farmers and bankers -- 4/06/20
Today's selection -- from Dreams of El Dorado by H.W. Brands. The uneasy, often adversarial relationship between farmers and bankers:
"For Western farmers, the depression that followed the panic of 1893 -- the worst depression in the nation's history until then -- merely added to the stresses they had been feeling for decades. Since the 1870s farm prices had been falling relentlessly, pushing prosperous farmers into the ranks of the marginal, and marginal farmers into ruin. Ironically, a principal cause of the price decline was the farmers' very success; they produced more corn, wheat, cotton, pork and so on than the markets for those commodities could absorb. Some of the overproduction was the result of the increase in farm acreage, notably under the Homestead Act. Some was the consequence of the mechanization of the farm process.
"But farmers didn't like hearing this explanation. It demeaned their labor and accomplishment. They were suffering because they had succeeded too well? It made no sense. And it implied that some of them -- maybe very many of them -- would have to go out of business.
"So the farmers blamed something else: the money system. A Nebraska farmer wrote to the editor of a local farm journal in 1891 lamenting the hard year he and his neighbors were having. 'The hot winds burned up the entire crop, leaving thousands of families wholly destitute, many of whom might have been able to run through the crisis had it not been for the galling yoke put upon them by the money loaners and sharks -- not by charging 7 per cent per annum, which is the lawful rate of interest, or even 10 per cent, but the unlawful and inhuman country-destroying rate of 3 per cent a month, some going still farther and charging 50 per cent per annum,' he said. 'We are cursed, many of us financially beyond redemption, not by the hot winds so much as by the swindling games of the bankers and money loaners, who have taken the money and now are after the property, leaving the farmer moneyless and homeless.'
"The farmer explained how the system worked against those like him who had to borrow to run their businesses. 'I have borrowed, for example, $1,000. I pay $25 to the commission man. I give my note and second mortgage of 3 per cent of the $1,000, which is $30 more. Then I pay 7 per cent on the $1,000 to the actual loaner. Then besides all this I pay for appraising the land, abstract, recording, etc., so when I have secured my loan I am out the first year $150.' Things get worse. 'This is on the farm, but now comes the chattel loan. I must have $50 to save myself. I get the money; my note is made payable in thirty or sixty days for $35, secured by chattel of two horses, harness and wagon, about five times the value of the note.' The note comes due; the farmer asks for a few days. 'No, I can't wait,' says the lender. 'I must have the money.' Says the farmer, to himself and the editor: 'If I can't get the money I have the extreme pleasure of seeing my property taken.'
"The editor remarked that he received such letters every day.
"They revealed how conditions on the Middle Border were beating the average farmer down. 'Take a man, for instance, who labors hard from fourteen to sixteen hours a day to obtain the bare necessaries of life. He eats his bacon and potatoes in a place which might rather be called a den than a home; and then, worn out, lies down and sleeps. He is brutalized both morally and physically.' His work had kept him from attaining the higher things in life, or even realizing that they existed. 'He has no ideas, only propensities. He has no beliefs, only instincts. He does not, often cannot, read. His contact with other people is only the relation of servant to master, of a machine to its director.' This man was a product of a system of finance that threw one farmer against all the others in a cutthroat competition for survival of the fittest. 'Deny it if you can; competition is only another name for war. It means slavery to millions; it means the sale of virtue for bread; it means for thousands upon thousands starvation, misery, and death. After four thousand years of life, is this the best that we can achieve?'"