THE WEAK SPOT IN AMERICAN RURAL ECONOMY
The evidence of competent American witnesses proves that there is, in
the United States, notwithstanding its immense agricultural wealth, a
Rural Life problem. Here, as elsewhere, on a fuller analysis, the utmost
variety of race, soil, climate and market facilities serve but to
emphasise the importance of the human factor. But this consideration
does not lessen the need for a sternly practical treatment of the rural
social economy under review. In this chapter, I propose to go right down
to the roots of the rural problem, find what is wrong with the industry
by which the country people live, and see how it can be righted. We
should then have clearly in our minds the essentials of prosperity in a
rural community.
Agriculture, the basis of a rural existence, must be regarded as a
science, as a business and as a life. I have already adverted to
President Roosevelt's formula for solving the rural problem--"better
farming, better business, better living." Better farming simply means
the application of modern science to the practice of agriculture. Better
business is the no less necessary application of modern commercial
methods to the business side of the farming industry. Better living is
the building up, in rural communities, of a domestic and social life
which will withstand the growing attractions of the modern city.
This threefold scheme of reform covers the whole ground and will become
the basis of the Country Life movement to be suggested later. But in the
working out of the general scheme, there must be one important change in
the order of procedure--'better business' must come first. The dull
commercial details of agriculture have been sadly neglected, perhaps on
account of the more human interest of the scientific and social aspects
of country life. Yet my own experience in working at the rural problem
in Ireland has convinced me that our first step towards its solution is
to be found in a better organisation of the farmer's business. It is
strange but true that the level of efficiency reached in many European
countries was due to American competition, which in the last half of the
nineteenth century forced Continental farmers to reorganise their
industry alike in production, in distribution and in its finance. Both
Irish experience and Continental study have convinced me that neither
good husbandry nor a worthy social life can be ensured unless
accompanied by intelligent and efficient business methods. We must,
therefore, examine somewhat critically the agricultural system of the
American farmer, and see wherein its weakness lies.
The superiority of the business methods of the town to those of the
country is obvious, but I do not think the precise nature of that
superiority is generally understood. What strikes the eye is the
material apparatus of business,--the street cars, the advertisements,
the exchange, the telephone, the typewriter; all these form an
impressive contrast with the slow, simple life of the farmer, who very
likely scratches his accounts on a shingle or keeps them in his head.
But most of this city apparatus is due merely to the necessity of swift
movement in the concentrated process of exchange and distribution. Such
swiftness is neither necessary nor possible in the process of isolated
production. But there is an economic law, applicable alike to rural and
to urban pursuits, which is being more and more fully recognised and
obeyed by the farmers of most European countries, including Ireland, but
which has been too little heeded by the farmers of the United States and
Great Britain. Under modern economic conditions, things must be done in
a large way if they are to be done profitably; and this necessitates a
resort to combination.
The advantage which combination gives to the town over the country was
recognised long before the recent economic changes forced men to
combine. In the old towns of Europe all trades began as strict and
exclusive corporations. In the eighteenth and nineteenth centuries new
scientific and economic forces broke up these combinations, which were
far too narrow for the growing volume of industrial activity, and an
epoch of competition began. The great towns of America opened their
business career during this epoch, and have brought the arts of
competition to a higher perfection than exists in Europe. But it has
always been known that competition did not exclude combination against
the consumer; and it is now beginning to be perceived that the fiercer
the competition, the more surely does it lead in the end to such
combination.
