BULLETIN OF THE UNIVERSITY OF TEXAS NO. 298 FOUR TIMES A MONTH GENERAL SERIES, NO. 33 OCTOBER 8, 1913. Studies in Agricultural Economics BY THE TEXAS APPLIED ECONOMICS CLUB EDITED BY LEWIS H. HANEY PROFESSOR OF ECONOMICS PUBLISHED BY THE UNIVERSITY OF TEXAS AUSTIN, TEXAS Entered as second-class mail matter at the postoffice at Austin, Texas BULLETIN OF THE UNIVERSITY OF TEXAS NO. 298 FOUR TIMES A MONTH GENERAL SERIES, f'IO . 33 OCTOBER 8, 1913. Studies in Agricultural Economics BY THE TEXAS APPLIED ECONOMICS CLUB EDITED BY LEWIS H. HANEY PROFESSOR OP ECONOMICS PUBLISHED BY THE UNIVERSITY OF TEXAS AUSTIN, TEXAS Entered as second-class mail matter at the postoffice at Austin, Texas TABLE OF CONTENTS. Prcfaee 3 The Crop lVEortgag{) Sy~tern in Texas, Sam L. ,Joekel. . . . . . . . 5 The Need and Possibilifr of Co<>pcratin' Rnral Credit in Texas. Lewis H. Haney . . . . . . . . . . . . . . . . . . . . . . . . . . . . J0 CoiiperatiYc Agrieultmal Crcrlit, \r. Trcnckmann . . . . . . . . . . JI) CooperatiYc Proclnction hy Farmer~. r. E. Lnma~tcr .... ~ has :financed him. The element of competition is not allowed to come in. 3. Still a third defect,-an ethical evil,-is one which leads to the deterioration of a class of tenant farmers through the crop mortgage system. They know that the crops they are tend­ing are not their own. Therefore, the individual is not likely to put forth a very strenuous effort. He becomes accustomed to living from season to season on the strength of the mortgage. T11e majority of the shiftless negro farmers in the South are kept in that condition because of the privileges allowed them by the crop mortgage. 4. And now for the last but foremost evil. We hear much in the present day of diversified farming, and of rotation of' crops for the improvement of the soil. Where these methods have been put into practice, good has inevitably resulted. There can be no denying of the f.act teat the future success of our farmers lies in improved methods and scientific farming. These­methods take in both the above mentioned devices. Now what is the effect of the crop-mortgage on these devices? In the first place, it puts a damper altogether on diversified faming. It has: already been shown that the merchant is unwilling to take a mortgage except on a cash crop. Diversified farming is practi­cally prohibited, inasmuch as the farmer can obtain a lien only on that crop which is prevalent in his community. In south Texas this is invariably cotton or corn. And thirdly, diversi­fied farming and rotation of crops are out of the question be­cause of the unwillingness of the merchant to take a lien on a. crop which be himself cannot handle, and it is rarely the case that a merchant who handles cotton will be in any other produce business to any great extent. Further than this, the soil is worn out by the same crop being raised year after year. From the merchant's point of view, the crop mortgage is un­desirable in one or two respects. The unreliability of a certain class of farmers has already been mentioned. Then, while the merchant usually secures himself fully, still he is liable to lose the whole loan. The undesirability of having to appear in court, and in many cases the absolute futility of so doing, con­stitute another ground for the merchant's opposition. Studies ·in Agricultural Economics Altogether the crop mortgage system affords an unstable, unde­sirable point of security. Itis more desirable from the standpoint of the merchant than of the farmer, because the merchant has the power to dictate the conditions of the loan to a great ex­tent. He will take pains not to cheat himself, and to guard against all mischance. The farmer, on the other hand, has to submit to the terms of the merchant if he wants the loan. To him it is altogether too much of a one-sided deal,-one which very soon goes off into oppression. 'l'o give rise to a fair crop mortgage system we would have to have ideal conditions. This would mean that we must have energetic, conscientious farmers; we must have fair minded, sympathetic merchants; we must have good land in all cases, and continually good prospects for crops. With these conditions we would have no need for a crop mortgage system whatever. But inasmuch as these conditions cnnnot prevail, we must attempt to remedy the situation through a better and different system of credit. THE NEED AND POSSIBILITY OF. CO-OPERATlVB RURAL CREDIT IN TEXAS. BY LEWIS H. HANEY. Cooperative credit in a nut shell. It is generally recognized th'at ''credit'' rests upon two bases: character and solvency. What a man or group of men can borrow depends both upon the integrity of the individual or individuals concerned and upon the ability to pay. The fundamental problem in cooperative credit, then, is to strengthen or increase these bases. A careful examination of the working of credit associations abroad shows that they operate to solve this problem in two general ways. In the first place, they seek to reduce risk to a mm1mum. In the second place, they endeavor to secure the cheapest possible management. It is most important to under­stand the means through which these economics are effected. (1) Reduction of risk. As implied in the bases of credit, risks may be reduced either by strengthening character or integrity or by increasing ability to pay. In the credit associations of Germany we find several means used to strengthen the character element. (1) As the writer of the follow!ing paper explains,1 good standing in the community is one test for membership; and to facilitate the application of this test the membership is restricted to a small district. Thus, the integrity of the CO'Operiaitive unit is raised above the average. (2) It is a fact that the capital is nearly all drawn from the co!:)perating membership composed of men who are mutually interested and willing to make sacrifices in hard times. Nearly 90 per cent. of the capital of the German personal credit unions consists of the deposits of farmer mem­bers and small local savings. In a word, the cooperative spirit makes the group more trustworthy. (3) A more tangible fact is the collective guarantee that the membership gives for the 1See below, p. 18. loans to each individual member. The credits of the individuals who compose the association are pooled, as it were, and, as this decreases the lender's clanger from bad debts, it increases the confidence in the group's will to pay. 'l'he foregoing point suggests the means taken to diminish risk by increasing ability to pay.-solvency; for the collective guar­antee just mentioned, by pooling the resources of all the mem­bers. nm kes possible the prompt and regular payment of larger sums. Collective action may mean both improved character and greater solwney. It must mean both if credit is to be most strengthened. ( 4) 1\Iore than this, there is a joint and unlimited liability" 011 the part of each member which directly increases the solvcrn:y or debt-paying resources of the group,-and in­directly makes for integrity by holding each responsible for the otheni. (;"5) Partly as a necessary precaution when liability is un­limited, and partly as a distinct means of insuring solvency, it is highly important that the purpose and application of all loans be earcfnlly scrutinized. As the Massachusetts bank commis­sioner pnts it, loans should he made " only for the purposes which promise to result in a saving or a profit to the borrower. Eac•h applicant for a loan must state the object for \Yhic:h he desires to horrow in order that the credit committee, ,,·hich passes on all loam;, may rigid! ~· pxclncle thriftless and improvi­dc11t borrowing." For all practical purposes, credit ma~· he defined as a promise to pay money in the future in return for goods received in the present. ::\ow, no measure is of more last­ing importance as a gna.ranty of ahility to pay in the future th~rn is one calenlatrcl to insnre honest and wise investment of loans in thf· pr0sent. (6) Finally, the coiiperative credit association is able to make its security readily negotiable. ;\s a result, a market is made for credit instruments which in this country our banks are loath to handle. The security (based on character and farm property) ]s brought together in such quantities and is so re­inforced by cooperation that it can he made the basis for con­ 'It would pPrhaps not be n0cess11.ry to have irnlimited liability. Per-hap~ douhh• lia.hility. or lia.hilit.'· in "'me proportion to borrowing, n1ight n.n~wer. venient and salable issues of bonds. It is a just general criti­cism of the banking system of the United States that land and the durable products of land are not made sufficiently available as a basis of credit. By pooling the credit of mortgagors, or bor­rowers, and issuing bonds of small denomination, on the col­lective security thus gained, this criticism may be removed. By cooperation, then, rural credit is made more mobile. This decrease2 the risk of the lender,-the buyer of the bonds. (2) Economy of management. It is a necessary part of real cooperation that the direction of the business concerned lies with the members of the asso­ciation. The body of the members bears the risks and makes the ultimate decisions as to what shall be done. This being the case, if the business is so simple that the average member can understand it thoroughly, there is an opportunity for the least expensive management possible. In cooperative credit associations the following means of cheap management are used : (1) The operation of the association is confined solely and exclusively to getting cheap credit for its members. It sticks to its own business. And by keeping free from commercial transactions and away from the lure of profits, the business is simplified and management made easy. (2) The local units are small and are very simply organ­ized. This makes for facility of management. (3) There is only a very small permanent capital, and the dividends paid are almost insignificant in amount. It follows that the administrative machinery for handling the funds of the association is relatively small and the problems and dangers attendant upon dividend payment are not found. As already observed, the business is not run to pay dividends, but to get cheap credit. ( 4) A central organization gives to the local association such economies of large-scale operation as are desirable. This cen­tral organization, as explained in the next paper, affords a gen­eral supervision of the scattered operations of the small asso­ciations, and it acts as a clearing-house for loans and investments. Through it the surplus funds of one local association can be Stitdies in Agricultural Economics readily placed at the disposal of another which needs to make loans. The foregoing points should make it clear that ordinary com­mercial banks can never quite fill the place occupied by local cooperative credit associations. Banks are hardly local enough; they do not come close enough to the indivi.dual farmers. Above all, they cannot take the place, where it exists, of the cooperative spirit of self-help with its resulting reduction of risks and economy in operation. Di/f'erent kinds of credit association neaded. One cannot study very long on the problem of rural credit without becoming convinced that two kinds of loans are needed by farmers, and that two kinds of credit association are re­qnired to supply these loans. In business, everywhere. there are the long-time obligations or "bonds" ("funded debt") and short-time paper (current liabilities, short-term notes). So it is with the farming business. In Texas, the farmer needs long­time credit for constructing irrigation and drlil.inage sy.stems, roavhat as business houses are rated by Bradstrert or Dunn. But after all has been said and done, there remains a place for cooperation ; and the sooner the farmers of Texas can get together in local groups and pull together for the mutual good, the better for them as users of capital. CO-OPERATIVE AGRICULTURAL CREDIT. BY W. TRENCKMANN. The t0:pic of cooperative agricultural credit divides itself nat­urally into two fields, "land credit and persona·i oredit. Under the latter head, it is the pnr.pose of this article to consider, chiefly the so-called ''Raif£eisen'' credit unions ; and, under the head of the former, the "Landschaften'',-both of which insti­tutions are today most highly developed in Germany. Both will be considered with a view to their adaptation to T"e:x:as. Enough information has come from suoh sources as the Ameri­can Bankers' Association, the Southern Commercial Congress, the Texas Farm Life Commission, State and national govern­ments and the press, to make unnecessary statistics-establishing the efficiency of the first named institutions, in all countries where they have been applied. A Raiffeisen credit union may be described as au association of farmers for the purpoS6 of extending cheap credit to its members, the association operating in and recruiting its mem­bers from a very restricted district. The members are, as a rule, liable without limit for the debts of the association. The Landschaften ma.y be described as associations of landed proli>rietors, operating usually throughout a provinee, (about as large in area as a Congressional District with a population of from 100,000 to 1,000.,000), and lending money to their mem­bers upon a surrender by them of mortgages on land. The loans are made by means of mortgage bonds, guaranteed by the asso­ciations and payable to bearer, which are negotiated upon the open market, sometimes by the borrower. THE PRINCIPAL FEATURES OF THE RAIFFEISEN CREDIT UNIONS. 1. The district of operation. It was, Raiffeisen 's idea that the operations of the individual credit union should be confined to the immediate vicinity,­taking in about the trade territory of a village ("Kirchspiel"). Studies in AgricuUural Econornics The reason for this regulation is that it lessens the risk both of creditors of the unions and of the members who are individually liable for the debts of the union. It permits the members to know one another and to be acquainted with the trustworthiness of the ones who borrow. They can watch the application of the loan. Again, the restricted area makes possible a gratuitous business management. To some extent, too, it acts as a deterrent upon speculation. The followers of the purely Raiffeisen idea regarded it as a protection against defalcation by their officers, because of the ease of detection. The restricted district is 11. feature of the Raifffeisen credit unions in all countries in which they have been adopted, and is generally endorsed . .2. Organization and managernent in the Individual Credit Unions. Raiffeisen 's plan of organization was as follows: 1. A board of directors ( Vorstamd) of five members, headed by a chairman (Vorsteher), which determines as to the granting of loans and matters connected therewith; 2. A secretary-treasurer (Reckner) who executes the orders of the board of directors and keeps the books; 3. A supervisory board (Verwaltungsrat) of nine mem· bers whic'h supervises the work of the board and the treasurer; 4. A general assembly of all the members, which decides all questions not delegated to the above specified organs. This organization in its completeness may have experienced some modifications, but it is safe to say that in the main it still exists generally and that whatever modifications have been made are based upon local conditions. The secretary-treasurer is gen­erally the only officer who receives remuneration for services. Expenses of management are as a general rule remarkably small; but there is a wide variati.on, the minimum being .04 per cent. of the total business done, the maximum .53 per cent. of the total business. Commenting on this feature, Dr. Stoeger says that in some communities it has been found impossible to get a management without pay, and in such cases it would be better not to organize, for if the men at the head have no more patriotism they could hardly be expected to instil a cooperative spirit into their fellow-members. He says, furthermore, that many people would rather serve out of community spirit than for pay. Raiffeisen himself seems to have regarded gratuitous management as a proof against defalcation, in that it would put the men on their honor. These views are entitled to credit, but we cannot escape the fact that neither gratuitous management nor the restricted district have been altogether successful in preventing defalcation. The opinion of Dr. Criiger, a later authority, seems to be more acceptable in this respect. He says that gratuitous management is only a natural consequence of the restricted district and the small amount of business of each union. Past experiences in Texas reveal a great deal of cor­ruption in most cases where services are either underpaid or not paid at all and certainly warrant a reasonable remuneration for services. The most important qualification of the secretary­treasurer seem to be honesty and adeptness at figures. 