EUROPEAN AGRICULTURE 259 



When interest is not paid or a member is neglecting his farm, the local 

 deputy, as he is called, serves as the medium between the association 

 and the delinquent member. In this way the advantages and economy 

 of a centralized organization and at the same time the benefits of a de- 

 centralized association — that is, one close to the individual farmer — 

 are secured. 



Personal Credit 



While the land mortgage association is sufficient to provide the 

 long-time credit that is needed by the landowner, it does not suffice 

 to furnish the short-time loans that are needed to supply working 

 capital, to buy seeds, fertilizers, livestock to be fattened, to pay for 

 labor to grow crops and such operations as require capital for six to 

 nine months. To the farm renter or any farmer who does not own 

 land, the land mortgage association has nothing to offer. 



To meet this need the rural banks have been established. The work 

 of this class of banks had its beginning particularly with William 

 Eaiffeissen among the peasant farmers of western Germany about the 

 middle of the last century. Eaiffeissen saw the dire straits of the 

 small -farmers who were without credit and at the mercy of the usurer. 

 He began by establishing cooperative associations to do their own bank- 

 ing, and there were four fundamental principles that he insisted upon 

 that have been retained in the true Eaiffeissen banks of the present 

 time. First, unlimited liability of the members. This was necessary 

 in the beginning in order to get any credit at all. All the members 

 were practically without means and the question of limited or unlimited 

 liability was of little moment to them. 



Second. A restricted area of operation for the bank. This was 

 confined to the district in which the members were all personally 

 acquainted with one another. In European farming it is customary, 

 especially for the peasants, to live together in small villages and not 

 on single farms as in America, so that the boundaries for the operation 

 of the bank were generally confined to a single village. 



Third. No dividends to members. A low rate of interest, usually 

 4 per cent., was paid on the capital stock each member had invested in 

 the bank, but all profits made over that amount were set aside in a 

 reserve fund. 



Fourth. No salaried officers were employed in the banks except the 

 bookkeeper. The management of the bank was made a matter of 

 honor, the work to be done without any mercenary compensation. 

 The business was done in the most democratic manner possible. Every 

 member was given a voice and made to feel he was personally respon- 

 sible for the success of the business. Loans were made for specific 

 purposes, for example, to drain a field. The committee considered the 