A trade combination has three principal objects: it aims, first, at
improving what I may call the internal business methods of the trade
itself by eliminating the waste due to competition, by economising
staff, plant, etc., and by the ready circulation of intelligence, and in
other ways. In the second place, it aims at strengthening the trade
against outside interests. These may be of various kinds; but in the
typical case we are considering, namely, the combination of great
middlemen who control exchange and distribution, the outside interests
are those of the producer on one side and the consumer on the other; and
the trade combination, by its organised unity of action, succeeds in
lowering the prices it pays to the unorganised producer and in raising
the prices it charges to the unorganised consumer. In the third place,
the trade combination seeks to favour its own interests in their
relation to other interests through political control--control not so
much of the machinery of politics as of its products, legislation and
administration. I am not now arguing the question whether or how far
this action on the part of trade combinations is morally justifiable. My
point is simply that the towns have flourished at the expense of the
country by the use of these methods, and that the countryman must adopt
them if he is to get his own again. Moreover, as organisation tends to
increase the volume and lower the cost of agricultural production and to
make possible large transactions between organised communities of
farmers and the trade, it will be seen that the organised combination of
farmers will simplify the whole commerce of those countries where it is
adopted, and thus benefit alike the farmer and the trader.
This truth will be easily realised if we consider for a moment the
system of distribution which the food demand of the modern market has
evolved. Agricultural produce finds its chief market in the great
cities. Their populations must have their food so sent in that it can
be rapidly distributed; and this requires that the consignments must be
delivered regularly, in large quantities, and of such uniform quality
that a sample will give a correct indication of the whole. These three
conditions are essential to rapid distribution, but their fulfilment is
not within the power of isolated farmers, however large their
operations. It is an open question whether farmers should themselves
undertake the distribution of their produce through agencies of their
own, thus saving the wholesale and possibly the retail profits. But
unquestionably they should be so well organised at home that they can
take this course if they are unfairly treated by organised middlemen.
The Danish farmers, whose highly organised system of distribution has
made them the chief competitors of the Irish farmers, have established
(with Government assistance which their organisation enabled them to
secure) very efficient machinery for distributing their butter, bacon
and eggs in the British markets. Other European farming communities are
becoming equally well organised, and similarly control the marketing of
their produce. But where, as in America and the United Kingdom, the town
dominates the country, and the machinery of distribution is owned by the
business men of the towns, it is worked by them in their own interests.
They naturally take from the unorganised producers as well as from the
unorganised consumers the full business value of the service they
render. With the growing cost of living, this has become a matter of
urgent importance to the towns. In the cheaper-food campaign which began
in the late fall of 1909, voices are heard calling the farmers to
account for their uneconomical methods, while here and there
organisations of consumers are endeavouring to solve the problem to
their own satisfaction by acquiring land and raising upon it the produce
which they require.
In the face of such facts it is not easy to account for the
backwardness of American and British farmers in the obviously important
matter of organisation. The farmer, we know, is everywhere the most
conservative and individualistic of human beings. He dislikes change in
his methods, and he venerates those which have come down to him from his
fathers' fathers. Whatever else he may waste, these traditions he
conserves. He does not wish to interfere with anybody else's business,
and he is fixedly determined that others shall not interfere with his.
These estimable qualities make agricultural organisation more difficult
in Anglo-Saxon communities than in those where clan or tribal instincts
seem to survive.[4]
Now it is fair to the farmer to admit that his calling does not lend
itself readily to associative action. He lives apart; most of his time
is spent in the open air, and in the evening of the working day physical
repose is more congenial to him than mental activity. But when all this
is said, we have not a complete explanation of the fact that, by failing
to combine, American and British farmers, persistently disobey an
accepted law, and refuse to follow the almost universal practice of
modern business. I believe the true explanation to be one that has
somehow escaped the notice of the agricultural economist. Those who
accept it will feel that they have found the weak spot in American
farming, and that the remedy is neither obscure nor difficult to apply.
The form of combination which the towns have invented for industrial and
commercial purposes is the Joint Stock Company. Here a number of persons
contribute their capital to a common fund and entrust the direction to
a single head or committee, taking no further part in the business
except to change the management if the undertaking does not yield a
satisfactory dividend. Our urban way of looking at things has made us
assume that this city system must be suitable to rural conditions. The
contrary is the fact. When farmers combine, it is a combination not of
money only, but of personal effort in relation to the entire business.