8. MemlJ.ership. The chief qualifications of membership seem to be: residence in the district (precluding a membership in two credit unions by the same man), honesty, thrift, and a disposition to save. Membership is not usualy limited in number. In Germany, it ranges all the way from 7 to 1,400, 75 to 90 being the more usual figure. In Texas, it should, as a rule, run still lower, because our sparse population precludes sufficient acquaintance among a larger number. Raiffeisen aimed to extend membership to all in the immediate neighborhood not disqualified by their char­acter. The words of DeFourmantelle, a French authority on this subject, are valuable in so far as consistent with the fore­going. They are : ''Agricultural credit banks should carefully recruit their members. Do not admit too many members. Begin with 15 or 20 convinced founders of good standing in the neigh­borhood.'' That character, rather than property should be quali­fication, even in Texas, is well borne out by a statement of the president of one of the national banks in Austin to the effect that his bank would lend to a thrifty tenant much rather than to a shiftless farmer owning a valuable farm, and that honesty of the borrower is a large factor in the extension of their loans. 4. Regulation of loans to members. As to the size of the loan, we are told by Dr. Stoeger: ''The Studies in Agricultural Econvmics maximum loaned is regulated according to the credit ("Kreditu.rUrdigkeit") of the borrower and the means of the association, the question being: What sum can he, according to his personal circumstances and the purpose for which he intends to use the money, pay interest on and liquidate~" This seems to be the basis of regulation in credit unions today and is cer· tainly sound. The rate of interest charged the debtor runs from 3 to 5 per cent. It should be as low as is consistent with safe business management, remunerating the union for costs of administra­tion and the interest it pays for the capital used in making the loan. The first aim should be to furnish chea:p credit to mem­bers and not to make profits for shareholders. 'l'he time of the loans varies from 6 months to 3 or sometimes -though rarely-as much as 10 years. The purpose to which the loan is to be put and the time in which it promises returns seem to be the chief consideration in fixing the term. Raiffeisen contended that short time loans were not adapted to the needs of the farmer and recommended loans from two to ten years. This idea was severely criticized as a violation of the banking principle which demands investment in readily realizable securi­ties. Raiffeisen made the mistake of attempting to meet the criticism by making the loans subject to call on four weeks' notice. Dr. Stoeger rightly says that very few farmers are in a position at any time to liquidate on four weeks' notice and points out that in actual practice it is regarded as a pure formality. He suggests, however, that the provision may be of advantage in that the union will be in a better position to protect itself in case of gross mis-application of the loan. It would seem the better plan to make the loan subject to instant recall in such cases. In Germany, in 1909, 28.3 per cent. of the loans were subject to call, while only 15 per cent. of the working capital was subject to call. This appears to be a satisfactory solution, at once meet­ing the really existing demand of the farmer for long time credit, and adjusting a portion of the loans so as to be able to meet at­tacks on the working capital. The chief security for these loans lies (1) in the restricted dis­trict, (2) the unlimited liability, (3) the judgment and care exercised by the management in making the loan. As a rule, personal credit with one or more endorsements is preferred to mortgage. Raiffeisen himself opposed. formal evidences of debt, and to some extent, even today, loans are made on the bor­rower's mere note or verbal promise. To a greater extent, loans are based on pledges and like se­·Curities. Local conditions and particular circumstances should be considered in regulating the evidence of the debt, demand­ing pledges, etc. The first three securities mentiond, should always be present. The objection to mortgages seems to be that they are too com­plicated and involve too many questions of law for the simple business machinery of these unions. This objection would hold good to a much greater extent in 'l'exas, where exemption stat­utes make a great majority of the population execution proof. 5. Unlimited liability of the members. Unlimited liability is the general rule among the credit unions of Europe, being found in 92 per cent. of those in Germany. Liabilities thus accepted per member in that country vary from $175 to $750. A fraction of the remaining unions have liability to make supplementary payments apportioned among the mem­bers. The authorities regard unlimited liability as the soundest basis for small cultivators. It fosters care in accepting new members, in making the loans, and in watching the application of the loans, among the members as a whole as well as the man­agement. It inspires among third parties a confidence in the paper of the unions. It is therefore a material element in their success. Mr. David Lubin suggests that limited liability is necessary where there is wide variation in the wealth of the members. Such variation is productive of discord, however, and it is hardly desirable to have a union composed of such elements. 6. Capital and its co11stititents. a. Deposits. In Germany, in 1909, 90 per cent. of the work­ing capital of these unions was furnished by members, 75 per cent of it in time deposits and 10 per cent in deposits on current account. The advantages of this are: 1. Members, being liable for the debts of the union, are not likely to withdraw their de­ Shiclies in Auric11ll 11 I'(// /;'n1110 111 il's :21 posits in time of stl'ingl'Tl('~· -'> Tt c·rcates a. healthy spirit of indepm1d<:ncc aud of sc~lf-help. ;l. Pride in an i11stitntion of their own making-. the distrihntion of the benefits lol·ally, and intr 1"<•st in th<> safrt,v of tlw institHtion. hPlp to draw savings of nw1nhcrs to its coffers 111l<1 c·ountl'ract a gTcecly demand for a hig·h I'll tc• of interest. b. E'llfrn11 cc /1·es. HniffPiscn opposed an c11tnrnee fee, re­gan1ing it as a c1isco11ragrnw11t, and in urnn,v casrs as a bar, to 11 e\\" rncrnbe rs. ;J nst \\'hat proportion of the c11 pita l of these 11nio11s c·orncs from this so.urce, the \\'l'itcr has not been able to ascertain. But it is cxc·ecclingl,v small and in a gTcat many <·asc•s 1101H•xistc·nt. 1 ·11<10\Jhtedly, r11trm1ce foes shoHld never hc pcn11i1tc>d to dcbm· an honest. thrifty applicant from rnem­br rship, as that. would gn•s. slrnrc•s sPldom n11i over $25. "\s a g·<'ll <'l'Hl r11l<', in (:rr111a11y. tlw 1111ions \\·ith nnlirnited liahility rrstriet c•a<'h nwrnh<·1· to 01w sharP In limited liability u11io11s. hO\\"<'Yl'I', \'Heh llH'llllH'I' rna,v btkP 11s rnany sharc>.s as he \\·islws. The p111·c>l,v Ha iffris<'n \Jn ions are opposPd to the dis­trilrnt ion of profits. evading· the law J't'rest.) :3. The 11nlirnited liability of the members. (In 1\•x11s. 0111· exemption statute makes this a very uncertain safe­guard at la\\·, but the moral influence is by no means to be llP!..dPr·ted.) .f. The intervention of district banks in an or­ganized system. •(To be discussed later.) A valuable sugges­tion at this point is to be found in the fact that many Raiffeisen hanks avoid larg:e loans from an.\· one source for the reason that tlw s11ddPn withdrav:al of a large amount might embanass the nnron. f. Uovc1·111J1c1tl subsidies. Uovprnment subsidies are not fa­vored b.v tlw m1tho1·ities 011 this subject. They are reg:arded as paternalisti(·, and as stifling ind(•rwnrking capital of the 11niorn; nnder government sponsorship <·onsists of non-i11ter<:'st-lwaring loans from the Bank ·of Franc<'. It is said to have created a harmful spirit of de­penclcncc. the 1111ions freq11cntly omitting to make paymentR on th<' pri1wip1il of these loans as they fell due. The policy of the ,\ 11strim1 .:!'0\'(•1·11111(·n1. that of making-a contrib11tion to the initial (·apital strnhrrN. Shares are to a large exfrnt owned hy individual 1111ions, these heing as a rnle required to take shares in onlrr to he entitlrd to receive the benefits of tlw crntl'al lmnkN. am1 to a lrss Pxtpnt by individ11al8. Liability is limit<~2.6 pet· cent. in 1910. (Econornists do not reg·anl thi,; as necessarily a bad siµ:n , since iu a .:!.Teat many cas<'s it reµ:isters a change from the position of Jahorl'r to that of tenant.) The information at hand is too i11<1dinik to fmnish a basis for conclnsions, but it may be said with a r<'aso1rnhle degree of certainty that there arc numbers of <'.0111m11n itit~s in Texas today which arc in actual need of the assistaiH·<~ of cooperative unions, and numbers of others >vhich wol!ld secure immense savings thro11gh them. In conclusion, the leading features which should ch<'lraeterize personal credit unions in Texas may he stakd as follows: 1. TlH'Y shonld have hut 011e 1111rposr, that of get.ting· <'lwap cn•dit fol' their members. All other eonsid(•rations sho11lLl he sui> borrowers are amortization loans running-frequently for more than fift~· :vcars, though the dehtoi­may repay the \rhole at any time \rithin the statutory period of notice. The ratP of interest paid on them covers the rate paid hy tlw association on the honels (from '.) to 4 1-2 per cent), plus 1-2 to 3-4 per <'<'lit for amortization of the debt. and, in a great many cases. also 1-10 of 1 per cent. for expenses of the association. the policy being to make the borrowers pay all ex­penses. In some cases. these amortization payments amount merely to a regnlarly incoming gnaranty fnnd, sinee the bor­rower, on having discharged as mnch as 5 or lO per cent of the debt may draw ont the amonnt discharged or borrow its equiv­alent. In other cases, he may discontinue amortization pay­ ments u1ion having discharged 10 per cent. of the debt. The loans may be recalled by the Landschaften only on definite grounds (waste, etc.). Loans are now usually granted to two­thirds of the value of the property mortgaged. 3. Bonds. Strict account is kept of both bonds and mort­gages. The statute prescribes that the mortgages shall be a security for the bonds. The funds of the association are addi­tional security. In many cases, each bond is secured by all the property mortgaged, in the older Landschaften also by the property of all members. The amortization fund is another security. It is said that the public, however, depends chiefly on the integrity of valuations and loans. Corresponding to the right of the · debtor to repay his loan at any time, is the right of the association to recall the bond at any time, and the two are frequently resorted to for the pur­pose of converting a higher into a lower interest. It is pointed out, however, that a too frequent resort to this method has sometimes hurt the rating of the bonds. The bonds stand high in the estimation of the public and the statute recognizes them as a suitable medium for the investment of trust funds. In 1910 the outstanding bonds amounted to $700,000,000. Some seven banks in central cities of the country, largely endowed by these associations, do their banking business, which is very considerable. A Central Landschaft, formed by nine of these associations, for the purpose of gaining a wider mar­ket for bonds, proved comparatively unsuccessful. The limi­tations on the activity of the individual association involved in it proved an overwhelming disadantage. Only a few other countries, notably Austria-Hungary, seem to have copied the Landschaften in all their essential features. The Credit Foncier of France has been mentioned, and is in many respects a direct copy of them. It is to a large extent subject to governmental regulation. It lends to one-half of the value of the land. The essential differences between the Landschaften and the Credit Foncier are that the Credit Fon­cier has a capital stock, pays dividends and conducts its busi­ness to a large extent on a profit-making basis. One objection­able feature, moreover, is that there is a lottery connected with Sttid,ies in A.y1'ic11ltural Ero110111ics it. and this feature has contributed ver~· larp:cl~' to its popu­la1·ity. A.pplication to Te:ras, Tlw greatest obstacle to the introtl1wtion of i11stit11tions like the r,andschafkn into Texas, in s11eh a \\' ~tak. S('t'lllS to ht• tht> IHm1pstrad exemption. The institutio11s coidd assist ,,. Vidor Bol'osini on "\ g-r·ic11lt11ral Credit. !J. :\I. 'I'. l l('t'l'i(·k on ,\grieultnrnl <>edit. 10. HcpOl't of \\'isc·onsin ~tate Boa rel of Puhl ic· ~\ ffa irs. 11. Heport of the ~e«retc;r~· of the Hochcim. De\Vitt County, CoopC'ratiw Storm. Fire', alld Li ghtning· lnsnranee ~\ssocia­tions, 1!.l12. 12. Dallas .:\e\\'s Heports, :\oy. 10th, XoY. 6th, Sr~pt. 22d, 0l'L :27th. 1:3. Edwin Clrnrnherlain on "\ g'l'ic11lt11l'al Credit in Emope. 14. ''The Land ::\fortga.!.!e ~\sso<'iations.' ' Dr..J. H ennes in Conrad's Hanchrnertcrlm<'h. 1900. Li. Statistical 11 istor:· of the Cenmm Banking-System, 1888.1!)07. Hobert J<'rallZ in " ])er Deutsche Oekonornist." 16. The Organization of Credit and Banking "\rntngcments irr ( ;<'nn;rn:·. Oherfirn1rn~1·at Dr. \Valdemar of the Drcsdener Bank. 17. The Pr<'11ssisc·l1!' Cent1·al ( :(•nossC'11sdrnftsk;1ssr. C. Hrile­g-e11s1:adt. Con l'acl 's I I among individuals. It is the old and familiar question of team work: one's strength counts for . more when one acts in accord with his fellows. Cities have succeeded where rural districts have failed, just by observing the principle of cooperation. It behooves us to find· how the virtues of this princip1e may be determined and ap­plied. The experience of Denmark almost justifies the strongest en­thusiasm for cooperative production. This little nation, only a fourth as big as Wisconsin, or a twentieth as big as Texas, was the most impoverished nation of Europe fifty years ago; now it is among the wealthiest of them all in proportion to its population. Eighty-nine per cent of the families ow:r;t their farms and houses. In 1908, the Danes had $208,000,000 in savings banks, or over $100 apiece. The people are thrifty, in­ telligent, and educated. These conditions are necessary to coop­eration on a large scale. It was through cooperation that Den­mark has achieved her enviable position. Land can be bought and paid for in annual installments amounting to 4 per cent of the principal, the debt running for fifty years. Or a man who can pay one-tenth cash can borrow the other nine-tenths by giving a lien on the property purchased. Texas farmers pay about 10 per cent, but the Danes can borrw money at 4 per cent. With the new movement for cooperative credit comes the hope for cheap money in Texas, and then there will also be the opportunity for cooperative production. Again, partly as a cause and partly as a result of cooperation, the average man in Denmark is far better educated than the people in Texas. What we need are agricultural, ·industrial, and technical education. Danish farmers read agricultural lit­erature; too frequently Texas farmers do not. When the people are properly awakened to the· importance of education, they will then also be able to bring about the other conditions necessary to cooperation. The first essential in a cooperative group is the right kind of people. Too much of our present population is floating, restless, and untrustworthy. Men must trust each other and live long enough in one place to find each other to be wholly reliable. While the Danes are probably more thrifty than we, we have the advantage of possessing more and better land. We also have a larger per capita wealth. On the other hand, they have the advantage of an early start. Also their standards of living are lower than ours. Another condition for successful cooperation is an apprecia­tion of the need for it and faith in its efficacy; and to this end capable leadership is essential. Once the people in a single county take hold of the idea, like those in Jackson County,. Minnesota, are at present doing, its success is assured. We need only a few leaders to put it up to the people in a clear and concise manner, and the latter will go into it at once. This statement can be verified in the county just referred to. Lead­ers, however, are very necessary. Somebody must go to the farmers and organize them. In the matter of organization lies an important factor, and Studies in Agricultural Economics on this point the experience of others must be known in order to avoid a repetition of their failures. There will be practically the same rules for each of the four kinds of societies which are to be described here, and for that reason the illustration of a cooperative dairy will be sufficient for all. . Cooperative Dairies. There are three main points for consideration: (1) There must be a fixed rate of interest on capital, and, after payment to a reserve fund has been deducted, the · re­mainder of profits should go to the members, in proportion to the raw materials supplied by thern. The employees sometimes share in the profits also on the basis of their wages. (2) The capital may be furnished by any persons who de­sire to furnish it, though preferably farmers should hold all the shares. The shares should be small-about $5 each-with, say $1.25 paid in cash, and the remainder subject to call at the discretion of the committee. Each member then should be re­quired to subscribe for loan guarantee shares in order that the company may borrow money.1 Let $1.25 be paid in cash, as above, and the remainder at the discretion of the committee. This fund is in addition to the original cost of the $5 share. The best plan is to have unlimited liability, that is, the bank making the loan can recover from any one individual in case the cooperative group fails. (3) The most important phase of the business organization is the control of the supply of raw material. Farmerv; rnust agree, for example, to furnish all or a definite part of thefr rnilk, except that needed for home uses; and unless this rule is en­forced, the society will surely fail. Farmers may be offered a higher price for