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msmm The Source of the Bank Account. Co-Operative Farm Products Marketing How It Is Done in Europe and May Be Done in America to the Profit of Both Farmer and Consumer By MATTHEW 6. DUDGEON. \tU o p y r l g h l , 1V14, V ^ e siern N e w s p a p e r U n ion WILL THE BANKERS REFORM? I Copenhagen, Denmark.—The Ameri can banker m ust reform. If he does not he will be up against It as are others who refuse to mend their ways. T h e American farm er cannot get money of American bankers upon term s suited to his needs. He is go ing to have the money from some source. If the banker will not give it to him he will organize a new kind o f a bank, for you may rest assured th a t the American farm er is going to have an opportunity to borrow money upon some suitable basis. The Irish farm er can get money on favor able term s; the Belgian farm e r co operating w ith his neighbors does his own banking; in Germany the co operative banks do a business that la astonishing in its volume; in Denmark It is easy to get money for buying a farm or for temporary investm ent in seeds, fertilizers or stock. The same Is true of the farm er in Italy and France; even in benighted Russia farm credits are cared for by co operative organizations. Do the bankers of America think that the American faitner is going to consent to continue to be the only civilized agriculturist who has no ade quate borrowing facilities. T h a t Is n o t the American way. W hat, then, can possibly prevent the formation of co-operative credit associations all over America? Nothing, except the presence of some institution th a t will do for the American farm er what co operative credit is doing for the Eu ropean farm er. If the American bank er wishes to do the banking bueiness o f America so far as the farm is con cerned, he and he alone can give the farm e r this sort of an institution and thus make co-operative credit socie ties unnecessary. It is up to the banker. Capital for Farming. Formerly when an American farm could be acquired by living upon it, when horses and cows and implements were cheap, and when fertilizers, blooded stock, and special high-grade seeds were unknown, a young man with comparatively little capital could begin farming. Now considerable capi tal Is as necessary to success in agri culture as it is in the manufacturing Industries. Every wise farm er knows that money Judiciously expended in better stock, better buildings, labor- saving m achinery, proper fertilizers, and good seed will net large returns. But It takes money to do these things. Consequently there is a demand for loans. y In America the farmer can seldom g e t a loan on term s that m eet his needs. In Ireland, Belgium, Germany, Holland, Denmark, France, Italy and elsewhere upon the continent the banks have forced the farm ers to or ganize co-operative credit societies. In m any instances the government also has aided the co-operative banks in obtaining money for loans. These so cieties are taking a safe, profitable business away from the bank. Now when it is too late the banks realize th e ir mistake. The question Just now is this: Will the American bankers forestall co operative credit companies by meet ing the needs of rural borrowers or will they force the farmer to go into the banking business as did the bank e t s of Europe? It is up to them. Will they beat co-operative credit banks by beating them to it? , Buying Farm Easy in Denmark. To buy a farm there are a num b er •of different methods open to th e Dan ish farmer. It m ust be remembered that in Denmark a farm is consid ered as having live stock and imple m ents used in working the land in separably attached to it, hence the purchase price to be paid includes all equipm ent necessary to the operation jf the farm and all mortgages are se cured by a pledge of this personal property as well as of the real estate. If the wouid-be buver has forty per c e n t of the purchase price he may gpply to a credit society for a long tim e loan amounting to sixty per cent. S t the value of the farm and all equip ment and stock upon it. The loan may run from forty-five years to seventy- nine years. The borrower has his prospective purchase surveyed and as sessed. He makes out a mortgage and delivers it to the co-operative society. This mortgage and hundreds of oth ers like it are delivered to a trustee with a trust deed which pledges them as security for a series of bonds. The co-operative society guarantees the bonds also. It is from the sale of these bonds that the co-operative society obtains its funds. These co-operative credit associations have in the beginning no capital whatsoever. Each is simply an agency whose functions are to see (1) th a t the real estate security of fered is assessed at its true value; (2) that the title is clear; (3) that the mortgages are properly executed; (4) th a t they are grouped, pledged and deposited with the trustee; (5) th a t the trustee Issues bonds; (6) th a t th e jan d , buildings and equip ment are pi;6perly cared for and