AGRICULTURAL CREDIT IN THE UNITED STATES 943 



worse off, despite his increased equity, than if the land had not 

 increased in value, because of his larger interest payments and 

 the fact that the mere acquisition of the land has depleted his 

 working funds. To quote from the report of a recent investiga- 

 tion, " where land values are high, the amount of money invested 

 in working capital becomes proportionately small." This refers 

 to conditions in Indiana, Illinois and Iowa. And Trosien states 

 that the higher the price of land rises, the more difficult does it >/ 

 become to secure capital for its proper working. 



The significance of equity becomes clearer if farming is viewed 

 as a business which is successful only if it yields a fair return on 

 the investment and pays the farmer fair wages of management. 

 That this is not the case in our most advanced agricultural re- 

 gions has been clearly brought out by the report of the above- 

 mentioned investigation of farming conditions in Indiana, Illinois 

 and Iowa. Two hundred and forty-seven rented farms were in- 

 vestigated, with the result that the average return on their invest- " 

 ment to the landlords in these states is shown to be 3.5 per cent, 

 3.6 per cent and 3.2 per cent respectively. In the case of 273 

 farm owners who tilled their farms, the average labor income left 

 after the deduction of 5 per cent interest on the capital was $408. 

 " One owner out of every three paid for the privilege of working 

 his farm, that is, after deducting 5 per cent interest on his in- 

 vestment he failed to make a plus labor income," And the farm 

 owners, with an average investment of over twelve times that of 

 the farm tenants, made less than half as much labor income. 

 The bulletin concludes that the farmers of these regions who are 

 owners are living on the earnings of their investment and not on 

 the real profits of the farm. 



It is not at all certain that this increased equity is stable. It is 

 evident that part of the increase has resulted from land specu- 

 lation ; and since production has remained about stationary, the 

 rest must be credited to the rise in prices of farm products. 

 These prices are now so high that any further rise must either 

 curtail consumption or stimulate importation, and is therefore 

 improbable. Indeed it is doubtful whether the present high 

 prices will continue even if there is no interruption of general 



