treated, and to make the Congress completely successful the Department of State consented to have present the Honorable David Lubin (the American representative to the International Institute of Agriculture, at Rome, Italy), not only during the session of the Congress but for two weeks previous thereto, in order that the first seed might be sown in connection with the introduction of a system of rural credits in America that would be the most potent factor in agricultural development of any one thing that could be considered.

As a result of that highly successful meeting, the executive officers of the Congress were instructed by the unanimous voice of the nine hundred delegates there present to proceed to raise a representative commission for the purpose of visiting all European countries which were then using progressive methods of rural finance, with the

result that in April, 1913, just one year thereafter, ninety-five representatives of thirty-six states and five provinces of Canada embarked for a thorough study of this question under the general auspices of the International Institute of Agriculture, and with the hearty support and assistance of not only this country but those of all Europe as well.

The joint work of the Commission covered three months of active labor, ten hours each day, as may be seen when it is advised that very thorough investigations were made in Italy, Hungary, Austria, Russia, Egypt, Germany, Switzerland, France, Belgium, Denmark, Sweden, England and Ireland. The Commission was graciously received in every instance by ine governments of these respective countries, who, by pre-arrangement, were ready with experts from national and local institutions, officers of central societies, eminent economists, bankers, specialists in agricultural developments, etc., all of whom gave valuable testimony which otherwise it would have taken the Commission months to secure, and thus to have covered such a

field would have been practically impossible in so short a period of time.

So important and far-reaching have been the results of the research, that by and with the consent of President Wilson, the American Commission has become a permanent body to continue its labors for general welfare and rural uplift, electing the following as its officers: Senator Duncan U. Fletcher, of Florida, President; Dr. Kenyon L. Butterfield, of Massachusetts, Vice President; Thomas S. Southgate, of Virginia, Vice President; Harris N. Weinstock, of California, Vice President; Clarence J. Owens, of Maryland, Managing Director. The offices of the Commission will be in Washington, D. C. Two committees have been duly appointed, viz.: committee on compilation of official report, and an advisory board to the compiling committee.

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These committees are charged with the duty of assembling and compiling the official report for the people of the United States. It is hoped that this report may be ready for distribution by the first of the new year. In the meantime, it is but proper that a preliminary report be made to the state and people whom the writer represented and the following very brief reference to the work of the Commission is but a personal expression of the writer's opinions, and in no manner that of the Commission as a body.

DEVELOPMENT ABROAD.

First, let it be said that uniformly

in all countries of Europe, agricultural development is far in advance of that to which our American farmers have yet attained. Not because European farmers possess a larger degree of intelligence; in fact, this is to the contrary; but the reasons for this difference are along other lines and are most obvious:

1st. The high cost of living and the necessity for furnishing food for over-populous areas make it the most vital and far-reaching concern of the governments themselves, hence their

direct assistance.

2nd. One of the fundamentals of political economy is that a nation which can produce a surplus of life's necessities immediately and automatcally places itself in an independent position and becomes a factor among other nations as a world power; hence the governments' additional incentive.

3rd. The struggle of the govern ments of Europe to prevent the ba ance of commerce from being invari ably against them by reason of the constant need for the importation of food stuffs to feed their people.

4th. The vital need for improv ing rural life conditions, not only to keep men on farms, but prevent socialistic unrest so pronounced in many parts of Europe. These governments believe firmly that a higher type of citizenship which will inevitably resul therefrom.

This, then, is a brief outline of why this development has exceeded ours, which naturally leads to a statement of what these advanced methods consist.

1st. A genuine system of co-operation for mutual aid and betterment, in finance, production and marketing.

2nd. Intensifying of acreage and yield by the application of better and more improved methods.

3rd. The strenuous conservation (They of every phase of resource. say we waste more than they produce.)

4th. Educating the farmer to business methods in buying and selling and handling his records and accounts.

5th. In the continued thought for rural uplift work. The inaugurating of co-operative schools, even churches. club-rooms, amusement halls, libraries. playgrounds, etc.

THE VARIOUS SYSTEMS.

To analyze these: First, in regard to co-operative effort in finance, marThere are keting and production. three popular systems of banking which should be mentioned, because they are fundamentally the basis or starting-point of all co-operation: (1) The Raiffeisen System, of "unlimited liability"; (2) the Schulze-Delitzsch system, of "limited or unlimited lia

bility"; (3) the general "land mortgage" system, with amortization fea

tures.

