There is undoubtedly a place for both kinds of legislation in the field of rural credit reform. Government aid should supplement rather than supplant private initiative. But this harmony of interest is not contemplated in current legislative There is about them a distressing irregularity of purpose which must be attributed largely to the failure on the part of those seeking to solve the land-credit problem to recognize the existence of two problems. There is a fundamental difference between the credit needs of landowners and those of the landless. The former require long-term credit for the purpose of equipping the farm; the latter need long-term credit in order to complete the purchase price of land. The adoption of any scheme purporting to treat both classes alike will leave the tenancy problem unsolved, irrespective of the kind of remedy applied. The problem of supplying landowners with adequate credit facilities should without question be left to private initiative. Experience has shown that private land-mortgage companies can, when reasonably well managed, succeed in supplying landowners with the capital they require on terms that are mutually advantageous. The Pearsons-Taft Land Credit Company of Chicago, the oldest concern of its kind in the United States, and the Woodruff Trust Company of Joliet have made enviable records in this field. The latter institution, although only four years old and confined in its business to a very restricted territory, now has outstanding bonds and guaranteed mortgages well over $600,000. It makes long-term loans, repayable by amortization, on agricultural lands at 6 per cent. This means that a borrower can extinguish a debt of $1000 in twenty years by making semi-annual payments of $43.26. On the combined security of the mortgages held in trust the company issues bonds to the public at 5 per cent and invests the proceeds in further agricultural loans. This process leaves a margin of profit sufficiently large to enable the company to pay liberal dividends to its stockholders. While the scheme has not greatly reduced the farmer's rate of interest, it has succeeded in reducing his cost of borrowing by relieving him of the necessity of paying renewal commissions. It would be well for the states to follow the example set by Massachusetts, Utah, and Wisconsin, and enact laws providing for the organization of these companies, so regulating their formation and activities as to afford reasonable security to the holders of land-mortgage bonds. Legislation of this character, if supplemented by a revision of the foreclosure and exemption laws, would solve the land-credit problem for landowners. It would not, as some have thought, have any far-reaching effect on the welfare of the tenant classes. It does not strike at the cause of the tenancy problem. The credit problem of tenants calls for more radical treatment if land-tenure reform is the goal. VI It was probably an appreciation of this fact which has caused several states to attempt to reduce the farmer's rate of interest below the rate that can be profitably offered by private landcredit companies. In Missouri, for example, a law (to become effective December 1st if in the meantime it is ratified by the voters of the state under the "initiative") has been passed boldly providing for an appropriation of $1,000,000 from the state treasury. One half of this amount will be loaned to farmers at 4.3 per cent. The other half will be invested in bonds of recognized standing and allowed to accumulate as a reserve fund. On the security of this fund, together with the deeds of trust on hand, bonds will be issued by a central state institution and additional capital provided for long-term loans. The rate of interest paid by the farmer will be the rate paid by the land bank on the bonds. The Missouri law is a drastic attempt to solve all land-credit problems within the state. It treats the two problems as one and proposes to employ centralized state machinery as the only effective means of accomplishing the reform. This is an unfortunate situation. For should a state succeed in reducing materially the rate of interest to all farmers it does not follow that the low rate of itself would cause any diminution in the percentage of farm tenancy. The immediate effect of a reduction in the current rate of interest is to raise the value of land owners. The mere prospect, indeed, of witnessing an arbitrary reduction in the interest rate is cause for general animation among landWith their speculative cupidity fully aroused they mortgage their land and acquire more, expecting eventually to convert their interest charges to lower rates and to realize a handsome profit from the advance in land values. This tendency appears whenever the promise of a low rate of interest is about to materialize. It is obvious, therefore, that legislation which promotes the spirit of land speculation is opposed to the interests of farm tenants. It would raise the value of land, further the movement toward concentration in ownership, and only aggravate the tenancy problem. About the only way in which a material reduction in the rate of interest can be made to serve the needs