their milk for the purpose of wrecking the society, such societies always having their bitter enemies. Ac­cordingly, a fine may be imposed upon the number of gallons withheld. (4) It should be further remarked that no man is entitled to more than one vote, and that each member should be re­quired to hold shares. The cost of an average sized dairy, according to Fay, varies 'See Cooperation at Home and Abroad, by C. R. Fay. from $3,500 to $7,500. The minimum number of cows required is about 400, and a single dairy can cover a territory with a radius of about five miles. Clearly, the farmers must live near enough to deliver the milk fresh each morning. The smaller the farms and the more intensive the cultivation, the more profitable will be cooperative dairying. In general, in any radius of five miles, 400 to 500 cows should be found. Such is not the case in Texas, for cattle in many parts are becoming scarce. HO\Yever, improved systems of agriculture will increase the number of farms, and, consequently, the number of cattle . ..An auxiliary, or small sized, dairy can be installed where there are fe"·er than 40D cows. The sum of $2,500 is sufficient to equip one. The large dairies are more profitable, however, and should have over· 1,000 cows if possible. This does not mean that profits depend wholly upon the size of the plant: the fact is that good managemnt is. the most im­portant factor. An honest man who will not "sell out" is needed at the head of the concern-a man who is industrious and efficient. There are books to keep, accounts to look after, and milk to inspect. The manager must also know that each cow is a profit to the owner, except in those cases where the magnitude of the business justifies a separate office of cow­inspector. The daily routine of work can soon be learned. The milk is brought to the dairy early each morning, placed in heat­ing vats and separated, the cream being churned into butter. and the skim-milk (three-fourths of the whole) returned to the farmer to be used as additional cattle feed. The buttermilk is likewise returned to him after the butter has been extracted. The work is soon over for the day and each farmer may be back in his field. Cooperative dairying is complete only when there is a system of cooperative marketing. This plan is worked out in a way so similar to that described in an accompanying article on Mar­ keting that there is no need to go into details here. Statistics show that the price of butter advances wherever cooperation is effective.2 In France it is observed that the annual increase per cow due to cooperation amounted to 57 francs, or about 0See Coop. Bui. on Agriculture, \Vis. State Board of Public Affairs. $10.75, which is something like a 20 per cent increase, esti­mating butter at 25 cents per pound, and the product per cow at 224 pounds. Other advantages Qf the cooperative dairy are the superior organization and superior marketing power. There is subdi­vision of labor, which is economical, and also a superior relation between the various contributing factors. Each farmer gets high class service and bears only a small part of the expense. Then, too, the use of a good dairy equipment provides a better quality of output and a better use of by-products. The Irish farmers grumbled when their buttermilk became less valuable through more thorough churning, not realizing that the loss was more than compensated for by an increased amount of butter. 'rhe machine usually gets a fourth more butter out of the milk than could be got by a hand churn. Factory butter is superior in quality to -farm-made butter. In 1909, while farm-made butter was seiling in "Wisconsin at 22 cents a pound, factory-made butter w:as going at 28 cents. Now, only 8 .out of 113 pounds of butter made in that State are made on farms. The census report for 1909 showed that the average annual income from the dairy cows of Wisconsin, where cooperative daries-abound, was over $42 per cow, in spite of the fact that there are yet thousands of cows there not ''earning their salt,'' a fact due to careless breeding. What has been said of the organization and management of dairies, or creameries, may practically be said also about cheese factories. Up to 1911 there were none in Texas, and there are nowhere as many cheese factories as dairies. There is more expense in a cheese factory, and, moreover, there is less con­sumption of cheese than of butter. In 1909 Wisconsin reported 1928 cheese factories which paid their owners over $50 per cow net. There were others that failed through having too few cows, through mismanagement, or through improper organiza­tion, these being the three usual causes for all failures in cooperative enterprises. At least 200 cows must be available, the. average for Wisconsin being 228. On an average, there are twenty-one farmers per factory. It is far better to have at least twice this great a force-say, 400 to 500 cows. It is eGonoJiiy to run a combination cheese factory and dairy, for in this way there can be a better utilization of labor. On the whole, farmers do not cooperate in cheese-making so frequently as they do in dairying·. Why this is so the writer is unable to explain. Cooperative. Breeding and Cou:-Test·ing. Before either dairying or cow-testing associations succeed as they should, farmers must pay more attention to the im­proving of their cows. For this purpose there should be estab­lished cooperative cow-breeding associations, beginning on a small scale. A certain Texas dairyman, who is skeptical as to the merits of cooperative dairying, is a firm believer in the value of cooperative cattle-breeding. There may not be "more in breed than in pasture",-yet no one can question the supe­riority of some breeds over others. In each vicinity there should be a thoroughbred bulL bought by the association and kept as near the center of the group as possible. Each farmer should get a few first class cows at first and improve his herd as the business grows. That a cow has a certain pedigree, however, no longer guar­antees her milking qualities. Each cow must be proved indi­vidually. By agreement, the farmers can employ an expert to test their cows once or twice a month. He will go from place to place, charging about a dollar a head per year for testing, if enough farmers subscribe. There should be at least 400 cows for this plan to work. The farmers themselves must cooperate. No cow can be fairly tested in a month, or even six months. The owner must keep a year's record of her consumption and production, if he is to determine anything definitely. All de­ficient cows are soon recognized and can then be eliminated or. sold for beef. After one year of testing, according to C. R. Fay, the average for the cows in Denmark increased from 112 to 224 pounds of butter a year. It is estimated that a cow must give at least 150 pounds of butter fat per year to pay for her keep. It costs very little more to keep a cow that gives 300 pounds per year. There are eleven associations in Wisconsin, with 287 members owning 4,465 CO\\"S. The returns for each dollar spent for feed is $2.14, or an annual profit of 114 per cent. One Studies in Agricultural Economics particular association claims an average of 403 pounds of butter fat from each cow after testing three years. Cooperative Bacon Curing. Bacon curing societies are run on the cooperative plan in Denmark, and with· unusual success. The plan of organization is similar to that of dairies. Profits are distributed according to the amount of meat brought in. In 1910, the societies, com­prising 93,000 farmers, shipped over $1,500,000 worth of hogs, and received the best market prices for them. Through cooperative marketing there would be good money in raising hogs in Texas, where stock is becoming scarce and where we have so much land adapted to hog ranches. The equipment for a bacon-curing factory would be very small. Each member agrees to furnish it with either his entire output, de­livered, or a stated minimum amount per year. The factory cures and prepares the meat for shipping and turns it over to a Sales Department.3 Cooperative Grain Elevators. Lastly, farmers can build cooperative grain elevators. The plan will, in general, be similar to that of the dairy, the mem­bers subscribe a certain part of their annual product and receive, dividends in proportion to the raw material furnished. There must be an expert grader employed to determine the value of each farmer's grain, and his advice can also be sought in im­proving grades of grain. The best illustration of a cooperative grain elevator to be found is that of Lakefield, Minn., a town of 1,200 people. (See R. of R. for April, 1913.) Nearly every farmer in the county is a cooperator in some way. The elevator company earned a 12 per cent dividend the first year, 5 per cent the next, and 8 per cent ever since. The capital grew from $7,900 ot $10,900, and a second elevator was built by the company. The surplus in 1908 was $7,000. The capacity is 520,000 bushels per annum, and the grain sells for 3 cents more per bushel than is got any­where else. The company also buys and sells other products for its members at wholesale. Individual shares are limited. Aside from financial benefits are those of a social character. •see. Rev. of Rev., April, 1913. The farmers get acquainted and forget many of their church and political differences. After years of unsatisfactory dealing with the line elevator companies, the farmers of Iowa rebelled and organized coopera­tive elevator companies. They had a bitter fight and found difficulties in securing sites for their elevators and the railroad facilities that the combines enjoyed. But they were so suc­cessful that Iowa is covered with farmers' elevators. In Feb­ruary, 1910, the first annual meeting of the Farmer's Grain Dealers' Association was held. There were 167 companies rep­resented. A constitutional amendment is now before the people of Texas which provides for the issuance of bonds by counties for the construction of warehouses and elevators.5 To sum up: (1) Cooperative production is profitable, and it can be adopted in Texas; experience elsewhere shows that the difficulties are not insurmountable. (2) These difficulties are educational, legislative, and personal-those of an individual character. The citizens of Texas need agricultural and indus­trial training. This we are now endeavoring to give them. We also need laws in regard to agriculture, credit facilities, and the adoption of the Warehouse Bill now pending. Finally, our citizenship is becoming more stable and tending towards the cooperative spirit; W'e are much more ready now for cooperation, it is believed, than we formerly were. But the people must first be convinced that cooperation is profitable, and even indispen­sable, before they will be ready to undertake it. ''See below, p. 55. CO-OPERATIVE MARKETING OF FRUIT, TRUCK, AND COTTON IN TEXAS. BY GEORGE WYTHE. Although cooperation is spreading in every field of industry, it is receiving greatest attention as applied to agricultural pur­suits. Probably none are in greater need of its beneficial effects than the farmers, who have always furnished the extreme type of independent, uncombined workers.1 Farmers are made in­dividualistic by natural circumstances, which have made impos­sible the easy combinations of the manufacturing and trading world. In order to put themselves on an equal footing with other industries it is necessary for them at least to cooperate to some degree. The most important turn that cooperation has taken in the United States is its application to marketing of the products of the soil. The securing of a market is the all-important ques­tion of the grower, for without a market large production represents only a loss to the extent of the cost. The Federal Government, through its agricultural bureaus, experimental farms, and demonstrators, has done much to teach the farmers better methods of production. And the Agricultural and Me­chanical Colleges of the country have performed a valuable service in teaching scientific farming and showing ''how to grow two blades of grass where only one grew before.'' But, as Peter Radford, President of the Farmers' Union, says: ''In­creasing production will never solve our agricultural problems. The problem in which the counsel and cooperation of the busi­ness interests is most needed is in selling our products.'' In fact, the large crops have often glutted the market and have harmed, rather than helped. It is important, of course, to teach the farmers how their efforts can bring the greatest yield, but just now it is more important that some plan be devised whereby the producers will be better paid for his. efforts. Production without reasonable profits is poor encouragement in any calling. It is no wonder, then, that the most successful form of coopera­ 'G. Harold Powell, 1910 Yearbook of the Dept. of Agriculture. tion has been in marketing, and that this phase of the question is receiving most attention today. Although money returns are always the primary object of cooperation among farmers, other beneficial results always ac­crue when they get together. In the first place, by this appli­cation of business methods, farming is placed on a level with other industries and is made more attractive. It will also culti­vate the farmer's lrn.owledge of business and make him a more prominent figure in the community. In the second place, the social life of the farming class will be materially bettered. Their association in the cooperative organization will be bene­ficial and profitable, and besides, will make country life more pleasant and tend to check the steadily growing movement from the farm to the city. Lastly, cooperative associations organized for marketing. always have their educational side. At the meetings of the association, better methods of production and a finer quality of the product, as well as better prices, are discussed. Considering all these advantages, it may be asked why coop­eration is not the rule instead of the exception. Two reasons may be offered: (1) The farmers are not live to its benefits. They do not recognize its advantages, and it is difficult to over­come the individualistic tendencies of the farmer. (2) The farmers are suspicious and afraid that they will be deceived. It has been the experience of almost every community in the State, no doubt, that at some time an attempt was made to organize an association for the marketing of truck, but that it soon broke up because some of the members grew suspicious that someone else was getting too much benefit. It has been thought that the promoter was active only because he expected to be benefited in some way other than mutually, such as re­ceiving the manager's profits. (3) Of course there is the third reason that the associations are improperly organized and badly conducted, but this will be discussed later. ~-\.t the present time all of these objections are passing away. The adrnntages of cooperation are becoming better kno"m, and the farmers show a tendency to unite and join with their neigh­bors in a business proposition. With the better organization and improved methods, also, former suspicions are vanishing. Studies in Agric1lltttral Economics Fr1lit and Tr1lck Growers' Associations. Cooperative marketing finds its widest application in the sell­ing of fruit and truck. Organizations in this branch of indus­try are widely scattered throughout the Union. California, however, ranks first among the States. Annually the orange and lemon crop of California amounts to some 50,000 carloads, or 20,000,000 boxes. This fruit is produced by from 10,000 or 12,000 growers. Four-fifths of these growers are members of cooperative selling organizations, and 60 per cent of these are federated in the California Fruit Growers' Exchange. This association acts as a clearing house for the crops of the 6,500 affiliated growers, providing the facilities for distribution and marketing the fruit. "There are three foundation stones upon which the federa­tion is based," says Frederic J. Haskin.