The Raiffeisen system of rural banking operates as follows: A community, neighborhood or county organize themselves into a co-operative banking society without capital stock; the membership of these organizations averages 25 to 40 each. When one man

wishes to borrow, the obligation is upon him to satisfy the loan committee of the bona fide need which he may have. This done, the note or bill is made in the name of the society, and every member is thus bound for the payment of the loan of the This note or bill one so borrowing. is re-discounted with an affiliated state bank, several of which in each country act as agents for the country societies, both to receive their deposits and furnish funds for their loans. The country bank borrows its money from the state institution, usually at 4 to 5 per cent, and in extending its loan to its customer adds 2 per cent to cover expenses only, as these country banks are not operated for profit, but only in and for mutual benefit and protection.

The second system-that of the Schulze-Delitzsch, is identical with the Raiffeisen system, except that these banks or societies are usually founded with share capital (but one rate to one member), and are called "limited liability" banks, adaptable to urban more than rural conditions. When loans are granted members, the security to the discounting or state banks is the entire capital stock of the country bank or society first, then the prorated remaining liability of the stock members second.

The third system has but little direct connection with either of the others. It is less co-operative, but is of all factors used in Europe the most potential in the development of general agriculture, viz.: the "land mortgage" system. These institutions are very large and influential, with capital stock ranging from $10,000,000 to $100,000,000, which capital is used to perform but one function, i. e.,

the loaning of money on farm land mortgages.

HOW THE FIRST TWO SYSTEMS OPERATE.

ive functions.

It will readily be observed that these two separate styles of banking institutions render two separate but nevertheless very important respectIn the first (the Raiffeisen or Schulze-Delitzsch systems), the loans to affiliated members are all short-time loans, payable usually within the year, at harvest. This style of money is called by them "dynamic", because it assists in immediate results, enabling the borrower to buy new equipment, to purchase stock, to build barns, to save growing crops, to do all those things for the individual

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Not only this, but more: co-operative banking societies borrow money frequently for the benefit of their members jointly. For instance, suppose an affiliated society wishes to build for itself a tobacco warehouse, in which to conduct its own sales, or a cotton storage warehouse or gin, or a co-operative dairy; it borrows the money for the benefit of all. The same committee fixes a low uniform charge for the use of the warehouse, dairy, etc. As the public utility earns slowly a profit in its operations, the

joint note as originally made is gradually curtailed and finally disposed of without one-third the cost for the daily (the public utility's) service to any member that would result in shipping as individuals these various products to city commission men, or otherwise; and thus co-operative marketing follows as naturally as possible and great economies invariably result.

But further still, this same society, through its executive committee, pools the need of its members for fertilizer, machinery, stock and other basic essentials, and thus the society buys in large quantities for cash from the the discount of its joint note or bill, and each member finally pays as his interest may appear. The result is the society buys, for instance, the general individual ingredients of fertilizer, assembles them and mixes the constituent parts in a co-operative factory, according to national and state formulas readily furnished by the government, with the result that the member farmer effects large saving in buying cost. He ceases to pay for the large percent age of filler; he quits paying the railroads of the country $2 to $5 per ton freight on the weight of the filler that is of no use to him; and thus it will be seen something of what EUROPEAN CO-OPERATIVE PRODUCTION means.

These are only outlines of what may be done by these small banking community societies, the full force of which may be appreciated by the statement that in Germany alone the societies using the two systems (Raiffeisen and Schulze-Delitzsch) did a business in 1912 of $4,500,000,000, and other systems were used in addition. These figures are from government records, which also testify that this wonderful amount of business was

handled on co-operative responsibility without the loss of one-tenth of one per cent. Surely, then, this class of money has rightfully earned the terminology of "dynamic".

LAND MORTGAGE BANKS.

Now the third important system, viz. the "land mortgage" bank, performs also a much needed service and can possibly be briefly illustrated as

follows: This form of money is termed "static". A farmer who is : renter, or who may be working on shares, as so many do, saves a sma amount and wishes to become an owner.

