942 READINGS IN RURAL ECONOMICS 



165 per cent, while for Alabama it was 621.4 per cent. Although 

 the rates on mortgage loans are much higher in the South than 

 in the better developed agricultural regions of the North, the bur- 

 den of mortgage indebtedness is much lighter in the South. In 

 much of the South agricultural conditions to-day are very similar, 

 as regards the return on investment, to those which prevailed in 

 the great Middle West a generation ago. High interest rates are 

 offset by large profits ; the short term of the loan, which is from 

 three to five years, is usually sufficient time for the farmer to pay 

 off his debt if he is so inclined. 



Beyond the expenditure necessary to maintain the former level 

 of production, which may eventually mean an increase in mort- 

 gage indebtedness, any further increase in such indebtedness 

 should indicate expansion ; that is, an increase in production. In 

 Germany, for example, while mortgage indebtedness has greatly 

 increased during the last quarter of the century, there has also 

 been an enormous expansion in agriculture. Helfferich shows that 

 the yield of wheat, rye, oats, barley, potatoes and hay increased 

 77.7 per cent during this period, while the acreage increased 

 87.7 per cent. Similar figures might be given for Denmark. In 

 the United States, however, the increased mortgage indebtedness 

 is not reflected in increased production. Agricultural prosperity 

 has been almost solely due to an increase in prices. 



Some writers maintain that this is not a serious matter, since, 

 owing to the rise of land values, the farmer now has, on an 

 average, despite his heavier mortgage indebtedness, a greater 

 equity than before, shown by the fact that in 1890 the mortgage 

 debt on farms operated by owners was 35.5 per cent of their 

 value, while in 1910 it was but 26.1 per cent. But the argument 

 seems to the writer fallacious. The real measure of the prosperity 

 of the farmers as a class is not the amount of their equity but 

 the net return on their investment. Although an increased equity, 

 not accompanied by a corresponding increase in the net return 

 on investment, is of course a gain to the farmer who wishes to 

 sell, it is of no material advantage to the one who wishes to hold 

 his farm and whose income is sufficient for his needs ; while a 

 new owner, whether by purchase or by inheritance, is actually 