* "First of these is the local association, which corresponds to the county govern­ment in our political system. Several of these local associations form a district association, which corresponds to a State in our system of government. These district associations, in turn, form the Exchange, which corresponds to the Federal Government. Each district association has a right to control its own affairs so long as they do not conflict with the constitution and by-laws of the Exchange, and each local association can do as it pleases, within the bounds of the constitution and laws of the Exchange and of the district association of which it is a member." The smallest unit of the California Fruit Growers' Exchange is the local association. There are 115 of these, each of which has from 40 to 200 members. Each local association maintains its packing house, where the fruit is graded packed, cooled, and pre­pared for shipment. Some of the associations also pick the fruit and prune and fumigate the trees of its members. All this work is done under the direction of the local manager, appointed by the directors, who are in turn elected by the members. There are seventeen district exchanges whose function is to take charge of the fruit turned over oy the local associations and watch after the shipping. The central exchange has a capital of $17,000 and is managed *Houston Post, F~li. 27, 1913. by seventeen directors, acting through a general manager. Each district elects one director. The sales department of the Exchange maintains a bonded agent in each of the principal markets of the United States. These agents send daily telegraphic advices as to market con­ditions and carload sales. These reports are issued to the local associations in daily bulletins.1 The Exchange also has departments that take care of all litigation arising out of the marketing of the fruit, handle all claims, attempt to secure the best possible railroad service, and conduct an extensive citrus fruit adwrtising campaign and de­velop new markets. ~ow, in spite of the fact that the Exchange endeavors to aid the growers in every particular, every shipper reserves the right to regulate and control his own shipments, to use his own judgment as to the time, place, and price at which he sells, to develop his own brands. and even compete with his fellow members.2 The California Walnut Growers' Association is a smaller organization than the Fruit Growers' Exchange, but it renders practically the same service to the walnut growers of Southern California as is rendered to the growers of citrus fruit by the Fruit Growers' Exchange. The Grand Junction, Colo., Fruit Gro"·ers' Association is a marketing organization of a little different type. It is a stock company "ith a membership of 1,000. It furnishes its mem­bers with all the supplies necessary for the proper maintenance of their orchards,' such as spraying machines, etc. The Rocky Ford :Jlelon Growers' Association markets cante­loupes only. The Florida Citrus Fruit Exchange is similar to the Cali­fornia Fruit Growers' Exchange. It is a large, non-profit, cooperative association, with headquarters at Tampa. There is a local association to pick. grade, pack, and cool the fruit, and to load it on the cars: a sub-exchange to take charge of the loaded car and deliver it to the Exchange; and the Exchano-e 0 ' 1Coop. ;n Calif.. by Ira B. C'ro;:.;:., in •.\.mer. EC'on. Rev., Vol. I, ~o. 3, p. 542 ' ArtiC'le by F. J. Haskin, a.bow C'ited. Studies in Agr·icultural Econornics which distributes, sells, and collects for the grower. The whole of t~e United States and Canada is divided into districts, and a district manager is employed to handle the territory, either on salary or brokerage. The expenses of the association are met by an assessment upon all citrus fruits handled and sold.4 The Eastern Shore Produce Exchange of Virginia each year handles some 5,000 carloads of potatoes, 230 carloads of straw­ berries, 150 carloads of cabbage, and other produce in propor­ tion. Any farmer may secure the privileges of the Exchange by paying $1 a year; and some 3,000 farmers are affilia.ted with it. The Exchange make$ a careful study every day of .the supply in sight, and of the markets in which it can be placed to best advantage. The commission charged is 5 per cent on the goods that measure up to the standard to command the Exchange 's brand, and 3 per cent on the remainder. The Southern Texas Truck Growers' Association, organized in 1906, is the largest and most prominent marketing organiza­tion in Texas. In 1911 it shipped i,859 cars of onions, 804 cars of potatoes, 205 cars of cabbage, and 105 cars of other produce, or 2,973 cars in all.5 The home office is at San An­tonio, and there are branch offices under the direction of the general sales manager in New York, St. Louis, Kansas City, Fort Worth, and other leading cities. The Association pur­chased seed for the growers at a considerable saving._ The claim department rendered assistance in making collections of over­charges, damages, etc., from the transportation companies. Grading, inspecting, and advertising also form a prominent part of the Association's work. A greater demand for the Texas · product is expected from a campaign of newspaper advertising. The crop-growing activities of the Association are limited to a territory . bounded on the north by Austin and taking in all · the country south to the Rio Grande River. One of the most successful examples of cooperation in Texas is the Alvjn Fruit and Truck Growers' Association, which, while primarily an organization for marketing; has erected a two-story building for packing and crating, and a warehouse on the rail­ •Handbook published by the company. "Annual report of the company. way track-the latter paid for out of profits. It has bought fertilizer, seed. wood, cotton hulls, etc .. in carload lots, making a saving of from 40 to 60 per cent on the seed. Formed in 1906, at the end of four years its capital stock was doubled, and its membership increased from 62 to 204. The organizations outlined above are the most prominent cooperative concerns in the country. Smaller associations are scattered throughout the West, and several are to be found in the :Middle States. For example, the Knox County Berry and Truck Growers' Association, of Knoxville, Tenn., shipped 105 cars of strawberries in 1912. In Texas, local exchanges have arisen, flourished, and waned, and in many counties they are still struggling for existence, producing considerable fruit or truck. But in Texas no organization has made a very great success for any length of time. What is the trouble? In the first place, there are certain difficulties that must be overcome. All the producers must be shown the advantages of cooperation so that they will take part and not hold out on aecount of suspicions, fear of schemes on the part of the large producers, and enticing promises by dishonest brokers. The more men that can be persuaded to join the association, the better; for, obviously, a monopoly is an ideal selling agency. Furthermore, many in­dependent shippers make the market bearish and uncertain, as well as continually disturb the association by making the mem­bers dissatisfied. And as long as there is internal friction in the concern. it has been repeatedly proved that the members will fail to reap the profits they hoped for. The size of the association is also an important matter to con­sider. It should not be so large as to include territory not pro­ducing similar crops and not having common interests, nor should it cover so much ground that the members find difficulty in holding together and working in unison. On the other hand, up to a certain extent, the more extended the field can be made, without sacrificing compactness, the more profitable it will be. If the association is large, the market price can be better con­trolled: economies in packing, shipping, and selling can be made: a reputation can be built up for the association that will command attention; and the business of the concern may justify Stud!ies in A_gricultural Eco1wmics the erection of warehouses for the handling of the products. For these reasons it would be profitable for some local Texas associations to form a joint organization among neighboring counties having similar interests. There has been some difficulty in Texas in deciding upon the best form of organization. There have been two generai" types: those which allow a vote to each member and those in which the votes are allotted on the basis of the number of shares held.6 There has been considerable dissatisfaction with the latter plan. It has yielded almost completely in favor of the first. The type in which the voting is by individuals, not by wealth, has been the most successful because the small growers have more confidence in it and because it is more nearly like a purely cooperative, rather than a money-making, concern. During hard years, the smallest producers grow dissatisfied with the vote-by-share plan, and suspect it of being a scheme on the part of the large stockholders to bankrupt the weak members. After considerable internal dissension, the Southern Texas Truck Growers' Association, which was originally formed with one vote per share, has been reorganized and incorporated for the sum of $10,000, with 10,000 shares, only one share being given each member. But even after getting organized with the right size and form, many associations are a failure because of the lack of business experience. The members are enthusiastic; crops are good; everyone is sanguine; but profits do not come in. Perhaps the sales manager is low-salaried and incompetent; perhaps the manager is without authority, and everyone is directing the af­fairs of the association-either event is sufficient to wreck the concern. On the sales manager, in fact, depends the success or failure of the entire organization. The utmost care must be used in selecting him. He should be a man who is well acquainted with the needs and problems of the growers, and whose interests are bound up with the growers rather than the dealers. If the training of his life has been for the advantage of the growers, it will be natural for him to work for their benefit. It is im­possible to procure the services of a man who has as many and •G. Harold Powell in 1910 Yearbook. Bulletin of tlie University of Te.r.as as difficult services to perform as the manager without paying him a good salary. He should be as experienced as it is pos­sible to get; he must be free to devote his time and energy to the affairs of the association; and it is better if he is so situated that it .is to his advantage to build up t.he cooperative organi­zation in every way possible. ?\o doubt a large part of the at­tempts to build up creditable, efficient local organizations owes its failure to the fact that an incompetent man has been placed in charge. or else some busy person has been depended on to do the work' for the love of the cause. Furthermore. the manager should be given a considerable amount of authority. in order that his plans might not be in­terfered with, and he should be held strictly accountable to the board of directors. There has been a great deal of loose talk about the function of the middleman under the present competitive conditions. Some enthusiasts are apt to lose sight of the fact that his duties are indispensable. In fact, the largest cooperative con­cerns, such as the California Fruit Growers' Exchange and the Florida Citrus Fruit Exchange, merely assume the functions of the brokers. The California Fruit Growers' Exchange main­tains a bonded agent in each of the principal markets of the United States, and the Florida Citrus Fruit Exchange has dis­trict managers to handle the various divisions into which the United States and Canada are divided. The so-called "middle­man" is only a hired agent of the producers' organization. The advantages of these cooperative organizations is not that they do away with the position occupied by the middleman, which is impossible. but that they remove the objectional features of speculation and insure honesty of dealing. Unscrupulous methods employed by speculators sometimes make markets unstable. making it impossible for a grower to form an approximate judgment of his returns. Experience of onion gro"·ers in Southwest Texas proves that the profits de­pend largely on chance. One man may luckily get his produce on the market at exactly the right time and receive abundant profits. If a cooperative concern has sufficient control of the crop, it is usually able to keep the prices steadier and thus in­sure at least returns enough to prevent the heavy losses that the growers otherwise have to risk. Studies in Agricultural Economics Besides eliminating much of the risk now attendant on the business, the growers are able by cooperative methods of market­ing to secure for themselves part of the profits that would otherwise go to the brokers. If the middleman's functions are performed by an agent of the company, all unusual returns will come to the shippers who are members. Cooperative Cotton W areho1tses. Cotton is still king in the South, and when one talks of getting a better price for the fleecy staple one interests the greater part of the Southern farmers. The fluctuations of the cotton mar­ket affect the prosperity of almost every business; hence it is no wonder that the marketing of this crop is the subject of continuous debate in Texas. All are pretty well agreed today that the present scheme, under which all the cotton raised during a year is dumped on the market within a comparatively brief period of time, forces down the price lower than is neces­sary or desirable. When the market is flooded the price natu­rally descends, with the result that the bigger the crop the less the total returns. This is shown by the statistics for 1910 and 191). In 1910 the crop amounted to 11.965,962 bales, selling at an aggregate value of $820,320,000, or $68.55 per bale. In 1911 there were 16,109,349 bales raised, which sold for a total of $732,420;000--or an average of 45.56 per bale. There was an increase of 4,143,387 bales in 1911 over the previous year. The result was not only a smaller price per bale, but even a smaller aggregate value. Such astonishing losses were chiefly due to the fact that most of the cotton was sold on a glutted market. How to avoid this glut is the problem that must be solved. A practical warehouse plan whereby the cotton can be held and sold as needed seems to offer the only logical solution. What is needed is some aid that will enable the farmers of every community to erect a warehouse near their fields. Some theorists have advanced fantastic schemes for securing a mo­nopoly of all the planter's products in a gigantic system of warehouses, in which the cotton could be held for a stated price. Such schemes, however, can not stand practical business tests. In order to be of use the warehouses should be near the fields. The average farmer is going to sell his cotton as soon as it is gathered, because he needs the proceeds to pay his debts. and unless a scheme is devised whereby he can turn his cotton over to other parties conveniently and secure in return some­thing that can be used as currency in paying debts and buying supplies, it will be of little value. Furthermore, the fact that the haul to market should not be of unreasonable length must be kept in mind. An efficient warehouse plan will help the farmers all along the line, beginning with the planting of the seed and continuing until the crop is disposed of. In the first place, it will promote diversification where it is advantageous. At present, a large part of the cotton growers of Te:xas must place themselves under obligations to credit merchants at the first of the year in order to get supplies. The merchant always wants a lien on a crop that has a ready market, and the merchant forces the farmer to grow cotton almost entirely.7 In the next place, the present methods are wasteful and ex­pensive. The Federal Department of Commerce estimates that the "city crop," which consists of the samples and pickings from the cuts made in the bale for the purpose of sampling, amo\l.Ilts to 100,000 bales a year. Estimated on a middling basis, Hon. Clarence Ousley figures that this represents a loss of $6,000,DOO. Again, the cost of patching and the incident wastes in the yards will amount to fifty cents per bale; the exposure in open yards may be calculated at $2 per bale on one-third of the crop. The present expensive system of buying the cotton on the streets would be eliminated by a warehouse system. Mr. Ousley estimates that all of these items will aggregate $42,000,­000, or $3 a bale on the 1912 crop of 14,000,000 bales. Most important of all, warehouses will mean a scientific sys­tem of selling. Having the bulk together, a better price can be obtained, especially since the present methods of marketing on the streets, where everyone tries to scalp all others, will be done away with. By selling in bulk, furthermore, the price can be stabilized. One of the causes of fluctuation at present is the hasty and scattered selling of the farmers. A system of 1 See above, p. 7 f. Studies in Agricultural E co1wmics warehouses will accomplish regularity of supply to the manu­facturers. A proper plan will also reduce the present high insurance rates. Now, haphazard methods are usually followed. The cotton is piled up near the track, where it can be easily ignited by sparks from a passing locomotive. The hazards under such conditions is so great that the rates are enormous. Fireproof structures should be erected some distance from the main track on a switch. In order to facilitate the erection of warehouses, a constitu­tional amendment has been proposed and will be voted on July 19, 1913, authorizing "any county, any political subdivision of a county, any number of adjoining counties, or any political sub­division of the State, or any defined district now or hereafter to be described and defined within the State of Texas, and which may or may not include towns, villages or municipal corpora­tions'' upon a majority vote of the resident taxpayers to issue bonds or otherwise lend its credit in any amount not to exceed one-fourth of the assessed valuation of the real property for the "construction, maintenance, and operation of public ware­houses for storing, handling, classing, measuring, weighing, ele­vating and loading agricultural products. After the warehouse has been constructed, it see?ns to the writer that the charges should be suffic·ient to cover not only running expenses, but also to discharge Hltimately the expenses of erection. Warehouses are of such importance that it is well to use the credit of the county in securing their erection, but the people as a whole should not have to pay for them outright. This proposed amendment also provides that the Legislature shall provide for a Warehouse Commission with power to regu­late and inspect the business. BIBLIOGRAPHY. "Cooperation in the Handling and Marketing of Fruit," G. Harold Powell, Pomologist and Acting Chief, Bureau of Plant Industry. (Yearbook of the Department of Agriculture, 1910. Page 391.) Report of the Industrial Commission ( 1901), Vol. X. "How We Whipped Them," by Edward G. Dunn. (Farm & Fireside.) ''Cooperation in California,'' by Ira B. Cross. (The Ameri­can Economic Review, Vol. 1, No. 3. Page 535.) "Difficulties in Organization," by Chester T. Crowell. (Farm & Ranch, of April 19, 1913, p. 28.) Constitutional amendment, to be voted on July 19, authoriz­ing the issuance of bonds for the construction of warehouses. Frederic J. Haskin in an article in the Houston Post of Feb. 27, 1913. "Marketing Farm Produce," by Geo. G. Hill. (Farmers' Bulletin No. 62, U. S. Department of Agriculture). Report of the Industrial Commission, Vol. VI. Coulter, Cooperation Among Farmers. FARMERS' EDUCATIONAL AND CO-OPERATIVE UNION IN TEXAS. BY II. L. VOORHIES. In American political history there was a general movement between the years 1867 and 1896, remarkable for the character and activity of its social propaganda. This general movement is divided into three periods: (1) that of the Grangers; (2) that of the Alliance; ( 3) and that of the Populists. The Grangers began their movement in 1867. They had a head office located in Washington which supervised the ''Granges'' of the various States. The order was secret: and its purpose was to advance the social needs of the farmers. and combat the backwardness of farm life in general. The order ad­vocated a reduction of the tariff, lower freight rates, and higher prices for grain products. Later, it took up the fight against the middle man, and advocated cooperation in various lines. Grange stores were established to buy almost everything. Grain elevators, warehouses, dairies, flour mills, and insurance com­panies were operated upon the cooperative basis. In advocating these measures, the Grange fell into disrepute over the policies to be pursued, and the national organization lost control of the State organizations. From 1874, it rapidly declined and by 1880 it had lost its national significance. However, in some of the New England rural districts and in Michigan, there are still a few surviving organizations. 