In a coöperative creamery, for example, the chief contribution of a
shareholder is in milk; in a coöperative elevator, corn; in other cases
it may be fruit or vegetables, or a variety of material things rather
than cash. But it is, most of all, a combination of neighbours within an
area small enough to allow of all the members meeting frequently at the
business centre. As the system develops, the local associations are
federated for larger business transactions, but these are governed by
delegates carefully chosen by the members of the constituent bodies.
The object of such associations is, primarily, not to declare a
dividend, but rather to improve the conditions of the industry for the
members. After an agreed interest has been paid upon the shares, the net
profits are divided between the participants in the undertaking, to each
in proportion as he has contributed to them through the business he has
done with the institution. And the same idea is applied to the control
of the management. It is recognised that the poor man's coöperation is
as important as the rich man's subscription. 'One man, one vote,' is the
almost universal principle in coöperative bodies.[5]
The distinction between the capitalistic basis of joint stock
organisation and the more human character of the coöperative system is
fundamentally important. It is recognised by law in England, where the
coöperative trading societies are organised under _The Industrial and
Provident Societies' Act_, and the coöperative credit associations under
_The Friendly Societies' Act_. In the United States (I am told by
friends in the legal profession), the Articles of Association of an
ordinary limited liability company can be so drafted as to meet all the
requirements I have named. Most countries have enacted laws specially
devised to meet the requirements of coöperative societies. However it is
done, the essential of success in agricultural coöperation is that the
terms and conditions upon which it is based shall be accepted by all
concerned as being equitable in the distribution of profits, risks and
control. It then becomes the interest of every member to give his
whole-hearted support and aid to the common undertaking. To accomplish
this, it is necessary to explain and secure the acceptance of a
constitution and procedure carefully thought out to suit each case. It
will be readily believed that associations of farmers which will meet
these conditions are not likely to be spontaneously generated; hence the
necessity for a plan and for the machinery to carry it through.
In this matter I am here speaking from practical experience in Ireland.
Twenty years ago the pioneers of our rural life movement found it
necessary to concentrate their efforts upon the reorganisation of the
farmer's business. They saw that foreign competition was not, as was
commonly supposed, a visitation of Providence upon the farmers of the
British Islands, but a natural economic revolution of permanent effect.
Our message to Irish farmers was that they must imitate the methods of
their Continental competitors, who were defeating them in their own
markets simply by superior organisation. After five years of individual
propagandism, the Irish Agricultural Organisation Society was formed in
1894 to meet the demand for instruction as to the formation and the
working of coöperative societies, a demand to which it was beyond the
means of the few pioneers to respond.
Two decades of steady development have confirmed the soundness of the
original scheme, and a brief account of agricultural coöperation in
Ireland will be of interest to any reader who has persevered so far. The
conditions were in some respects favourable. The farms are small and
their owners belong to the class to which coöperation brings most
immediate benefit. The Irish peasantry are highly intelligent. They lack
the strong individualism of the English, but they have highly developed
associative instincts. For this reason coöperation, an alternative to
communism,--which they abhor,--comes naturally to them. On the other
hand, the ease with which they can be organised makes them peculiarly
amenable to political influence. In backward rural communities the
trader is almost invariably the political boss. He is a leader of
agrarian agitation, in which he can safely advocate principles he would
not like to see applied to the relations between himself and his
customers. He bitterly opposes coöperation, which throws inconvenient
light upon those relations. We are able to persuade the more enlightened
rural traders that economies effected in agricultural production will
raise the standard of living of his customers and make them larger
consumers of general commodities and more punctual in their payments.
But in the majority of cases the agricultural organiser finds politics
in sharp conflict with business, and has a hard row to hoe. So, while we
have advantages in organising Irish farmers, we have also, largely owing
to well-known historical causes, to overcome difficulties which have no
counterpart in the United States or England.