their value to not permitted to deteriorate; (7) th a t the payments of principal and interest are promptly met. Easy Repayment of Loans. The farm er pays from four to six per cent, of the principal amount each year. This is not wholly interest, how ever, for it includes a small install ment of principal, for the mortgages are all amortization mortgages. Pay ment of this fixed sum annually or semi-annually for the fixed period therefor automatically discharges the debt. A small amount out of each payment is also set aside for reserve for the co-operative society and for an expense account. It has been the universal experience, however, that the expense runs very low. Still Easier for the Farm Laborer. There are other forms of loans even more advantageobs to the borrower, particularly if he is one of the poorer farm laborers. If such a laborer seeks to become a land Owner on a small scale he may under certain conditions secure a loan for nine-tenths of the value of the proposed purchase, being required to advance only one-tenth of the purchase price in cash. The gov ernm ent furnished the funds for these loans. The conditions are (1) the bor rower m u st have been engaged in ag ricultural labor for five years (women may take advantage of this law as well as m e n ); (2) the land m u st not exceed ten acres in extent nor $2,144 in value; (3) the borrower and pro spective purchaser m ust agree to crop the farm in a certain m anner, dividing it up into five or seven fields and fol lowing a certain rotation of crops, thus insuring continued productiveness and preventing deterioration of soil fer tility. U n d e r these mortgages the borrower pays three per c e n t interest with no installm ents upon the princi pal for the first five years. Then he pays, in addition to the interest one per cent, upon two-fifths of the loan as an installm ent upon principal, doing this until the two-fifths of the loan is entirely discharged. T h e reafter he pays an annual Installm ent-of one per cen t upon the three-fifths remaining of the principal, this being in addi tion to bis three per cent, interest as before. The bonds may be issued upon unstamped paper and are free from tax. Does the Danish farm er take advan tage of these opportunities 7 Are the tenants becoming land owners? The facts a re these: Denmark has 2,600,000 population, somewhat less than that of Chicago. It has about 600,000 fami lies, including those in cities and vil lages as well as those in the rural re gions. These co-operative credit soci eties have a membership of over 200,000; th a t is to say, two out of every five families in the entire coun try are represented in them. Largely as a result of this credit system ninety per c e n t of the farm ers of Denmark own their own land. How Character Is Capitalized. Obtaining a loan on personal secur ity has been euphoniously termed “capitalizing character.'* It is not an Inept p h rase since any fanner who h a s a good character, who Is a sober, hon est, industrious, intelligent, productive worker, has a capital th a t is consid ered a proper has is for credit and he can in fact capitalise his character. Hie character is in very truth under these conditions his capital. Here is the way it is done hero in Denmark: By th e law enacted ip 1898 the gov ernm ent is authorized to turn over to the credit association $1,260,000, for which the associations account to the governm ent at the rate of three per c e n t per annum. This sum is placed at the disposal of the farm ers’ c redit association in order that these asso ciations may be ready to give small loans to their membere. When any farm er finds it urgently necessary to secure a loan in order to m eet ex penses such as the payment of wages, th e nrico o f h o t t e r B e e tle o r o f a r t if i cial manures, or of feed for cattle, he makes aoplluatlon to one of these as sociations. In determ ining the am ount of the loan to be granted to each man it is the theory that the earning ca pacity of the borrower should be taken into account. This is thought to be best indicated by the number of dairy cows which he owns. A member may thus obtain a loan to about $13 per head of cattle fed and milked on the place. The loans m ust be repaid in from one to nine months. Interest m u st not, according to the original law exceed 4% per cent, per annum to the borrower. . Danish Bankers Have Reformed. The fact that there are in Denmark many banks which are organized for the sole purpose of meeting the needs of the farm ers has awakened the Dan ish banker to the fact that the rural credit is a big business which he can not afford to ignore. Compared with the American banker the Danish banker most decidedly has reformed. H e does meet the needs of the farm er in a manner which would surprise Americans. This is particularly true of the method in which he assists in financing co-operative associations. W hen the big Trifolium dairy associa tion was formed, for example, it was done in this way: One hundred farm ers, m ost of them owners of large farm s, formed an