'l'he second movement was led by the Alliance, which was founded in 1889. The Alliance reaehed its greatest power in 1890, with a membership of five millions. Its purpose was to secure remedial legislation for agricultural ills, and it held lofty ideals. The order advocated the abolition of national banks, free coinage of silver, government issue of paper money, tariff revision, secret ballot. and the incomP-tax. In 1890, the order developed astounding political strength and succeeded in cap­turing the legislatures of several Western States. In 1892, there was a strong demand for a third party. Va­ Bulletin of the Un-ive1'sity of Texas rious industrial organizations had been preparing the way for this party, and the Alliance's members joined in the demand. The party was organized and called the Populist Party. Its pur­pose was to get ethical gains through legislation. It favored free silver, the income tax, eight hours a day for labor, the reclama­tion of land, government ownership of railways, telegraphs and telephones, popular election of senators, and the initiative and referendum. It gained enormous strength throughout the Middle West during the years following the panic of 1893. But the Democrats appropriated most of its doctrine in their platform of 1896, and 1900; and the Populist became fused with that party. Thus, the Populist organization passed into history as its two predecessors had done. Organization and Pitrposes of the Union. In the year 1902, Newt Gresham and nine other Raines County farmers met in a barn and organized the Farmers' Edu­cational and Cooperative Union of Texas. It was incorporat~d as a Texas corporation, September 17th, 1902. From the be­ginning it grew very rapidly, and by the end of the :first year its Texas membership was 50,000. In three years' time, the or­ganization had established itself in Mississippi, Louisiana, and Arkansas, with a total membership of 200,000. Its original pur­pose was to control price through a central selling agency by disposing of produce in larger bulk, thereby cutting out the middleman's profits. At a convention in Dallas, in 1907, the Union (which up to this time had been a Texas corporation) was chartered as a national organization. But in 1907, the enormous over-production of cotton caused a drop in the price regardless of the efforts of the Union to market systematically and obtain a profitable price. This caused widespread dissatisfaction among the tenant cotton growers of every section, and for a time it seemed that the Union would follow in the footsteps of the Grangers and the Alliance. But, fortunately, the Union had broadened out in its efforts for the welfare of the farmer and was advocating those things which would ultimately benefit him in production as well as in marketing. After the failure of 1907, the farsighted members Studies in A.griculforal Ec01wmics of the Union set themselves to the task of improving the condi­tion which affect in general the profitableness of farming. They sought: (1) to discourage the credit and mortgage system; ( 2) to teach the farmer domestic economy, and the process of mar­keting; ( 3) to educate the agricultural classes in scientific farm­ing; ( 4) to systematize the methods of producing and distribu­tion ; ( 5) to eliminate gambling in farm products by ''Boards of Trade,'' cotton exchanges, and other speculative organizations; (6) to secure and maintain profitable prices for cotton, grain, and other products; and (7) to strive for good will and brotherly love among all mankind. The promotion of these objects is the aim of the Union at present. In drafting of the constitution and by-laws, the committee was careful to safeguard the interest of the Union against the disruption which had overtaken the Grangers and the Alliance. The Grangers, as is known, were disrupted in 1875, because they were unable to agree as to the policies that were to be pursued. Harmony of interests did not exist. Merchants, bankers, insur­ance men, and farmers were all in the same organization, and each had particular interests. With such a diversity of inter­ests, disruption was inevitable as no policy could be formulated to the interest of all. Human nature was bound to assert itself in the end in favor of a particular class and not for the interest of all. Section 13, of the Union's Constitution declares that no person shall be admitted to membership who is engaged in the occupation of banking, merchandising, the practice of law, or who belongs to any trust or combine for the purpose of specu­lating either directly or indirectly in farm products or the ne­cessities of life. In thus restricting the membership, a provis­ion was made to safeguard the Union against disruption through a lack of harmony as to interests. Again, the Alliance had lost its significance and power imme­diately because of its advent into the field of politics. Gain through legislation was its purpose, and the organization par­ticipated rather freely in the political campaigns of 1890, and 1892. Thus, it changed from an agricultural organization into a political faction. But the Constitution of the Farmers' Union states in the preamble that the Union is not a political organiza­tion, and that it will abstain from even a discussion of politics. The l'nion ma~·. ho,YeYer, through legislative committees, seek to secure the passaµe of pending measures favorable to the poli­cies of the l'nion. It does not endorse candidates nor put them out: and it never formulates a platform. A point of great importance for the p-µ.rpose of this paper is the influence the Cnion has had upon production and consump­tion. The influence upon produ<:tion will be discussed under the two divisions: (1) scientific crop growing; ( 2) and scientific marketing. Scientific Cultivation a11d the Union. The prosperity of a farmer is said to depend primarily upon his producing capacity. Farming today is more a business than at any time in past history, owing to the facility of exchange, and to the division of labor, or specilization. With the princi­ple that the farm is primarily a business producing commodities which are to command value in exchange, the Unio.n has inaugu­rated such policies and is urging their adoption. It has advo­cated that the various sections of the States adapt through ex­perimentation those crops to which each section is especially adapted. In south Texas, the boll weevil for years destroyed the cotton crop because that section is a moist country favorable for the existence of the weevil. The Union impressed upon the farmers the fact that they should experiment and find what other crop is suited to the soil and climate. Rice growing was tried, and rice is now the staple crop in a large section of the south Texas country. In the east Texas timber belt region, fruits and vegetables (especially· canteloupes and melons) are now the chief products, whereas only a decade or two ago the red hills produced but a meager existence for the farmers who were try­ing to grow corn and cotton. The Union was instrumental in doing this. In the counties adjacent to the Red River Valley, wheat, oats, stock, and cotton are now the main crops; and only a few years ago corn and cotton were almost exclusively grown. The Union helped to secure the diversification. The Pan Handle country with free grass and large ranches was primarily a cattle country, but the last ten years have witnessed a change from that of a stock country to a stock farming and agricultural conn­ Studies in AgricuUiiral Economics try. It was to some extent the policy of the Union that brought the change. Hence, north, south, east, and west, the Union has been influential in educating and encouraging the various sec­tions of the State in the production of the crops especially adapted to each. Again, the Union has advocated the diversification of crops in Texas. Diversification is undertaken with at least two views: (1) the conservation of the soil; (2) economies in use of labor and capital. A great drawback to profitable agriculture in this State has been the extensive growing of only one or two crops,­cotton and corn. In the "black land belt," they made up about 95 per cent. of the total crop acreage, and the average acreage given to corn did not exceed 10 per cent. of the total acreage. Thus, the growing of cotton year after year was mining the soil of its fertility. And the labor and capital of the farmer were idle a large portion of the year, whereas under a system of diver­sified farming the labor and capital could be employed at much greater profit to the farmer. Through the Union, diversification and rotation have been strenuously urged until at present re­markable advance has been made, and wheat, oats, sorghum, and alfalfa make a considerable per cent of the crop. Then, too, scientific cultivation has been one of the policies of the Union. The settlement and development of Texas has been very rapid for the last twenty five years. There is a change going on in the most highly developed sections of the State. It is the change from the extensive to the intensive systems of farming. Labor and capital are no longer to be economized as they were ten or fifteen years ago. Land is the factor that is to be economized, and scientific intensive farming is the means by which such an economy can be effected. Crop demonstration as to fertilization and cultivation are carefully worked out at ex­periment stations. and the Union takes up the results and urges their adoption: the results are understood and adopted more quickly through the efforts of the Union in connection with the various local lodges throughout the States. The local lodge lect­urers are kept informed by the State officers of the Union con­cerning all recent experiments and their significance. If it has been demonstrated that the yield of corn per acre can be in­ Bulletin of the University of Texas creased by the deep breaking of the land in the early fall months instead of the winter months, the members learn the results at lodge meetings, County institutes, and State conventions. If it is demonstrated that the big boll cotton yields heavier in the black land belt than any other variety, the members are induced to plant that variety. Further, if it is demonstrated that the yield of cotton per acre can be increased by flat brea:king the land instead of listing it according to the old system, the mem­bers are indueed to abandon the old system. R estriction of Acreage. It is often heard in Texas that land is too high in price and will not pay a return on the money invested in it. That is true in Texas under the old extensive system of cultivation. The Cnion, ho-\yever, is rapidly educating the members in scientific and extensive methods of cultivation which if taken advantage of will enable the landlord to receive interest on his investment in the land. This is the work that the Union is rendering to its farmer members. The Union has repeatedly expressed itself in favor of a re­duction of the acreage planted to cotton, and a. corresponding increase iil the acreage planted to other crops. No direct and aggressive steps have been taken toward that end, although reso­lutions fayoring such a poliey have been adopted in mass meet­ings and conventions. In 1908, a convention at Memphis, Tenn., passed a resolution favoring a. reduction of the cotton acreage. However, in the spring of 1908, it was evident that there wa~ a. large increase of the acreage planted to cotton. 'l'he officers of the Union recommended that the farmers plow up a per cent of the cotton already planted and plant in corn, peas, or some other crop for home consumption. President Barrett sent out a circular "·ith this recommendation. From reports and sta­tistics, it seems that this circular had very little effect ; but it is certain that the recommendation of the officers of the Union and the resolution by the convention and mass meeting for the re­duction of the cotton acreage has resulted in checking a more rapid increase in the cotton acreage. More scientific Marketing by the Union. The growing of a crop is said to be primary and its marketing secondary. But since farming is now more a business than a self sufficing industry, it seems that marketing is almost as im­portant as the growing of the crop. The farmer is interested in what he can get for his crop. From 1850 up to 1900, the farmer grew his crops and marketed them without paying any attention to his system of marketing. He dumped his grain or cotton on the market just as fast as it was harvested or gathered, with no regard to crop reports, taking whatsoever price the buy­ers were willing to pay him. With the farmer marketing in ignorance or total disregard for the law of supply and demand and general crop conditions, considerable surplus profits have accrued to middlemen and buyers. Within the last few years, however, scientific marketing has been one of the needs of the farmer that is receiving considerable attention. The Union's activity in behalf of scientific marketing are note­worthy. The members are informed as to the crop conditions in other States. The existence of the law of supply and demand are stressed. 'l'he Union sends out to the members the Govern­ment's monthly crop reports, and explains their significance and bearing upon prices. Then, again, in securing a fair price for commodities grain­eries and warehouses will have to be built sufficiently commo­dious to store the grain and cotton until the price rises to a prof­itable level. Early in its beginning, the Union advocated the building of a system of warehouses for the storing of the cotton. Under supervision of the State officers, the local lodges in con­tiguous territory were grouped, and a joint ·warehouse erected by them. Also warehouses were built in Houston, the headquarters of the sales agency, for the reception of cotton preparatory to its shipment in greater lots to foreign markets. But the ware­houses were not built according to the proper design. They were not sufficient to store all the cotton; rents and insurance were too burdensome for the farmers to realize a profit on the storing of the cotton. The attempt was almost a complete failure, and the Union was seriously discouraged and hampered for a time. An investigation of the warehouse system abroad as to design and structure of the warehouses was made. The Union is now advocating the building of warehouses according to the Euro­pean plan. The plan of finance upon which they are to be built is that similar to a community bond issue for the construction of good roads or au irrigation system. A bill was introduced in the last legislature designed to giw communities the privilege of issuing bonds for the construction of 'rnrehonses: but this has not yet been enacted into law. ·with the building of warehouses accord­ing to such a scheme. l'ach district with its local lodges would have ample storage for the cotton of its members. Cotton coul writer as the basis for discussion, rather than as final conclusions. A STUDY IN HIGHWAY AD1\11NISTRA'rIO~ WITH SPECIAL REFEREXCE TO TEXAS' NEEDS. BY M. H. GRIFFIN. lmportanee of good roads. '.l'he importance of public roads arises from the fact that about ninety per cent. of the freight carried on railways and steam­ships must first be hauled over them. The railways are the main arteries of travel, and the public roads are the veins. To men­tion one illustration, Rome owed her sway over the known world as much to her excellent system of trunk-line roads as to her legions. The permanent improvement of a road may be regarded as an investment of public funds. In the form of a ledger account, it might then be summed up as follows :1 PERMANENT ROADS. Debtor. Creditor. "To interest on investment ." "By sav.ing in heavy hauling." ''To increas ed cost of mainte­ ''Increase in land values.'' nance. '' ''More easy access tu market, church, school, and social ad­ vantages.'' There are 2,210,857 miles of public roads in the United States, of which only 10.1 per cent. are improved.2 'l'he United States spends annually $80,000,000 on road improvement through the agency of States, counties, and towns, yet England spends $90,­000,000 on only 150,000 miles of roads.3 Six hundred dollars per mile is spent in England, as compared with $37.20 in this country. Two hundred and fifty million tons of freight are annually hauled to the railway station in our country, with an average of $.24 _per ton per mile, and an average haul of nine miles. Over a half billion dollars is spent annualy in the United States in transporting freight over the highways to the railroads. In 'Hotchkiss, Rural High-icays in lVisconsin, p. 1. "BuI. of l,'. S. Dept. of Agr., 1912. 