Nevertheless, we managed to make progress. We began with the dairying
industry, and already half the export of Irish butter comes from the
coöperative societies we established. Organised bodies of farmers are
learning to purchase their agricultural requirements intelligently and
economically. They are also beginning to adopt the methods of the
organised foreign farmer in controlling the sale of their butter, eggs
and poultry in the British markets. And they not only combine in
agricultural production and distribution, but are also making a
promising beginning in grappling with the problem of agricultural
finance. It is in this last portion of the Irish programme that by far
the most interesting study of the coöperative system can be made, on
account of its success in the poorest parts of the Island. Furthermore,
the attempt to enable the most embarrassed section of the Irish
peasantry to procure working capital illustrates some features of
agricultural coöperation which will have suggestive value for American
farmers. I will therefore give a brief description of our agricultural
coöperative credit associations.
The organisation was introduced in the middle of the last century by a
German Burgomaster, the now famous Herr Raiffeisen. He set himself to
provide the means of escape from the degrading indebtedness to
storekeepers and usurers which is the almost invariable lot of poor
peasantries. His scheme performs an apparent miracle. A body of very
poor persons, individually--in the commercial sense of the
term--insolvent, manage to create a new basis of security which has been
somewhat grandiloquently and yet truthfully called the capitalisation of
their honesty and industry. The way in which this is done is remarkably
ingenious. The credit society is organised in the usual democratic way
explained above, but its constitution is peculiar in one respect. The
members have to become jointly and severally responsible for the debts
of the association, which borrows on this unlimited liability from the
ordinary commercial bank, or, in some cases, from Government sources.
After the initial stage, when the institution becomes firmly
established, it attracts local deposits, and thus the savings of the
community, which are too often hoarded, are set free to fructify in the
community. The procedure by which the money borrowed is lent to the
members of the association is the essential feature of the scheme. The
member requiring the loan must state what he is going to do with the
money. He must satisfy the committee of the association, who know the
man and his business, that the proposed investment is one which will
enable him to repay both principal and interest. He must enter into a
bond with two sureties for the repayment of the loan, and needless to
say the characters of both the borrower and his sureties are very
carefully considered. The period for which the loan is granted is
arranged to meet the needs of the case, as determined by the committee
after a full discussion with the borrower. Once the loan has been made,
it becomes the concern of every member of the association to see that
it is applied to the 'approved purpose'--as it is technically called.
What is more important is that all the borrower's fellow-members become
interested in his business and anxious for its success.
The fact that nearly three hundred of these societies are at work in
Ireland, and that, although their transactions are on a very modest
scale, the system is steadily growing both in the numbers of its
adherents and in the business transacted is, I think, a remarkable
testimony to the value of the coöperative system. The details I have
given illustrate the important distinction between coöperation, which
enables the farmer to do his business in a way that suits him, and the
urban form of combination, which is unsuited to his needs. The ordinary
banks lend money to agriculturists for a term (generally ninety days)
which has been fixed to suit the needs of town business. Thus, a farmer
borrowing money to sow a crop, or to purchase young cattle, is obliged
to repay his loan, in the first instance, before the crop is harvested,
and in the second, before the cattle mature and are marketable. Far more
important, however, than these not inconsiderable economic advantages
are the social benefits which are derived by bringing people together to
achieve in a very definite and practical way the aim of all coöperative
effort--self-help by mutual help.