organization for the m anufacture of dairy products and for the further purpose of supplying milk to the city of Copenhagen. These one hundred farmers were the owners of som ething like 12,000 cows. While they individually had property, real and personal, they had no money which they wished to Invest in a co operative organization. They there fore sent their leaders to the bank to borrow the money. They simply asked the bank for a loan of $125,000 on the note signed by these leaders. The bank did not require the other members of the association to sign the note, although by the terms of the agreem ent into which all had entered in the formation of the co-operative association all were liable, jointly and severally, for the debt contracted at the bank. As a m a tter of course the bank made the loan to these farm ers at a low rate of interest. A most interesting feature of this transaction is the method of repay ment. It was agreed that the loan should extend over a period of twenty years with the privilege on the part of the association to repay out of its profit each year a sufficient sum so th a t at the end of the twenty years the debt should be discharged. At this time the association has been run ning for twelve years and has been more than able to keep up Its am orti zation payments. At the end of eight years more the debt with the bank will be discharged. At Fredericks- sund, out some little distance from Copenhagen, there is a co-operative egg association which is composed of 10,000 farmers. These 10,000 farmers had no capital which they wished to invest in an egg-packing and shipping organization. Their leaders went to the bankers as did the leaders of the Trifolium dairy aesociatlon and made a sim ilar loan except that in the case of the 10,000 farm ers who wished to sta r t an egg-packing establishm ent the period of repayment was over a period of ten years rather than twenty. This seems to be quite an ordinary prac tice. Cart Banks Supply Rural Credit? I have said it to up to the banker to supply the American farm er with loans sim ilar to those supplied to the European farmer. But there are those who say that the joint stock bank can never meet the farm e rs’ needs as do co-operative credit societies and that co-operative credit will come in spite of all the bankers can do. Dr. Charles McCarthy is of this number. He bases his conclusion on these grounds: First, no Joint stock bank can afford to tie its money up for long-period loans as do the credit banks. These deposits are all short- tim e deposits. They have no way of hypothecating one series of loans in order to raise money for another se ries. Their system of finance is not sufficiently elastic to lend Itself to the transactions demanded in an adequate line of rural credit. Second: No money-making concern can possibly serve the farmers as do co-operative credit societies whose sole a^m i i j i p aid the borrower and to pro tect hie-interests. But in agriculture a system of rural credit cannot be a substitute for brains and business sense and a mar keting system. Unless the farm er pro duces a good product and sells it to advantage his farming will be a fail ure. Easy loans will only make it a bigger failure. Co-operative credit is important, but with it m ust come a better system of m arketing either co-operative or otherwise, which will give the farm er more than half what is paid for the farm product. And so far as we can learn co-operative m a r keting la the system which will do th is Making Tomorrows = = W o r l d = = By (flew VtiU t/MlmtmrO AUSTRALIA— AN EXPERIMENT IN DEMOCRACY Sydney, A U s- tralla. — Austra lia, .in area the size of the conti nental States, with pop ulation approxi mating in num ber tho^jh not in variety the population of the city o f N e w York, is trying o u t democracy. Here experiment is substituted for experience, new theories for old practises. The land is fa vorable to the experiment. It is the land in settlem ent, though oldest in geological years. Though discovered and named in 1606 by a forgotten Spanish navigator, it was not until 1770 that Captain Cook, sailing the South seas, refound the island con tinent and baptized it into the Brit ish empire. Nor did occupation by white colonists begin until 1787, and the first colonists were convicts. \Australia should be a land of se lected population,” runs an old and cruel saying, “for our fathers were sent out from England by the best Judges!’’ Only within the last third of a century has Australia, through growth of population and advanced legislation, taken any considerable part in the world s affairs. Australia has no ancient crust of privilege to be broken up by the plowshare of pro gressive legislation. The soil is clear to the seeding. The political husband man has had an unusual field, of which he has not been slow to take advantage. Continent of Marvelous Riches. The discovery of gold in 1851, at Bathurst, west of the Blue moun tains, turned attention to the mar velous richness of Australia, which had been comparatively unknown. Sheep had been, and are, the chief source of A u stralia’s wealth. It is a continent W estern Kansas is dupli cated, though on an am p ler and more arid scale, in western Australia, and Queensland resembles, to a degree. New Mexico and Arizona. It Sa “a new uvuiitiy'* »•» well w» varied, in which the experim ent of de mocracy is on trial. This excuse for any delinquency or failure is urged by every Australian. A White Man's Country. The experim ent is being made by white men. Australia is deliberately a white man’s country. A few abo riginal blacks survive, in color black er than the so-called \Guinea negro,” once known in America and in indus try, about on the same plane with his laziest and latest youthful descend ant. Some Chinese and Japanese re side in the coast towns, adm itted be fore the policy of \Australia for the white man” was entered upon, but altogther the non-whites are a negli gible fraction of the entire population and, unless the governmental policy be changed, as does not seem within the range of probability, will so re main. Immigration is sought in many ways, but this immigration must be desirable and white. No black, yel low or brown man need apply. He is not rejected on account of his color. That might lead to International com plications. He is rejected on other grounds, illiteracy, knowledge of no language, or for other reason. The law is adm inistered so that no col ored man can get into Australia. A captain, on whose steam er five China men came as stowaways, was fined $2,600. At the Queensland ports cus toms officers are specially vigilant In looking out for undesirable immi grants. Two grave, m ilitary-appear ing individuals, wearing caps that bore the label \H. M. Customs,\ might have been seen in my cabin, as the steam er tarried at Brisbane. They turned over every article of furniture and every bit of bed clothing in the berth to dis cover whether or not a Chinaman had been therein concealed, with or with out my knowledge. I was not to be perm itted to disturb the \Australla- for-the-whlte-man\ policy. Regarding only one part of Aus Town Hall, Sydney, Australia. land, however, for which Nature has done much, and in the use of which men can afford, for a time at least, to take long chances. Many and rich minerals are found. The mines are im portant and valuable. The main ex port, however, is wool, and it is as a producer of food supply and m aterial for raim ent that this Immense land has its most prosperous future. Hid den away until other lands were full to overflowing, Australia has been the reserve continent from which a large share of the world's food and clothing are to come. Its possibilities in this direction have hardly begun to be re alized. The four and a half millions of In habitants, fringing the shores of the continent or scattered on solitary sheep stations and cattle runs miles apart in the “back-blocks,” have scarcely commenced to possess the land, certainly not to subdue it. The handful of political and minor offend ers who, with their guards and over seers, canie first from England, have been succeeded by generations of pi oneers of much the same type as peo pled the western plains of the United States 50 years ago. The “Great American Desert,” as it appeared in the geographies before geographers knew any better, has its co«nteit>art in the vast interior of the southern tralia there is serious consideration of a reversal of the whlte-Australla policy. This part is in the northern territory, an immense, undeveloped region, lying within the tropics, where it has, up to the present time, been found impossible to colonize white men. There are six states constitu ting the comiponwealth of Australia: New South Wales, Victoria, Queens land, South Australia, W estern Aus tralia and Tasmania. The northern territory is directly adm inistered by the federal government, while the states have even larger self-govern ment than the states of the American union. The white men cannot or, at least, will nqt live in the northern territory, though it has much rich and fertile land. In an area larger than that part of the United States lying east of the Mississippi river, are less than two thousand whites. The cen sus statistics show that this popula tion has Increased just 27 in 27 years. The northern territory rem ains large ly inaccessible until the construction of the transcontinental railway, which is projected. This, railway and more insistent immigration schemes may change the conditions, a section of the Australian press and public favor departing from the white-Australia policy far enough to perm it colored la bor to enter the northern territory, to do what one Australian called the \doe- key work” in development. This sec tion is In the minority, however, and will doubtleea rem ain so until It Is dem onstrated that other plans of set tlem ent and development have been tried, and it has been conclusively shown that the occupancy of th e northern territory by the white man is impossible. If there be evil re sulting from the experim ent in de mocracy, the white man. the Briton