He is prepared to buy a $5,000 farm. He pays 40 per cent cash on it. or $2,000; and gives his mortgage for $3,000. He decides that it will take 20 years for him to liquidate his loan. The bank takes his mortgage on the amortization or sinking fund bass only, and charges him four per cent flat for his money, plus an amount that will amortize the loan in the period of time he desires.

For instance, if four per cent be the basis (as it is in most all parts of Europe, though it is four and onehalf in some sections) he will pay as follows: For twenty years, 7.65 per cent; for fifteen years, 9.35 per cent: for ten years, 11.85 per cent. He has thus paid a rate of interest which he can earn readily, and in many cases no more than ordinary rent would otherwise be; and at the end of this period his mortgage is paid and his property has usually doubled in value in the meantime. The illustration, of course, applies to the large farmer as well, who may own 100 acres and wishes to buy 200 more; he simply follows the same course.

The governments of Europe say that these institutions not only assist greatly in making the rural life proposition sufficiently attractive to induce larger production, but that they per form a great sociological service as well, for any system which helps to make an owner out of a tenant or hired man contributes to an incalcu lable degree to the citizenship of the state or nation, and hence the governments feel keenly the obligation to a sist, foster and promote these institu tions wherever they are needed.

This, then, is but a brief outline of what is really meant by European co-operative rural finance as referred to above in section one.

THE OTHER ASPECT.

As to Section Two-the intensifying of acreage and yield-not a great deal can be said, for this is a story

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which is already being constantly agitated by the agricultural departments of all the states, as well as by that of the national government. Suffice

it to say that the yield need is so great that the most of these farms are made

to produce two separate crops at the same time; in some instances, two vegetables on one large flat row with fruit or vine culture above.

They also study constantly the intelligent application of fertilizer and employ the most scientific methods of cultivation and irrigation when necessary. In the matter of conservation, it would be difficult to recite in print the degree of care and thought applied by these people to this one phase of farm operation, and surely there is

no lesson our American farmers need

to learn for their own profit more than that which this phase teaches. European farmers believe that everything

produced has a value and use effectively every by-product. They raise that which they need for their own use, as also that of their stock. They also employ the idea of co-operative selling as explained above.

Further, as to sections four and five. It must be admitted that the application of intelligent of intelligent business methods is a desirable foundation for any line of endeavor and should theoretically, at least, apply to the farmers as well as to other avocations in life. This is where co-operative rural community work has such an effective opportunity to reach and spread broadcast among its affiliated membership reforms of this character.

Men are slaves of rut, habit and custom; hence when a few strong leaders in any rural community take advanced stands for the public good, it is not difficult to get others to readily follow. Many forceful illustrations of this idea were found in the rural sections of Italy, Austria and Germany, where country life has been raised to a happy, contented and attractive state, which is the direct result of the various forms of community life made possible by genuine cooperative effort along all lines.

SUMMARY.

The above is but the briefest possible outline of what European co-operative rural effort means in the concrete, and, as stated before, will be treated more comprehensively, as well as in greater detail, in the Commission's official report when issued. It will be a great pity if the various. state legislatures do not aggressively take up this all important subject of assisting agricultural productiveness from every standpoint, especially so when it can be done so readily by the adoption of the following general plan of action, viz.:

1st. At the next session of the state

legislature a commission should be

raised, of which the Commissioner of

Agriculture should be either chairman or a member, the purpose of said all magisterial districts of the state commission being to personally visit.

and spread broadcast among the farmers of same this new and progressive ral co-operative banking societies method of finance and marketing. Rushould then and there be formed, either with or without share capital, as the farmers may prefer, and if with share capital, same to be contributed. by the farmers themselves in minimum amounts. These society banks should then arrange to clear through and deposit with a parent bank within the state, centrally located, either some institution now in existence or that might hereafter be formed for this purpose.

2nd. Every state legislature should assist in every possible manner to provide their rural communities with im

proved facilities in the matter of a land mortgage system that will give the farmers long-time amortization

loans, for the purpose of assisting them in acquiring additional land, and also in helping tenants to become owners. It is hoped that as a result of the Fletcher Bill, now before Congress, such a national institution may be formed. It is proposed by this same bill that such land mortgage banks shall be run under the strictest government supervision and not for profit, but, on the contrary, to afford the

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