Our coöperative movement, taken as a whole, is to-day represented by
nearly one thousand farmers' organisations, with an aggregate membership
of some one hundred thousand persons, mostly heads of families. Its
business turnover last year was twelve and a half million dollars. In
estimating the significance of these figures, American readers must not
'think in continents,' and must give more weight to the moral than to
the material achievement. As I have explained, the coöperative system
requires for its success the exercise of higher moral qualities than
does the joint stock company. Once a coöperative society becomes a
soulless corporation, its days are numbered. It requires also the
diffusion of a good deal of economic thought among its members, and
this, also, is no small matter in the conditions. The most striking fact
about this work in Ireland is that while in its earlier years
organisation consisted mainly in expounding and commending to farmers
the coöperative principle, we now find that the principle is taken for
granted and the only question upon which advice is needed is how to
apply it. The progress of agricultural coöperation depends largely on
the character of the community; its commercial value may be measured by
the extent to which it develops in the community the mental and moral
qualities essential to success.[6]
In agricultural coöperation, Ireland can claim to have shown the way to
the United Kingdom. Ten years ago, after the Irish movement had been
launched, the English rural reformers started a movement on exactly the
same lines, even founding on the Irish model an English Agricultural
Organisation Society. An Irishman, who had studied coöperation at home,
was selected as its chief executive officer. Five years later, a
Scottish Agricultural Organisation Society took the field. Both in
England and in Scotland the chief difficulty to be overcome is the
intense individualism of the farmers, and perhaps some lack of altruism.
The large farmers did not feel the need of coöperation, and where the
natural leader of the rural community will not lead, the small
cultivator cannot follow. Whether the same difficulties have prevented
any considerable adoption of agricultural coöperation in the United
States, it is not necessary to inquire. It is certain that the
underlying principles approved by every progressive rural, community in
Europe have not so far exercised more than an occasional and fitful
influence upon the rural economy of the American Republic.
If I have given in these pages a true explanation of the deplorable
backwardness of American farmers in the matter of business combination
when compared with all other American workers, those who take part in
the movement which is to provide the remedy will have set themselves a
task as hopeful as it is interesting. Americans as a people are addicted
to associated action. I have seen the principle of coöperation developed
to the highest point in the ranching industry in the days of the
unfenced range. Our cattle used to roam at large, the only means of
identifying them being certain registered marks made by the
branding-iron and the knife. The individual owner would have had no more
property in his herd than he would have had in so many fishes in the
sea but for a very effective coöperative organisation. The Stock
Association, with its 'round-ups' and its occasional resort to the
Supreme Court of Judge Lynch, were an adequate substitute for the title
deeds to the lands, and for fences horse-high, bull-strong and
hog-tight. But then we were in the Arid Belt and the frontier-pioneer
stage; we had no politics and no politicians. I must return, however, to
the less exciting, but I suppose more important, life of the regular
farmer, and consider his efforts at organisation.
Instances can be multiplied where the coöperative system has been
adopted with immensely beneficial results; but in too many cases it has
been abandoned. On the other hand, Granges, Institutes, Clubs, Leagues,
Alliances and a multitude of miscellaneous farmers' associations have
been organised for social, religious, political and economic objects.
From my study of the work done by these bodies, the impression left is
that almost everything that can be done better by working together than
by working separately has been at some time the subject of organised
effort. But these manifestations of activity have been fitful and
sporadic. They were commonly marked by some or all of the same
defects--mutual distrust, divided counsels, ignorance of what others
were doing, want of continuity and impatience of results. Many
organisations, after winning some advantages,--over the railroads for
instance,--fell into abeyance or even out of existence; others lapsed
under the enervating influence of a little temporary prosperity, such as
a few years of better prices. The truth is, American farmers have had
the will to organise, but they have missed the way.[7]
The political influence of the farming community has for this reason
never been commensurate either with the numerical strength of its
members or the magnitude of their share in the nation's work. It is
true that the Federal Department of Agriculture, appropriations for
Agricultural Colleges, some railway legislation and other boons to
farmers, are to be attributed to the efforts of their organisations.