away from Great Britain, is responsi ble and the white man alone. Democracy to the LlmlL The Australian federal constitution, modeled upon the Constitution of the United States, carries to the farthest limit the principle of trusting the people. Every adult, man or woman, has an equal voice In the election of both houses of parliament. There is no property qualification and no cir cum stance entitles any citizen to more than one vote. In actual practice, however, as Frank Fox, keen observer and long resident of Australia, pointed out, “it has been found that the prin ciple of federalism imposes a check on the actions of the Australian parli ament, which is deeply resented by the advanced labor leaders, and the inconvenience of which i is acknowl edged by others. The constitution fol lowed somewhat closely the United States model, and reserved very large powers to the states—far larger, for example, than the states or provinces have in Canada. To provide that there should not be any arbitrary en croachm ent on state rights, a ‘states house' was set up, in which house—the senate—the tiny state of Tasm ania has equal representation with the very large state of New South Waleg, Also, the respective power of the states of the federation were defined by the written constitution and the high court of the commonwealth was made the guardian and interpreter of that constitution.\ This high court, it may be observed, has kept a jealous watch for any trespasses by the federal power on state rights, and has declared a great deal of the federal legislation “uncon stitutional,” and therefore Invalid, be cause it went beyond the powers giv en to the federation or commonwealth by the constitution. This h£s created a strong demand for a revision of the constitution, just as the decision o f « the majority of the justices of the United States Supreme court in the income tax case caused a demand tor a revision of the American constitu tion. It strikes observers from older countries with surprise, and perhaps with dismay, that it should be urgent ly proposed to enter upon a profound constitutional change after only ten years’ experience of federation under the act of union. Labor In the Saddle. Other experiments, tried out, may be abandoned, lightly or otherwise, but the experim ent of democracy is not among them. The Australian, whether he be a member of the La bor or of the Liberal party—the two great political parties—is a dem o c rat One man is as good as another man in his eyes and, to employ the Irish phrase, often a little better. The sec-'* retary of the draym an’s union is apr pointed member of the legislative council. The cabman, who over charged me in Sydney, as cabmen overcharge the traveler in all cities upon earth, is a member of parlla ment. One prem ier is a miner, an other a printer. Not in mere theory, as in some other countries claiming to be democratic, the government in A u stralians in the hands of the butch er, the baker and the candlestick- maker. The extent to which democracy goes may be illustrated by the New South Wales experiment. The Labor party, returned to power in this state, the most im p ortant in Australia, selected aa its leader W. A. Holman, who had filled this place with distinction in the previous parliament. Under the con stitution and by precedent the forma tion of a government, that is the se lection of cabinet m inisters, fell to his lo t Prem ier Holman, as an ultim ate dem o c rat declined to avail himself of this Immemorial privilege, and called a secret caucus of all the Labor members of parliam ent to select the new ministry. A score of candidates were voted upon by the 48 Labor members, and after six hours of stren uous balloting the caucus selected ten names. These are the new cabinet ministers, though the caucus left the assignm ent of their separate port folios or officers to the premier. Faced Toward Socialism. W ith many Australians democracy spells opportunity for socialism, to greater or less degree. The two chief occupations of the Australian are sports and politics. Indeed, he car ries his sporting proclivities into the realm of politics, and Just now Is per mitting his democracy to take a long chance in socialism. He is staking the future of his continent on t h * new theories of government that he Is put ting into practise, betting that the world, up to now, has been wrong. Perhaps the Australian democrat, with bis face toward socialism, is rig h t Perhaps he is m istaken and will be compelled, and painfully, to re trace his steps. Just now he Is going ahead, confident, almost arrogantly, though capital hesitates and immigra tion lags. The fat years have been his, but the lean years m ust come. Today’s prosperous world in Aus tralia holds for the observer much that suggests answer to the question which every visitor asks: Will de mocracy, far advanced toward social ism, stand the lean years test? Having bet that all ,tb e world’s wrong, what will the Australian do U he loses, his wager on democracy? (Copyright, 1814. by Joseph B. BowtoaJ •■-k • ’ ’ V \.v>