3Putnam's :\fag., Vol. VII, pp. 780-792. Studies in Agricultiiral Economics France the cost of transporting freight to the railway stations is only $.12 per ton per mite-just half the cost in this country. Would not the $250,000,000 saved in freight charges under a system of good roads justify the building of such roads? 'l'he 2,000;000 miles of unimproved roads in the United States are as heavy a burden to the consumer as an excessive tariff, for every pound of produce brought from the farm to market bears a higher price because of the excessive cost of transportation from the farm to the point of shipment. Although many portions of the country are thickly settled enough to make the improvement of the roads an economic ne­cessity, particularly along the more travelled routes, yet in a Sta.te like Texas, where the population averages 16 inhabitants to the square mile, dirt roads must continue to preponderate, especially in the more thinly settled counties. Here, therefore, the problem is not so much the construction of permanent roads &s the constrndit•n of earth roads in the best and cheapest man­ner.4 A good road, whether permanent or not, should at any ri:ite be properly J•.x·ated, well constructed, and maintained in good condition, if the fullest possible use is to be made of it. Resitme of Foreign Road Administration. All of the most advanced foreign countries, except German and Canada, grant some form of national aid to the construction or care of roads.5 England has a system which seems to be very slightly centralized. 'l'he aid granted by the general government is, first, an annual appropriation, or subsidy, to help defray local expenses, the proportion of this fund to be expended on roads being largely discretionary with the local authorities. Second, within the past few years a government road board has been es­tablished, through which direct grants or loans are made for the construction of new or improved roads. The French system, on the other hand, is highly centralized, as the national roads (some 24,000 miles in extent) are entirely under the direction of the general government, while the re­mainder of the road system (some 340,000 miles in ex:tent) is 'Wis GeoJoa. and Nat. Survey, Bui. No. 18, Econ. Series, No. 11. •u. S. Bui.~ "Public Roacl System~ of Forei!m Countries," by Bourne (April 24, 1913), p. 84. under the direction of the departments. The fact that the pre­fect, or governor, of each department is appointed by the general government, and that the engineers of the government corps of roads .and bridges are constantly consulted and their services utilized in connection with the roads in about half the depart­ments, and the further fact that all public engineering works involving an expenditure of $20,000 or more must be submitted to a board of engineers at Paris, emphasize the marked degree to which centralization has been carried in the French system. The French organization. from the inspector general down through the various grades to the patrolmen in charge of short -sections of road, appears to be compact, highly trained, and with lines of responsibility clearly denned. As at present constituted, it requires a very large force of officials and employes. Germany, prior to the general introduction of railways, main­tained a system of national roads; but la:ter these were turned over to the various kingdoms and states comprising the Ger­man Empire, and have since been maintained as state roads. Italy, Spain, Belguim, Austria, and Russia all have administra­tive road systems whicli might be classed as centralized in char­acter. The ScandinaYian countries,-Norway, Sweden, and Denmark,-appear to haYe composite systems in whic~ the gen­eral direction and approYal rests with the centn;1l government, while the direct supervision rests with the local units. As an example of conditions and policies in the sparsely set­tled countries, the government of New Zealand has adopted the policy of making loans at yery low rates of interest for the con­:struction of roads, and has provided for the liquidation of these · loans by "benefit districts" in which :the lands benefited are as­:sessed in proportion to the benefits derived.6 In Canada the ad­ministration of° the roads is left "·ith the various provinces. Some details of the various administrative systems are worthy ·of special mention. The first of these is the patrol system of maintenance, which seems to be general throughout the Euro­J>ean countries and is being constantly extended. The main dif­ferences between the patrol system of maintenance and the methods in general use in this country are (1) that the pa;trol system provides continuous maintenance as compared with the GBourne, "Pub. Road Systems." aboYe C'ited, p. 85. Studies in Agriculforal Economics intermittent or occasional maintenance in this country; (2) that it provides a systematic maintenance in that each section of road is a part of the system, and the work done is in line with a gen­eral plan worked ou:t by higher officials and correlated with all other sections; ( 3) that it provides skilled service, due to the fact that the patrolmen are constantly employed and make the care of the roads practically their life work. In the United States the patrol system would be quite expensive, however, on account of the higher rate of wages which must be paid here as compared with European countries. A distinctive feature of the French system is the school of roads and bridges to which are admitted the graduates of poly­technic school after competitive examination, and in which the course of instruction is designed to fit the young engineers for service as members of the French corps of roads and bridges. The students of the school are paid a sufficient salary to cover their expenses, and upon graduation, are made under-engineers. This system results in a very high standard of efficiency on the par:t of French highway engineers. Another feature of the French system of granting aid to the different communes for the construction of roads is that the aid is made proportionate to tke needs of the commune and so ranges from ten per cen't. to eighty-five per cent. of the cost of the pro­posed improvement. In the case of the wealthier communes it is ten per cent., and in the case of the poorest it is eighty-five per cent. The basis for arriving at the proportion of aid to be granted is ascertained by dividing the wealth of the commune by its area. The following chart illustrates the administrative system of some of the more progressive European nations: -­ Country Aus tria. \England and Wales. France IS .I WI tl.crland -~----·----­· United States 00 L\J Population per SQ. mile. 246.6 615.88 189.6 1234.2 30.!) ---­ --­ · ----·--­ Miles of road to sq. mile of area. Population per mile of road. Administrative clnsses of road. Pro11ortlon of con· structlon cost pd. by each &'OV. unit. Extent nnd chnr· ncter of govern· ment supervls· Ion. Gov . highway ad· mlnlstratlvc or· ganlzatlon. .641 385 Government, provincial, district, and town roads. Gov . roads 100% Prov . & Dist. all Town Parish pays. Nat'!. gov. has complete supervision over con· structlon and malnte· nance of gov. road . Constructed by contract. Minister of Interior, dis· trlct ene-;lneers, road masters , 4000 workmen. 2.46 226 Main roads. Other roads. 'l'wo sourcea: Nat'!. go~ . pays Indeterminate amount. Local taxes pny part of cost. No gov. supervision where work is done with cur· rent revenues, but wheo done on borrowed mon· ey, ·gov. must approve. Government road board. Local supervision. County cctuncils. City authorities. 2.5 ,465 - 75 004 National roads Federa! aid cnnton roads. Department roads. Canton roads. Vicini al roads City roads. •classes . Nat'!. roads ··-· const. and Fed . aid roads built nnd maintained at gov. cx1>. malntalned by cnntons Dept. ronds mnlntaincd with fed . aid . Canton by depts . except vlcinnl R. maint. by cantons. roads which shared In City roads built by city gov. subsidy to nmt. of nid by cant., & $10'2 ,000 $1,544,000 In 1910. Fedemi aid. Gov. has complete furls· Ganton has supervisiondiction over all nat'l. oveir con-struetion an·d roads, and general jur­ maintenance of all lsdiction over all roads ro ads . by minister of Interior on public works. Minister of pub. works, Dept. of pub. works In Corpe of roads & bridges, each canton. Cant. Bu. Bu. of Dept., roads, au-of accounts. Fed. dept. to trafl'lo, patrolmen, of Interior, engineers, nnr. of nat'I roads, 28 snrveyors, ctr.' of (•an· inspect., 7'lJJ · engineers, ton. 1,715 cond., 1595 clerks, !!500 patrolmen, dep't. & dist. wardens. .726 State roads c State aid roads Locnl roads. - Vnrlcs mnong the Statos. :;one. Gov. maintains in­vestigatlve and educational dept . only. Annual expeodi­ture for roads by each gov. unit. Method of appor­tioning gov. aid. Sources of r•venue. N·at. gov.: $5,568,IDO In 1910. National roads Included In budget. Provincial roads, by tax­es. No convict or pauper la­bor, cost defrayed from current gov. revenues, no special taxes, no tolls. 190!HO By local au­thoritiee..___$(!2,41l8,000 From loans___ 7,916,llM Gov. grants__ 8,£30,675 $48,000,000-total ann. ex­penditure. Total cost of entire French system of roads, $1 ,003 ,000,000. By grants and loans at discretion of gov. road board. The road system of France is practically complete. An appropriation from budgetSI j)oth gen. & dept. govs. Statute labor required but may be commuted. From 1873 to 1911, the Federal gov . contributed to cantons for construe-tion of roads, $1,323,­ 720.00. Canton officials determine on construction of roads and cantons appropriate bids asked for. No tolls, revenue raised by general taxation. Statute labor used to great extent. Total expenses for road const. in 1911, $145,000,000. t R. (1' ""· "' ~· See Bourne, Good Roads, l•~elim. report to joint committee on Fed. Aid in Const. of post roads of Cong. of U. S., Jan. 14, 1913. p... IQ '"'! "" C"> · .,; ~ i Road Adrninistration in the United St(JJtes. Space forbids a discussion of the crude beginning made before the Civil War. During the period between 1860 and 1890, local revenues, mostly in the form of statute labor, were depended upon entirely for the construction and maintenance of roads. The old system of extreme localization was revived, with the ad­ministration of road affairs left to the towns in the North and East, and to the counties in the South and West. Many roads were built, but there was little improvement of roads.9 This localized system of building roads accomplished little; for it failed t-0 secure skilled supervision, provided an inadequate revenue, and depended upon a purely unskilled and unreliable class of labor. Construction of a permanent nature was prac­~ically precluded. State Aid. Though public sentiment favored reform in the road system. the movement for State control was not started until 1891, when New Jersey passed a law for an appropriation of $75,000 from the State treasury.10 This law provided for local initiative, sur­veys, estimates, and supervision, while the State was given the right to accep:t or reject the petition for State aid and to accept or reject contracts for construction. Also, upon petition of two­thirds of the property holders along at least one mile of road, pledging to pay ten per cent. of the cost of improving such road and requesting State aid, such aid would be granted to the ex­tent of 33 1-3 per cent. of the total cost, while the county would bear 56 2-3 per cent. An amendment to the New Jersey law in 1894 took the work from the hands of the State board of agri­culture and placed it with a commission of public roads to be appointed by the Governor for a period of three years. The power of the State to accept or reject petitions and contracts prevents useless construction and causes the work to be done by proper methods. The appropriation by the State in 1910 amounted to $500,000, and this was derived partially from a tax on automobiles. "Yearbook of the DPpt. of Agr., 1910, p. 269. 10/bid, p. 270. Studies in Agricultural Economics Massachusetts in 1892, Connecticut in 1895, and New York in 1898, established State highway departments with State aid.12 New York has a highly centralized system. The "Fuller Plank Act'' provided that towns providing a system of cash road taxes in lieu of the old labor tax could receive from the State twenty-five cents on the dollar of taxes levied and collected. The law was amended in 1902 so that fifty cents on the dollar collected was allowed. This practically abolished the old statute labor, for in 1899 New York paid out $34,557, while in 1908 she paid $1,057,605. 'I'he Higbie"Armstrong act of the same year contemplated a system of stone-surfaced roads throughout the State connecting county-seats and the chief cities. 1'he State was to pay fifty per cent.; the county thirty-five per cent., and the town :fifteen per cent. of the cost of stone-surfaced roads to be built in accord­ance with State provisions. Petition for this aid originated with the county board of supervisors. State engineers and surveyors were required then to prepare plans, cost, estimates, etc. If these were approved by the county board, construction was to be undertaken by contractors under the supervision of the State engineer. Roads were then to be maintained by the towns. In 1905 the New York Constitution was amended so as to al­low a fifty million dollar bond issue for road purposes. In 1907 the New York legislature passed a law providing that the county roads are to be improved jointly by the State, counties, and towns. The county pays two per cent. of the total cost for each $1,000 of assessed real and personal property liable to taxation in such county for each mile of public highway therein. The town pays one per cent., but not exceeding thirty-five per cent. of the cost shall be paid by the county, and not exceeding :fifteen per cent. shall be paid by the town. Town highways are to be improved and maintained by the towns with funds locally raised together with the supplement from the State aid apportionment. This apportionment is to amount to from one-third to one-half of the entire cost, according to the assessed valuation of real and personal property for each mile of highways in the town, the proportion paid by the State to vary inversely with the as­sessed value. "]bid, p. 271. In the same year the road law of New York was amended and consolidated,, ·and provided for 2,800 miles of State roads. Under this law, the State Highway Commission of three mem­bers has supervision over every mile of highways in the State. The State is divided into six districts with an engineer in charge of each. His duties are confined to improving and maintaining the State and county roads therein which have no connection with the town highways. Improvement of State and county highways is carried on wholly by contract. Plans, specifications and estimates are prepared by the State highway commission­ers, and, in the case of county roads, are submitted to the board of supervisors of each county for final approval. The State Highway Commission is given the right to accept or reject the improvement when finally completed. The following States have adopted the plan of State aid and State supervision in some form :13 Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Iowa, Illinois, Kansas, Louisiana, Maine, Massachusetts, Maryland, l\iichigan, Minnesota, Missouri, New Hampshire, New Mexico, North Car­olina, North Dakota, Ohio, Pennsylvania, Rhode Island, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin -thirty-one States in all. Some few of these have only State departments for investigation and supervision; others furnish State aid only in the form of convict labor; while most furnish State money aid with State supervision. Those States having only State highway departments for in­vestigation and supervision are Iowa, Kansas, Missouri, North Carolina, and Wisconsin. In these States the State highway commissioner gives advice to local officials upon any phase of the road question, but no money aid is extended in the actual work of improvements. When the counties or other local com­munities undertake improvements, the State highway depart­ments furnish an engineer to supervise the work. The State of Illinois, in addition to the above, extends its aid to road improvement by maintaining a crushing plant. This plant operates by means of State convicts, and furnishes rock for road purposes to the counties on application by the county ' 3Yearbook of the Dept. of Agr., 