84 Tlie Condition of the Western Farmer. [362 



loan at three per cent a month given by an early settler who 

 had practically no means to obtain the funds to begin cultiva- 

 tion or even to make the first payment on cheap land. For 

 the early settler could reasonably expect to make and save 

 both principal and interest out of a single crop, while the 

 variable income of the farmer to-day may often fall so low as 

 to fail to yield sufficient surplus to pay the interest on that part 

 of the debt which is represented by income-producing assets, 

 much less on the remainder of it. 



' In the region which we are considering, capitalization of 

 all agricultural property is too high (it has been previously 

 maintained that the basis of capitalization is not so much 

 income as a demand arising from other causes), and from this 

 two results follow: first, that the rate of income from land is 

 low compared to that from other investments, and second, 

 that the marginal amount of money that can be borrowed on 

 the land is high in just the proportion that the capitalization 

 is high. Now under these circumstances let a farmer pay 

 the rate of interest which is current in the money markets, 

 and if the debt is large or long-continued, the tendency is for 

 him steadily to lose. It must of course be remembered that 

 agriculture is a highly uncertain occupation, so that a suc- 

 cession of good crops may entirely overcome this normal 

 loss, or a succession of poor ones may greatly increase it. 



What we have thus far said of the use of credit has been of 

 such general application as to apply to all borrowers alike, 

 but it will now be necessary to show how borrowing becomes 

 a much greater evil to certain classes of farmers than to 

 others. It is a fact often commented upon that the small entre- 

 preneur who is out of debt takes pride in his condition and 

 usually avoids investments or speculations which would make 

 the use of credit necessary to him, while one who has once 

 become heavily encumbered becomes callous to the incon- 

 veniences caused by his indebtedness, and often does not 

 hesitate to plunge deeper if possible; moreover, the latter will 

 become reckless in his speculations, because if he is successful 

 the gain is his, and if he loses, much of the loss falls on his 