of the tenancy classes is by carefully restricting the conditions under which the low rate is to be granted so as to limit the borrowing power of landowners and speculators. Something of this kind has been attempted in the Oklahoma law of 1915. Briefly, the law provides that the commissioners of the land office may issue bonds, bearing an interest rate of 5 per cent, on the security of certain state educational lands, and make loans to farmers at 6 per cent. Further issues of bonds bearing the same rate of interest may be made on the security of the mortgages held by the commissioners. The maximum loan that can be obtained by any one farmer is $2000 and then only on condition that he reside upon the land given as security for the loan. This feature of the law is excellent. The residence requirement and the rigid limitation on loans will virtually prohibit absentee landowners from benefiting by the low rate of interest. Thus far the Oklahoma law is the only one really designed to promote ownership. If no difficulty is experienced in floating the bonds, an almost inexhaustible fund will be available for tenant farmers at a rate of interest well below the rate that is current in the state. Much permanent gain would result from the successful administration of the law. But, in the opinion of the writer, the problem of land-tenure reform is one of such magnitude as to be beyond the scope of state legislation. After all, state legislation on current problems is notoriously irregular and ineffective. Already the states have shown a disposition blindly to attack the land-credit problem. In view of the complex nature of this problem and its intimate relation to the tenancy problem, a strong national policy seems desirable. The federal government is in a much stronger position than any one state to carry through an effective program. It could market its bonds to better advantage, grant a lower rate of interest to the landless man, and apply a uniform remedy to a common problem. Furthermore, the federal government should have precedence in this field of legislation by virtue of a function it has assumed in the past. For many years it was a liberal donor of the public lands. Its policy made for ownership and democracy. Now that the supply of free land has been exhausted, a program involving special aid to the landless man would be a logical continuation of that policy. Those who are opposed to this kind of government intervention need carefully to revise their understanding of the landtenure problem. Eventually democracy will have its way, and it would be better to attack the tenancy problem in its infancy than to adopt retributive measures later on. Approximate equality in opportunity rather than in possessions is the goal. Whether this means socialism or a compromise régime is immaterial. This much, however, is certain: to object to a well designed system of government aid on the ground that it is unnecessary is to discredit the desirability of democracy; to condemn it as "socialistic" is equivalent to paying one's compliments to socialism. UNIVERSITY OF KANSAS. GEORGE E. PUTNAM. A PROPOSAL FOR PAN-AMERICAN MONETARY A UNITY CENTURY ago Napoleon looking down from the rock of St. Helena declared: "What Europe most needs is I a common law, a common measure, and a common money." Today, to most people a common law seems undesirable, a common measure both for Europe and the Americas is approaching attainment in the metric system, while a common money is widely looked upon as an ideal some day to be realized -but not far this side of the millennium. Fifty years ago the subject of international monetary unity was a live one in Europe and North America; and after the International Monetary Conference at Paris in 1867, which recommended uniformity on the basis of five francs of gold as the unit, it looked as if the international monetary unity achieved on a small scale in 1865 by the nations of the Latin Union, would be extended, though on a gold basis, to most of the leading states of Europe and North America. In its essentials the plan recommended by the International Monetary Conference at Paris in 1867, and, independently, by the Committee on Weights, Measures and Coinage of the Paris Exposition of that year, was the international adoption of the gold standard on the basis of a unit represented by the gold content of five francs of French coin, all gold coins to be .900 fine, and the gold coins of each country entering the monetary union to bear the emblems of that country but to have legal circulation in all the other countries. England was to reduce the pure gold content of her sovereign by about .9 per cent, or approximately 2d on a pound, the United States to reduce the size of the gold dollar by about 3 per cent, and France was to coin a 25-franc goldpiece. By this adjustment five francs 1 Quoted by United States delegate Samuel B. Ruggles in his report, to the Secre tary of State, on the International Monetary Conference of Paris of 1867. Senate Executive Document, No. 14, 40th Congress, 2d Session, p. 97. House Ex. Doc., No. 266, 41st Cong. 2d Sess. pp. 5-6; and Sen. Ex. Doc., No. 14, 40th Cong., 2d Sess., pp. 18-19. |