1910, p. 272. Studies in Agricultttral Economics officials. No charge is made, and freight rates are made as low as possible. In 1909, West Virginia appropriated money for the construc­tion of certain roads, and placed State and county convicts at work on the roads.14 Virginia also authorizes convict labor and appropriates annualy $250,000. Arizona, Colorado, and New Mexico ext.end aid by the use of convict labor, and also appro­priate from the State treasury for the construction of certain specific roads. The States furnishing only convict labor are: Florida, Georgia, Louisiana, and North Dakota. Some of the States which have taken the lead in the work of road improvement are also constructing trunk line roads, to be used in a connected system of State roads. Among the States adopting this plan of improvement are Maryland, New Hamp­shire, New York, and Washington. California leads all the States with her $18,000,000 bond issue for the construction of a system of trunk line roads throughout that State. In ten of the Southern States there are 502,050 miles of pub­lic roads of which only 17,700 are improved, or .35 per cent.15 This percentage is far below the general average for the whole country. This is probably due to the slow recovery of the South from the effects of the Civil War. The old labor ta:x: is largely relied upon for the construction and maintenance of roads, but the counties in most of the States are now allowed to levy a di­rect tax for this purpose. The bond issue is more popular than a high tax as a means of raising revenue for road construction. Good roads associations exist in most of the Southern States, these being principally organized with the county as a unit. They are very important in educating the people to the neces­sity of a bond issue for road improvement in local districts. Federal Aid. After the construction of .the Cumberland Road in the Twen­ties, the Federal Government did not again aid Public High­ways until 1893.16 On account of a petition to Congress in 1893, signed by the governors of many States, Chambers of Commerce "/bid, p. 273. ".4.nnals of A.mer. A.cad. of Pol. and Soc. Sci., Vol. XXXV, pp. 105-110. "Putnam's Mag., Vol. VII. pp. 780-792. in cities, and State Legislatures, Congress established the Office of Public Roads in the Department of Agriculture. This office was to make enquiries regarding the systems of road manage­ment, to make investigations as to the best methods of road. making, and to issue publications in cooperation with experiment stations and agricultural colleges for the dissemination of such information. It also constructs object-lesson roads, tests road materials in the laboratory, and provides expP,rt engineers free of charge to plan and supervise local road improvement. General Tendencies. The present trend of road affairs throughout the various States is toward a reform in administration and the adoption of a more progressive policy.17 Highway departments have been created in the different States, and the services of skilled engi­neers have been provided in connection therewith. The depart­ments assist the local road authorities, prepare plans and speci­fications for highway improvement, aid in the selection of high­ways to be improved, superintend the expenditure of State aid money, and give advice and instruction to overseers generally. T'here are four types of organization in highway departments. (1) 'l'he department may consist of one salaried commissioner, or engineer, appointed by the governor or elected by the people for a definite term.18 (2) In other cases, it consists of three salaried commissioners appointed by the governor for a given term.10 (3) Sometimes these commissioners have only a general supervision of the work, which is done by a secretary, who is a civil engineer.20 ( 4) A number of States have an ex-officio board, sometimes, but not always, comprising the heads of en­g,ineering schools or departments of a non-political nature,-as in California, Idaho, New Mexico, Virginia, and Washington. The powers and duties of the efficient State highway depart­ments generally include the right to prepare and improve the plans and specifications of highways to be improved by the aid of the State. They supervise the work of construction in all "N. Dak. Pub. Lib. Com., Legis. Ref. Dept., Bul. No. 2, p. 7. ""As in Conn., Del., Me., Mich., N. Hamp., N. J., Ohio, Vt., and W. Va. '"As in Col., :Md., Mass., and N. Y. ' 0As in Ill.; :'.\lin·n., R. I., and Tenn. Studies in Agricultural Economics States granting State aid. They pass upon contracts for high­way improvement by the aid of State funds before the same are finally let, or themselves let the same.21 In a considerable pro­portion of the States the highway departments select or approve. the selection made by the local authorities of roads to be per­manently improved wholly by State funds or by State aid. 22 The membership of the highway commission is limited to qual­ified electors in Rhode Island. In New York, at least one mem­ber must be a civil engineer, and the board be non-partisan. No more than two members may belong to the same political party in Illinois, Minnesota, and New York. The United States Office of Public Roads approves the plan whereby the highway com­mission is composed of the professors of civil enirineering in the different State colleges as ex-officio members. This type of board continues in office regardless of changes in politics. It can thus attain the highest efficiency. As to local supervision, most advanced States have uniformly provided for a county, district, or local official, qualified by train­ing and experience, to direct highway improvement. Iie is var­riously called county engineer, superintendent, inspector, or com­missioner of highways. This skilled supervision is provided also by many ~1on-State-aid commonwealths which provide for th1~ eleeticn or appointment of county engineers who are expert :a the art of civil engineering. The majority of the States give the counties or townships the right to issue bonds, under proper safeguards, for highway con­struction.23 Where State aid is granted, funds thus provided very conveniently supplement the shares of the State. The rais­ing of money for permanent road improvement by thr ordinary process of taxation, without imposing heavy burdens on the [ax-payer is so slow as to be impracticable. No State has accomplished permanent State irnpr\>vements of its highways that has not given the localities the power to issue :>onds for this purpose. Another as1,er\t that is notic~a::ile in the mul:'J::trnt for bett'3r "As in Col., Cal., Conn., Me., Md., Mass., Minn., N. Hamp., N. J ., N. Y., OhiO, Pa., R. I., Vt., and Wash. 224s in Col., Cal., Me., Md., Conn., Mass., Mich., :\!inn., N. J., N. Y., Ohio, Pa., R. I., and Wash. "See N. Dak. Pub. Lib. Corn.. Legis. Ref. Dept., Bui. No. 2, p. 9. Bulletin of the University of Texas roads is the nadual disappeart•11ce of statut·~ labor. This in­efficient system is being rapidly discarded for the better plan of paying all road taxes in cash. Pennsylvan:H·t OITN'S a temptin)! molicy rewa1d to all townships thar abolish statute iabor on their roa1ls. The present trend shows that the State will ultimately be the linit of administration, and will largely dir0::t and cvntrol the road work in the counties and townships.24 A reduction in the number of road officials is inevitable, and knowledge and skill in road building will be required of every official. In a word, the trend is strongly toward centralization of administration. As a resume of the present status of the movement for State control of highways the following :table is given : 24Yearbook, above cited, p. 273. - Payment Per· .:ent Township, Salary per Salary State State of prop. Ann. State paid by The county. No. of year. town or resident engineer. Bonds. tax for Approp. State. district. commissioners. I Cal. Money $18,000,000 bonds100% Ex-officio. $4,!lOO ' .. . Col. $50,000 nmt. $600 3 .. Conn. $7fi0,000 75 to 871h% $5,000112'h to 25% .. Del. $1 ,000 50% I 50% 1 Idaho Money or Ex-officio. labor 3 I Ill. In 'htwps. Expenses. $1,800 $25,000 t 3 - Me. Money $2,50033%% 1Reward system .. Md. Bond issue of $2,000­$2,500 50% 6 50% $5,000,000 .. Mass. $500,000 $2,500-ch. $3,500 . 3 .. Mich . $1fi0,000 § $2,5001 Minn. Money in Expen·ses. 'i4 twps. $300,000 33%% 366%% Money Bonds to sum of $1,000,000 N.Hamp. $125,000 $6,500 25 to 75% Govs . conncil Reward system I , 3 Expenses. labor N. Mex. Money or I - $5,000-ch . $6,000Money $3,500,000 N. Y. 100% 3 .. $5.000 $300,000 1 N. J. 1033%% 56%% .. $2,500$158,000 25 1fl0%Ohio 25% - ... $6,500 twps. $1,500,000 1 In some 75% Pa. 12'h% 12',2% -1----­ --i Bonds issued to $6,000,000 R. -I. Money 100% I _:p;:·-1--$3,oOO .. (JO Vt. 1 $71>,000 e50% 1--­ _i_ ___ .. Va. $200,000 $3,000 50 4 50% _ I, . .. I Wash. !f,650,000 3 Exvenses. $2,000 ____i I .. 1 $8,000 33%% 66%% W. Va. J I I I See Johnson; Good Roads: N. Dak. "Pub. Lib. Com. Legis. Ref. Dept., Bui. No. 2.91-2: Hotchkiss; Rural Highways in Wis., p. 122. *Each county must raise double amount appropriated io it by Com. tState furnishes crushed rock to Counties and Cities. c 1100 per cent by State but 25% must be returned by Counties in installments. §50% reward systern . VMay pay entire cost or only n J•Urt thereof . ­ **Reward of 50% to townships for c.ash road taxes. ***100% on State roads. 50% on State aid roads. 1!>% charged local roads. Studlies in Agricultural Economics Having reviewed the system of road administration in foreign countries, and in the States of the Union, we shall now examine the road system prevalent in Texas, with a view of suggesting reforms where needed. The Situation in Texas. Of the 128,991 miles of public roads in Texas, 4,896 miles are improved, or 3.8 per cent. of the total. Sand-clay,25 grayel, and stone are the chief materials for surfacing the roads. The aver­age cost of sand-clay roads is $593 per mile, that of gravel is three times as much, while for stone surfaced roads the cost is still higher. One hundred and forty counties repor,t no improved roads; eighty-one report less than ten per cent., and .thirteen report ten to twenty per cent. improved. The counties that have made the greatest progress in road building are Bexar, Dallas, Harris, Tarrant, Ellis, Travis, Webb, Montgomery, Jack, Guadalupe, Liberty, Jackson Comal, Mason, and Aransas. Great progress is being made in road construction in Texas. Large amounts of bonds are being issued by the various coun­ties and districts for road improvement. The importance of local bond issues for road construction and improvement is shown by the fact that over $5,500,000 was expended during the fiscal year ending August 31, 1912.26 Up to date, the State bas done nothing to aid or encourage the building of good roads, and has taken no steps to see that the vast sums being raised foF this purpose are being wisely spent. The Texas road law gives the county commissioners general oversight and supervision of highways.27 Each commissioner is supervisor of roads within his precinct. The commissioners' court divides the county into precincts and appoints overseers to supervise the road work therein. For the maintenance and construction of roads, and for other purposes, taxes are levied and collected. The commissioners may issue bonds for road and bridge purposes, provided a majority of the voters of the county favor such issue. Statute labor is provided for. All persons "U. S. Dept. of Agr. Bui., Jan. 26, 1912. ••Annual Rept. of Compt. of Pub. Accts., l!Jl2, p. 70. "Revised Civil Statutes of 1911, Art. 6859, et seq .. not exempt by law are required to work on the public roads for a period not exceeding five days each year, or in lieu thereof to pay one dollar per day. In addition to this labor, county con­victs must be put to work upon the public highways if they can not be utilized in the workhouse or on the county poor farm. The Reforms Needed. The foregoing investigation of the road laws of other· States shows the necessity of substituting a cash tax for the old com­pulsory labor service demanded by Art. 6919 of the Revised Statutes. (1) The cash tax makes possible the securing of labor just when it is needed without regard to whether any particular farmer is able to come out. (2) It gives the overseer complete authority over his men. (3) And it improves the character of the service, for the simple reason that the workers know that they can be discharged. Article 6970 of the Civil Statutes gives the commissioners' court, in counties levying a special tax, the right to exempt persons from working the roads. Either all counties should be required to levy a special tax within the Con­stitutional limit of fifteen cents on the hundred dollars valuation of property, or a premium system such as Pennsylvania has should be adopted. In Pennsylvania, when taxes are collected in cash, the State· awards the townships a sum equal to fifty per cent. of the amount so collected. Would not the increased taxes collected because of the higher land values made possible by good roads soon pay for the roads? The convenience in marketing crops and the ease of travel would justify such aid to counties. Almost half of the States of the Union defray from one-third to three-fourth of the cost of construction of all highways. Texas should fall in line. To carry out a program of State aid in road construction and improvement, the experience of other States shows that a high­way commission or a State highway engineer, or both, are needed.28 The State highway department should be headed by a non-partisan, non-political commission, which should elect the State Highway Engineer, supervh~e the work of the highway de­partment, and provide permanence and continuity of policy and organization for the working force of the department. '"Texas Welfare Com. Rept. of 1912. Sf1.ldies in Agriculforal Economics The State engineer should not only have power to construct demonstration or model roads, as the recently proposed highway commission law for Texas provided, but he should have the power to compel uniformity in road construction by preparing plans, and to accept or reject contracts for construction, with the fur­ther provision that all construction should be under his super­v1s10n. This would apply to cases where State aid is granted. In the case of county or district aid to highways, exclusive of State aid, the work should be placed in the hands of a com­petent and experienced road engineer or supervisor, who should be subject only to the orders of the county commissioners' court and not subject to the orders of any single county commissioner. Article 6953 of the Civil Statutes gives the commissioners' court the right to employ a road superintendent for the county. This should be amended so as to require a road superintendent, or engineer, for each county. Where the population of a county is small and the road expenditures are too light to justify the employment of such a road engineer, the State highway depart­ment should have the authority to combine two or more counties to form a district which should then employ a road engineer for such district. The county or district engineer should work in harmony with the State department. He should furnish reports on the roads, and be subject to the regulations of the State high­way department. By employing a good highway engineer, the county will save more money than if the whole matter of road construction and maintenance is left, as at present, to foremen who know nothing about road construction. Convict labor should be used on the public roads and in rock quarries owned and operated by the State for the benefit of pub­lic roads, as in Illinois. Georgia illustrates what can be done for highway improvement by the aid of convicts under an efficient system of administration. Instead of the two-thirds majority at present required for. a bond issue for road purposes in subdivisions of a county, a mere majority should be sufficient. RAILWAY RATES AND SERVICES AS AFFECTING THE TEXAS FARMER BY F. L. vAUGI:L\N. No other factor is more important in the promotion of farm­ing than the railway. This influence may show itself in the form either of rates or of services. The general effect of these two factors upon the Texas farmer will be considered. In 1906, the average rate from all points in Texas to Gal­veston, taking into account the quantity of cotton affected by each rate quoted, was 52.9 cents pP-r 100 pounds.1 For the other Southern States, the average freight charge was 32 cents per 100 pounds, or 20.9 cents less than the Texas rate. This, combined with the fact that the cost of hauling cotton from the farms of Texas to the market is about 3 cents greater than elsewhere,2 shows the disadvantageous position of the Texas farmer from the .standpoint of the expenses of transportation. For example; suppose that the price of cotton is 10 cents. Then the expense of transportation for the Texas farmer is 7 per cent. of the value of his cotton at the seaboard, while that for the agriculturists of the older Southern States is only 4.5 per cent., a difference of 2 1-2 per cent. The cotton buyers make allowance for this dis­parity, offering about 1-4 of a cent less per pound or $1.25 less per bale than is paid in other parts of the South. Thus it is proved that railway rates materialy affect the prices of the farm products in this State. Moreover, since the value of land is measured by the price of its products, it is evident that this cost of transportation affects indirectly the price of farms. Assuming a yield of two-fifths Of a bale per acre, the Texas farmer receives two-fifths of $1.25 or .