August. 1H22 



SCIENTIFIC AGRICULTURE 



397 



for them. Moreover, it co.sts money to place 

 a mortgage on a farm. Thi.s .sliould not be 

 necessary. Provision should be made that 

 such intermediate credit could be secured 

 without the expense of a mortgage. 



We now turn to study the effects of bor- 

 rowed capital. The first effect of borrow- 

 ed capital is that it permits of a more in- 

 tensive use of the farmer's own capital, labor 

 and land. Sometimes the farmer does not 

 have enougli capital of his own to make the 

 most economical combination with the land 

 and labor at his command, and under these 

 circumstances it might be much to his ad- 

 vantage to borrow some additional capital. 

 For example, the farm family may be too 

 large for the size of the farm and it might 

 be highU' profitable to buy anotiier farm 

 near at hand, by means of long-term credit. 

 By so doing there would be fuller scope for 

 the labor that was available and sometimes 

 the same amount of machinery, when pro- 

 perly handled, would be sufficient for work- 

 ing both places. It is evident that here 

 there would be a more intensive use of the 

 labor and capital involved and the money 

 returns therefrom would be correspondingly 

 greater. Or, on the contrary, the amount of 

 the land held by the farmer may be too much 

 for the small amount of labor and capital 

 he may have; and if the farmer has the 

 ability to use more capital and direct more 

 labor on the same farm he is wasting his 

 time and effort in carrying on his work with- 

 out having the necessary working capital 

 with which to obtain suitable equipment and 

 employ additional labor. I have already 

 noted the way in which a more intensive use 

 of the capital, labor and land may be at- 

 tained by having the winter months more 

 fully occupied. 



The personal aspect of this must not be 

 over-looked. A farmer develops his ability 

 for larger things by being placed in contact 

 with the opportunity for them. By using to 

 the greatest degree the resources which he 

 has, he will develop his ability to accom- 

 plish still greater things. Business ability, 

 even in the case of the farmer, is not born 

 with him, but evolves according to the mea- 

 sure to which he uses what he has and to the 

 extent to which opportunities are open to 

 him. In the case of many a farmer he has 

 not the ability to use credit because he has 

 never been able to command it. "To him 

 that hath shall be given," applies as much 

 here as in the realm of the personal life of 



the individual. Of course, the farmer should 

 learn to use borrowed capital gradually, by 

 increasing the amount borrowed through 

 careful stages and noting the results at each 

 stage. Here, as in urban enterprise, busi- 

 ness ability is a progressive unfolding of the 

 individual power and the slow but sure de- 

 velopment of this quality from lower to 

 higher gradations should be the aim of the 

 farmer. 



Then, the increased amount of capital 

 available for investment in land brings a 

 ready response in the increased value of the 

 land. Where land is thought of only as an 

 investment its value will be determined by 

 tlie amount of the return which it will vield. 

 But even where the land is worked by the 

 owner for the satisfaction of having a good 

 home, the investment value is still an im- 

 portant consideration. If the return from 

 it is not such as he could obtain in other 

 fields of activity through the use of the 

 same amount of capital and the expenditure 

 of the same amount of effort, the sentimental 

 tie of home usually weakens and he moves 

 to the place and into the line of activity in 

 which his return is the largest. Now the 

 natural tendency is that the value of land 

 changes inversely as the rate of interest on 

 an investment of that kind. For example, if 

 the net rent of a piece of land is $300 per 

 year, and the rate of interest on such an in- 

 vestment is 4 p. c. the value of the land wUl 

 be $7,500; but if the rate of interest be 5 

 ' p. c. the value of the land is only $6,000. 

 Before the war, when interest rates were de- 

 clining, the value of land was progressively 

 rising. This was amply attested in the 

 United States, for after the establishment of 

 the Federal Farm Loan system by which 

 capital at low rates of interest was made 

 available more abundantly, the land values 

 took an almost immediate slant upward. 

 Unless there is some counterbalancing in- 

 fluence this increased value of land will in- 

 variably follow the more abundant capital 

 available for use in agriculture and the lower 

 interest rate. No means has yet been de- 

 vised to prevent increased land values under 

 these conditions. The question is sometimes 

 asked. — If that is the case, does it make the 

 purchase of a farm any easier to have a sys- 

 tem of long-term credits with low interest 

 rates .^ I must leave that unanswered since 

 it is not germane to the subject in hand. 



But it is to the financial effects of bor- 

 rowed capital that I would direct most at- 



