Nom The years 1917 to 1919 were years of exceptional prosperity for farmers, because the price of their products rose faster and higher than either farm wages or the prices of the things that farmers buy. The years 1920 and 1921 were disastrous. Farm products began to fall while nearly everything that the farmer had to buy kept on rising in 1920, and then fell in 1921, but less than did farm products.
long-term farm credits at rates of interest considerably higher than were paid for loans on urban real estate. The total of agricultural loans was estimated in 1916 to be $3,500,000,000. Though rates of interest had become more equalized through out the whole country, they still ranged between 7 and 10 per cent in the southern and western states, averaging 7 per cent in the whole country for interest and commission. The need See ch. 8, I 8.
of better opportunties for credit in the agricultural districts was long recognized. The high rate of interest for borrowed money necessarily placed a limit on improvements in equip ment and methods of farming.T § 15. Provisions for farm loans. The Federal Reserve Act made two important changes to improve agricultural credit.° Long and vigorous discussion of the subject led at length to the enactment of the Federal Farm Loan Act, July 17, 1916. It authorized the establishment of twelve Federal Land Banks, each with a capital of not less than $750,000, to make loans through national farm associations organized somewhat after the model of the building and loan associ ations. The bonds issued by these banks may bear not to ex ceed 5 per cent interest and are tax exempt. The loan is re paid by the farmers under a regular plan of amortization.
This plan went into effect opportunely, when the with drawal of loans from America by European investors and the financing of the war was already causing rising interest rates. But for this act, the financial difficulties to agriculture would have been serious just as the patriotic slogan declared, "Food will win the war." As private investors were not ready to subscribe for stock in the banks, the Treasury of the United States did so. In the first year of its operation the Federal Farm Loan Banks issued nearly $100,000,000 of bonds; and at the end of about three years (by October, 1920) more than $350,000,000 ; at which time farm loan associations to the number of four thousand were operating. Besides, there were operating under the act twenty-five Joint Stock Land Banks with mortgage loans of nearly $80,000,000 outstand ing.
All of the effects of this legislation are not yet fully appar ent; but it is clear that it has brought down the rate of 7 See Vol. I, pp. 495-497, on the relation between lower interest rates and productive processes.
8 See ch. 9, 7 on time deposits, and § 9 on farm loans.
interest on long-time loans of farmers to nearly 5 per cent in the remotest parts of the country. This must stimulate ag
ricultural improvement and make it possible for thrifty ten ants to purchase land on long time. But, inasmuch as farm lands are brought within the circle of lower interest rates, their capitalization will be higher, based on the net annual rental. But ultimately the law should, with wise administra tion and careful changes made in the light of experience, broaden and strengthen the independent farm ownership of the nation, as well as increase agricultural production.
§ 16. Need of an agricultural policy. Men of the farthest vision in the field of agricultural and land eco nomics—men such as Liberty Hyde Bailey, chairman of the Roosevelt Country Life Commission, Eugene Davenport, director of the Illinois College of Agriculture, Kenyon L. Butterfield, president of the Massachusetts College of Agri culture, and Richard T. Ely, founder of the Institute for Re search in Land Economics—have since the beginning of this century been striving to gain for this great problem some due share of the national thought and effort. The events of the Great War gave force to their appeal for a national policy of agriculture. It is not too optimistic to believe that in some respects substantial progress toward this end has been made in the development of experiment stations and state colleges of agriculture, farmers' institutes, and "farmers' week" gatherings, that bring together the progressive farmers by thousands, not only to get some technical and practical hints on raising crops, but to gain a broader view of their economic task and of their civic responsibilities. These schools and meetings are helping, as are automobiles, good roads, tel ephones, rural free delivery, better schools, and an active rural press, to destroy the isolation of country life and to make farmers as a class more broadly educated, more co operative and more public-spirited than the average urbanite. More insistently the call is heard for a national policy in ag riculture, with the belief that, more than any other occupation, agriculture is bound up with the very existence and survival of the nation. This belief rests not merely on the crude physi cal fact that men must have food to live, but also, and even more, on the eugenic fact that whatever be the country pop ulation will ultimately be the nation, and on the historical fact that democracy, stable government, and liberty must have their roots in the soil and in the ownership of homes. This and the foregoing chapter have but sketchily suggested some of the topics that make up the agricultural problems. It is even more important to appreciate that the agricultural prob lem is connected with all the other industrial problems, and is but a part of the one greatest problem, transcending indi vidual, class, and sectional interests, the problem of national welfare.