$.50 less per acre for his cotton than the cotton grower east of the Mississippi. This amount capitalized at an 8 per cent. inter­est rate equals $6.25, the difference in the value of cotton lands in Texas as compared with other Southern States, due to the higher cost of transportation in the former. 1 Hl06 Yea.rbook of Dept. of Agri., p. 372. ']bid, p. 373. Studies in Agriciiltural Ec01iomics However, the past forty years have witnessed a steady decline in the expense of transportation. The average receipts by the railways of Texas for freight traffic, per short ton per mile, was about 1.303 cents in 1890 and 1.056 cents in 1910; the rates for the United States were .941 cents and .753 cents respect­ively.3 This shows that during this period the average re­ceipts decreased 3 per cent faster in this State than in the whole country. It is natural to expect that this decrease in freight charges will continue in the future. Improved meth­ods of loading and unloading freight, economies in the dispo­sition of cars so as to lessen the number of empty cars hauled, a larger quantity of valuable freight paying higher rates per unit of freight,-all would tend to lower the cost of transporting farm products. The Farmer's Share of Retail Price. A general complaint of the farmer now concerns the decrease of his share in the distribution of prices. He is realizing slowly but surely that a more economical distribution of his products, and not a greater output per acre, is at present the main prob­lem to solve. The question, why does not the farmer receive a larger percentage of the price paid by the ultimate consumer, is continually arising. The relation of the railways to this prob­lem will now be considered. An investigation into the increase of prices in the process of distribution was made in 1910, the main object being to discover what fraction of the consumer's price was received by the farmer.4 Milk was one of the commodities under investigation. It was found that the dairyman receives only one-half the price paid by the consumer, the other half going to the railway com­pany for carriage, to the wholesale milk dealer, if there be one in the chain 0f distribution, and to the retailer. 'rhe freight charges approximate about 7 per cent. of the consumer's price, leaving 43 per cent. for the dealers. Owing to the cheapness in the distribution of butter, the creamery receives 86.3 per cent. and the railway .6 per cent. of the consumer's price for that commodity. S"Statistics of Railways in the U. S.", 1910, P· 59. •Yearbook of Dept. of Agri., 1910, p. 20. A similar investigation was made by the Industrial Commis­sion in 1900. Although the information is thirteen years old, it is thought that the ratios between producer's and consumer's prices are approximately the same now as they were then. Poul­try was found almost to double in price between the farmer and the consumer. Of the price paid by the consumer, the farmer receives 69 per cent. in the case of eggs, when bought by the dozen; cabbage, 48.1 per cent., by the head and 64.9 per cent., by the pound; blackberries, 83.3 per cent, by the crate; melons, 50 per cent., by the pound. The farmer received 93 per cent of the price paid by cotton manufacturers for the raw cotton; 91 per cent. of the price of cattle offered by the packers; and 73 per cent of the price of. wheat when bought by millers. With approximate accurracy it has been determined that when the farmer receives 50 per cent. of the consumer's price, the freight charge on eggs is about .6 per cent.; beans, 2.4 per cent. ; potatoes, 7.4 per cent.; grain of all sorts, 3.8 per cent.; hay, 7.9 per cent; cattle and hogs, 1.2 per cent.; live poultry, 2.2 per cent. ; wool, .3 per cent. These allowances for freight are to be increased by one-half in the cases in which the farmer gets about three-fourths of the consumer's price. Thus, it does not appear that railway rates make a serious burden in the case of most agricultural products. One general fact shown was that the farmer's percentage of the consumer's price diminished as the quantities in which the produce was retailed were smaller. Onions afford a convincing illustration. When purchased by the peck the farmer received 27.8 per cent. of the retail price; by the barrel, 58.3 per cent.; and by the 100 pounds, 69 per cent. The explanation of this variation is of course that the freight rate per unit decreases as the quantity shipped increases. Also the cost of retailing is increased. The Railway and the Fruit and Truck Industry. Perhaps no other industry is so inseparably dependent upon an efficient system of safe and rapid distribution as fruit-grow­ing. The network of railways has converted unproductive land into highly specialized fruit growing regions being able to dis­tribute the products of the orchard and vineyard to remote mar­kets. There has been a gradual evolution of special transporta­ Studies in Agricultural Economics tion facilities, until today the fast refrigerator car lines and the cold storage warehouses have better brought together the pro­ducer and consumer. Yet the distribution of the fruit crop from remote areas is one of the most difficult problems of transporta­tion. Few commodities are more likely to deteriorate in transit than fruit. The ripening and the rots continue to develop in the cars during hot, moist seasons, unless they are checked soon after picking by a cold temperature. Of course, fall and winter fruits are less subject to this danger, but on long trips the ripening process or rots may cause serious loss. Other causes of injury to fruit are due to too loose packing, to severe pressing, and to careless handling. The successful transportation of fruits in re­frigeration depends primarily on the sound condition of the fruit itself; on cooling it soon after picking; on shipping it in pack­ages which cool quickly throughout; on a dry, pure, cold air uniformly distributed in the car; and on a free circulation of air throughout the packages. The modern refrigerator car is generally capable of main­taining a uniform degree of cold under ordinary icing, after the fruit is cooled. The most needed improvement is a practical method of reducing quickly the temperature of the fruit during hot weather to prevent further ripening and the development of Tots during the early part of the trip. This improvement might be made either by increasing the refrigerating power and equal­izing the distribution of cold dry air in the car, or by cooling the fruit before loading (pre-cooling) and merely maintaining refrigeration in transit, as in the present methods of meat ship­ment. One of the most live and important questions at present, when complaint of the high cost of living is heard on every side, con­cerns the means by which the producer and consumer may be brought closer together. An effort leading to this goal was made last March by the truck growers before the Texas railroad com­mission. Their appeal included a demand for both better service and cheaper rates. First, a maximum of five stops at $3 each, instead of three stopovers costing $5 each, was asked for. Also additional rights in selling products from the car were demanded: Although no 100 tremendous advantage could be derived from such changes, they would nevertheless aid a better distribution of farm produce. First, the fruit and truck growers would be benefited in that their market would become wider and more varied. The result would be that the supply of fruit and truck could supply the demand of many markets, thus making possible higher average prices for these articles, and preventing the overstocking of any one market. On the other hand, the consumer could be brought into direct contact with the producer, sales from cars meaning at least a partial elimination of the middleman. Lower prices for the con­sumers would be the result, since the consumer could be in a po­sition to enjoy, not only the usual profit of the commission man, but also cheaper freight rates due to carload shipments. Every dollar thus saved in the chain of distribution by the privilege of selling products at more numerous and inexpensive stopovers, would lower the cost of the living to that extent. Two changes in the freight tariff were advocated: The first changing the minimum weight on a car of strawberries or black­berries from 20,000 to 17,000 pounds; the second permitting products in mixed cars to bear their proportionate car rate. The latter can be easily defended, the chief argument in its favor being that it would encourage diversified farming. The small truck grower would no longer be compelled to raise only one or two commodities so as to ship in car load lots; instead he could raise a greater variety of products and then ship in mixed cars without paying the highest rate prescribed for any one com­modity in the car. Moreover, the new tariff would tend to dis­courage the waste of small quantities of fruit and truck, since they could be cheaply shipped together to the market. Furthermore, these two alterations in freights, and the con­sequent diversified farming, would give a stimulus to the devel­opment of uncultivated and isolated parts of the State. The individual farmer, knowing tha:t he could better compete with the large producer, would not hesitate so much in utilizing land especially adapted to fruit and truck growing. Of course, every measure considered by the railway commis­ sion involves two sides: first, the welfare of the people; second, the right of the railway to a fair return on its capital. Although Studies in Agricilltttral Economics the freight rate would be appreciably lowered, it is believed that ultimately the railways would profit by the proposed change. The encouragement of more shipments and the development of the country would naturally cause a greater tonnage of freight, thus benefiting the railways by increasing the amount of their traffic. The Railway and the Marketing of Live Stock. The advent of modern :facilities for transporting live animals marked a turning point in the growth of the live stock industry. Only within recent years have more cattle been sent to market by rail than by trail. The history of live stock transportation in the United States may be divided into two parts. Two marked characteristics of the first period were: first, the injury to stock due to inferior accommodations and faulty management of traffic; second, complaint of the shipper. The extension of rail­ways throughout the range country of the West, and changes in roadbed, cars, and traffic methods, making the transportation of live stock more humane and economical, distinguish the second or present period. In comparison with water transportation, the transportation by rail is steadily becoming of more importance to the stock raiser. During the later sixties, for example, the railways car­ried more than three times as many cattle into St. Louis as the established river service, but today the cattle traffic by rail is over eighty times that on the river.5 The importance of local shipments of cattle within this State is illustrated by figures covering practically all the railways of the State for the six months ending May 31, 1908.6 The total number of cattle shipped during this time was about 350,000 head, more than two-fifths being consigned to points within the State, and less than three-fifths, to points outside. This serves to illustrate the tremendous influence for good or evil which may be exercised by the Texas railway commission, this body having almost exclusive control of intra-state transportation. The chief expense in marketing live stock is made up of trans· portation, including not only charges for freight, feed, attend­ 'Yearbook of Dept. of Agri., 1908, pp. 231, 234. •[bid, p. 239. ance, yardage, and other expenses of the road, but also losses in transit. The steady decline of all these expenses, together with a marked diminution of free pasturage and inaccessibility of water along the old cattle traii, has caused a decided increase in th~ shipment of live stock by rail. Next, attention may be directed to some of the facilities and future economies in transporting live stock. The total number of live stock cars owned by railways in the United States in 1907 was 69,997, representing a carrying capacity of 2,013,170 tons.7 This capacity, however, represents the weight of dead freight that the car is permitted to carry and not the weight of the liv-1910 Ellis -------­--­-­--------------­------··-----------Rockwall _________ ____________ __ ---------------­Grimes -----­__ -------------­_-----------­__-----­Falls ---­----­------­---­--­---------------------­-Robertson ___________ ·---------------------------­Fort. Berid ..____ ------­-­_____ --------------------­Navarro ____-­____ _____ ----­-­-----­--­-----------McLennan ______ -­--­------~--___ ----··------­----­Collin ------­___-------------­____ ____. . ____ _______ Fannin ----­-­--­----­-----­-----------­---------­Hill ---------­--­-­__ --------------------­__ ---­--­Red River_____________ ---------------------------­Lamar ___-­__ --------------­---------------------­ + 4.3 + 4.3 + 3.2 + 9.4 + 7.2 + 6.1 + 6.8 + 5.2 + 5.5 + 10.7 + 6.1 + 7.4 +13.3 + 3.3 + 0.5 -1.7 -1.7 + 5.1 -2.2 + 1.6 + 2.0 + 7.9 + 2.2 + 4.2 + 2.6 + 3.1 + 7.6 + 4.8 + 1.5 + 7.7 + 12.3 + 3.9 + 8.4 + 7.2 + 13.4 +12.!l +10.~ +10.0 +16.4 ;:-+ Increase -Decrease. It will be noted that in every county the percentage of ten­ancy increased during the whole period from 1890 to 1910. From 1900 to 1910 the percentage of tenancy declined in three counties,-Grimes, Falls, and Fort Bend ; and in every other Studies in .Agricultural Economics county, except Collin County, the per cent. of increase during the decade from 1900 to 1910 was less than the per cent. of in­crease from 1890 to 1900. In most sections of the State, the percentage of tenancy in­creased from 1900 to 1910. In 38 counties, however, the per­centage declined, and a remarkable fact in regard to t,his decline in tenancy is that in every county, except two, Aransas and Washington, the decline was in the face of an advance in the price of farm land.• COUNTIES IN WHICH PER CENT. OF TENANCY DE­CREASED FROM 1900 TO 1910. Oounty. Andrews ____ ------·· -----------------------------------Aransas -------------------··------------------------­Austin -------------------------------------------·--­ BrazQrla _____________----____________________________ _ Brazos -----------------------------------------------­ Brewster _____-------__--_----------------------------Burnet -----------------------------------------------Oameron --------------____ ---------------------------Oolorado ___ ------------------------------------------ Ector ____--___________________________________________ El Paso._______------------_______ -----------------·-­Fayette ----------------------------------------------­ Fort Bend•••__-----______________----------__________ Freestone -------------------------------------------­Gaines -----------------------------------------------­ Galveston --__ ---------__---------__-----------------­ Garza ------___________________________________________ Grimes ___________----_______..__ ---------------______ Harrison ______-----___________________---____-----__ _ Hidalgo ---------------------------------------------­Jasper · -----------------------------------------------­Johnson ______ ----------------------------------------Lavaca ----------------------------------------------­Leon ---__ --------------____ -------------------------­Montague _------------------------------------------­Newton __ -----______----------------------------------Panola ----------------------------------------------­Pllcos ---------------------------------------------­Polk -------------------------------------------------­Reeves -----------------------------------------------­ San J aclnto ___________________-----__ ----------------­Upton -----------------------------------------------­ Val Verde______ ---------__ -----------------·---------­Washington _-----------____ ------------------------­Webb ------------------------------------------------­ Williamson _________________________________________ Winkler ---------------------------------------------­Wise -----------------------------------------------­ 1910 5.6 21.5 44.7 37.4 60.0 3.2 45.3 45.4 46.7 13.1 22.6 49.9 61.0 55.5 17.5 18.4 21.0 61.2 51.7 35.0 22.5 52.1 47.6 52.4 48.4 14.6 47.8 3.6 40.0 9.3 46.4 2 .9 20.4 57.2 9.5 59.1 0.8 47.6 1900 25.0 23.4 47.0 48.6 60.3 14.3 47.0 62.0 54.5 56.0 25.2 53.1 63.2 56.5 50.0 28.8 23 .7 62.9 53.6 50.6 31.0 53.9 49.9 52.7 52.6 27.8 50.4 16.8 41.5 25.4 49.6 22.2 50.0 63.9 40.0 60.0 S3.3 48.4 % decrease. 19.4 1.9 2.3 11.2 0.3 11.1 1.7 16.6 7.8 42.9 2.6 3.2 2.2 1.0 32.5 10.4 2.7 1.7 1.9 15.6 8.5 Ul 2.3 0.3 4.2 13.2 2.6 13.2 1.5 16.1 3.2 19.3 29.6 6.7 3Q.5 0.9 32.3 0.8 We should probably expect to find the highest percentages of *It is also a notable fact that in the list but few of the leading cotton countries appear,-a fact which serYes further to emphasize the connec­tion between cotton and tenancy. May we not infer that diYersification wo11 l'~odati"11". JS. )Iiddlt'111an . .'i:!. !l!i. )fortg-a!.!t''t. 111:~. Prin'"· farm"r·· ;Jrnrl' 1.1f. Pti: e"ntr11l ni l>y fornwr". ,j.J, li:!. ti:l : "P•'<·1tla· tion and. ]Iii'. Raiffei,-t•n c·1"·:lit m1i1)Jl ... Joi. llii. Hai lw;1~·,. an1l Jli11~'. ]ll!li. $onthern T""'"" Tn!l·k l;rp11·pr~· ..\"""'·i1llio11 . .J!I. ~pecnlntit1n. J111llf: Ptl°Pd 011 )'l'in·"· 10711". Taxat ion and farmi11.~. l:!Gtl'. T11<111t iarm1·r". s. 11 It!'. 'YagP"-oi farm han.J,.. I .J. \\';trt'hnn" ''· 1·11i'•J1l'rnt in'. .i:L ti:{.