Yet, as compared with the influence exercised upon National affairs by
the farmers of, say, France and Denmark, the American farmer has but a
small influence upon legislation and administration affecting his
interests. What better proof of this could be given than the absence of
a Parcels Post in the United States? The whole farming community are
agreed as to the need for this boon to the dwellers of the open country,
and yet they have not succeeded in winning it against the opposition of
the Express Companies, because it is merely a farmers' and not a
townsmen's grievance. And not only political impotence, but political
inertia, result from the lack of organisation. The state of the country
roads--one of the greatest disabilities under which country life in the
United States still suffers--is as good an instance as I know. Congress
has shown itself well disposed towards the farmer, but not always so the
State governments, and the good intentions of Congress on the roads
question are largely nullified owing to the failure of one-third of the
States to establish highway commissions, or make other provision for
expending such amounts as might be voted to them by Congress. Here, as
in the cases of the transit and marketing problems, we see the need for
a strong, central, permanent organisation, fitted alike to direct local
or promote National action; an association capable of securing the
legislative protection of the farmer's interests, and an organisation
fitted to further the business side of his industry. In fact, this need
is urgent, and a coöperative movement of National dimensions should be
established to meet it. Had such a movement been started after the War,
or even twenty years later, the American farmer would be in a far
stronger position to-day, and much misdirected effort would have been
saved.
I have now tried to explain the weak spot in American rural economy. It
may be regarded from a more general point of view. If we were
considering the life of some commercial or industrial community and
trying to forecast its future development, one of the first things we
should note would be its general business methods. No manufacturing
concern with a defective office administration and incompetent
travellers could survive, even if it had an Archimedes or an Edison in
supreme control. I cannot see any reason why an agricultural community
should expect to prosper while the industry by which its members live
retains its present business organisation. I have urged that as things
are, the farming interest is at a fatal disadvantage in the purchase of
agricultural requirements, in the sale of agricultural produce, and in
obtaining proper credit facilities. Whatever the cause--and I have set
down those which I regard as the chief among them--American farmers have
still to learn that they are subject to a law of modern business which
governs all their country's industrial activities--the law that each
body of workers engaged in supplying the modern market must combine, or
be worsted at every turn in competition with those who do.
I do not much fear that this general principle, overlooked, perhaps,
because it was too obvious to be worth enforcing, will be disputed. I
hope I may gain acceptance for my further contention that the inability
of American farmers to sustain an effective business organisation has
been due simply to the fact that the not obvious distinction between the
capitalistic and the coöperative basis of combination suitable to town
and country respectively was missed. For it will then be clear why, in
the working out of Mr. Roosevelt's formula, better business must precede
and form the basis of better farming and better living. The conviction
that in this general procedure lies the one hope of solving the problem
under review accounts for the otherwise disproportionate space given to
that aspect of rural life which is of the least interest to the general
reader.
I shall now attempt to determine the principles which must be applied to
the solution of our problem. Those who have followed the arguments up to
this point will have a pretty clear idea of the general drift of my
conclusions. The substitution in rural economy of the coöperative for
the competitive principle, which I have so far advocated as a matter of
business prudence, will be seen to have a wider import. This course will
be shown to have an important bearing upon the application of the new
knowledge to the oldest industry and also upon the building of a new
rural civilisation we must provide for the dwellers of the open country
a larger share of the intellectual and social pleasures for the want of
which those most needed in the country are too often drawn to the
town.
FOOTNOTES:
[4] I should expect the negroes in the Southern States to be very good
subjects for agricultural organisation. I have discussed this question
with the staff of the Hampton Institute in Virginia--a fine body of men,
doing noble work. The Principal, the Rev. H. B. Frissell, D.D., whose
judgment in this matter is probably the weightiest in the United States,
and his leading assistants, both white and coloured, are of the same
opinion.
[5] Where capital is, in rare instances, subscribed by persons other
than farmers, it is usually invested less as a commercial speculation
than as an act of friendship on the part of the investor, who in no case
exercises more control than his one vote affords.
[6] Readers who are sufficiently interested in the rural life movement
in Ireland will find a full description of it in my book, "Ireland in
the New Century," John Murray, London, and E. P. Dutton, New York.
[7] Mr. John Lee Coulter contributed to the _Yale Review_ for November,
1909, an article on Organization among the farmers of the United States
which is a most valuable summary of the important facts.