55] THE INFLUENCE OF THE CREDIT SYSTEM 55 



The other class of loans out of which goods for con- 

 sumption are bought, are predicated largely upon the 

 product of labor, with land as a collateral security. The 

 practice now under consideration comes nearer giving 

 color to the doctrinal basis of the wages fund notion 

 than does any other. Nevertheless close examination 

 shows that the process does not directly involve even a 

 temporary diminution of capital. This is explained by 

 stating that the farmer does not consume in order that 

 he may produce, but that he produces in order that he 

 may consume. So true is this, that even under the 

 credit system he normally produces before he consumes. 

 The crop lien itself is essentially a recognition that this 

 product has value in all stages of its development, from 

 its inception to its completion. The crop lien gives the 

 merchant a claim upon this increasing value, while it 

 tends to enable the farmer to consume day by day the 

 virtual product of his labor. 



If there were no unusual risks connected with this 

 farm supply business, and if the farmers were vigorously 

 alive to their own interests, the percentages added to the 

 cash prices would approach the normal rate of interest. 

 But neither of these conditions has been sufficiently ful- 

 filled in Georgia. The credit system working in the 

 midst of such unfavorable conditions brings about an 

 unsatisfactory distribution of the product, to which ref- 

 erence will again be made in the closing chapter. To 

 predicate a loan upon a crop is a daring venture. Those j 

 who have fallen by the wayside engaged in such an 

 undertaking show that unusual ability is required for 

 success. Bearing in mind also the fact that during the 

 two decades preceding 1894 cotton declined in price 

 seventy per cent, while increasing in the rate of produc- 



