Delitzsch did not like the plan of Raiffeisen. In the year 1873 and again in 1876 he attacked the Raiffeisen system on the floor of the Imperial Parliament of Germany, of which he was then a member, and in 1875, in a brochure, he put in print these charges: (1) The Darlehenskassen have not a business or reserve fund (Geschäftsantheil) [or, as we say, "stock shares," i. e., the regular payment of a small sum at monthly or other intervals]. Yet these payments are indispensable for the security of the association. (2) The Darlehenskassen lend the capital they receive for longer periods than it is borrowed for, which invites bankruptcy. (3) The reserve fund, which is constantly growing larger, is never distributed, which is an anomaly. (4) Associations which do not hold out hopes of profit are running counter to the aspirations of human nature and will not encourage saving, and can have no independent existence (auf eigenen Füssen zu stehen). These points have been answered in detail and so effectually by M. Durand1 that his defense is probably the best exposition of the Raiffeisen system extant. To the first charge made by Herr Schultze Delitzsch, M. Durand replies: "There is no necessity for a reserve fund in the Raiffeisen system of agricultural credit, for the system is operated by and among a body of small proprietors who have land and instruments of tillage. The possessions of the members of the association on the plan of Schultze Delitzsch are by no means sufficiently large to reassure capital, and the accumulations of the Geschäftsantheil are a necessity for it. Again, if it is absolutely essential to have a Geschäftsantheil, the Raiffeisen system has a small but constantly growing one, which is held perpetually, while the Schultze Delitzsch scheme permits any member to withdraw with his 'Geschäftsantheil."" To the second charge against the Raiffeisen system, M. Durand replies by denying the validity of Herr Schultze Delitzsch's contention. What bank is there that does not accept deposits payable at sight? Do not the associations founded on the idea of Schultze Delitzsch pay depositors on demand with accumulated interest? The fundamental principle of banking is not the length of time of the deposit or of the loan, but of ability to meet the demands of the depositor, and this is done by lending to parties whose paper another bank will discount in case of need. The Raiffeisen associations conform to this principle of banking. They have three resources: (1) The repayment of short-time loans (generally made for one or two years); (2) the long-time loans are subject to a sinking fund or repayment by installment operation, which practically reduces them to several short-time loans; and (3) the ability to borrow from other capitalists to repay the one demanding his money, in the guaranties they have to offer—and what establishment possesses the guaranties offered by the Raiffeisen system of Darlehenskassen, possessing, as they do, from ten to sixty times the amount of their debt? It is not to be supposed that a powerful coalition of large bankers would attempt to wreck the system. Establishments giving credit have, it is true, been ruined by this means, but these wrecked banks were undermining the speculations of those who coalesced to ruin them. The very essence of the being of "agricultural credit," on the Raiffeisen principle, is not to speculate so as to make money, but merely to attract money where it will not flow unless the banks which have it to lend can be assured that it will be returned. And, strange as it may appear, in times of public financial doubt, as during the Franco-Prussian war in 1870, the Raiffeisen societies were obliged to refuse the deposits that were offered to them without interest. But suppose a still greater crisis, suppose every commercial house, savings bank, banks 1 Following Dr. L. Löll, royal Bavarian councilor, in Die bäuerlichen DarlehenskassenVereine, 2 ed., Wurzburg, 1889. of issue, and, finally, the State, shall have bankrupted. Under such extraordinary conditions the societies that guarantee agricultural credit may fail without dishonor. During the twelve years of prosperity in Germany, from 1875 to 1886, with no war, no commercial crisis, 200 of the societies founded upon the grand conception of Schultze Delitzsch became bankrupt, which in itself is a very sufficient answer to his second charge against Raiffeisen's profound modification of his Vorschussvereine to adapt it to an agricultural society. The third and fourth charges are in reality but one. The Raiffeisen society, according to Schultze Delitzsch, can not exist, can not stand on its own feet, since it is founded upon the principle of philanthropy and not of business, and it therefore lacks the mainspring of prosperity, the spirit of gain. In reply, it is to be said that Raiffeisen recognized the absolute necessity of self-help, but he labored to procure it in a manner which will not expose the brotherhood of peasants to the danger of being fleeced or used by the sharper members of the organization for their own personal benefit under the pretense of placing a precious opportunity in the hands of each laborious and worthy member. As to the very lively attacks made upon the undistributed reserve fund, to the exclamations of pity for the poor peasants who are creating a fund which they will never enjoy, it is to be remarked that as the fund increases the interest paid on loans will decrease, as the money will come cheaper. At least it is a precaution that has been taken to prevent too high an interest being asked. Such are Mr. Durand's responses. But to those who see the rate at which the rural populations are crowding to the cities the accumulation of a local fund coming to one generation from its predecessor has a meaning, especially when each generation is compelled to add in its turn to the total by its own saving, thus keeping constantly in view the means, the only means, by which such a fund may be created, as also the value of money in the form of cash, not for pretentious "internal public improvements," the opportunity of contractors and their friends, but for private enterprise in its efforts to support a family in the slow and legitimate round of unostentatious living.' See also page 1263, "Possibility of improving agriculture.' CHAPTER XXVII. COLLEGES ENDOWED BY CONGRESS FOR THE BENEFIT OF AGRICULTURE AND THE MECHANIC ARTS.1 The income from the land grant of 1862 and its potential value as an interestbearing fund; State aid to agricultural and mechanical colleges, its character and amount; Comparison of the three great sources of income of the landgrant colleges; The gross amount of all revenues expended for the subjects specified in the act of August 30, 1890; Classification of the amount expended for these subjects out of funds from Federal Treasury received or on hand during the year 1895-96; Diversity of the interpretation of the meaning of the terms used to indicate technical courses of study; Farmers' institutes, the cause of their origin; Their probable antecedents; The law of Michigan (1895); The organization and administration of institutes; Course of instruction in agricultural colleges of France and America; The possibility of improving agriculture; Engineering testing laboratories in Europe; Students in land-grant colleges by sex, grade, and course; Reports of presidents to the Federal Government; Tables showing in detail the numerical facts concerning professors, students, and finances. I. THE LAND GRANT OF 1862 AND ITS PRESENT MONEY VALUE. For the first time since the grant of land by Congress in 1862 it is possible to state with all desirable accuracy the amount of the income it affords to the institutions for the benefit of agriculture and the mechanic arts which it called into existence. The income is now (1896) $617,506, of which $588,144 is enjoyed by institutions either specifically or practically for the Caucasian race, and $21,752 by three institutions specifically for the American negro. This amount is not permanent, as there are two elements that will cause it to fluctuate. One of these, the rate of interest, will tend, probably, to decrease until every State has reached the limit fixed by the Federal law, which is 5 per cent. The other element of change is the increase which the lands still held by several Western States will yield to the agricultural and mechanical college fund of each of those States particularly, and to the whole fund considered for all the States generally. To illustrate these fluctuations in the productive value of the fund derived from the sale of the 9,600,000 acres granted by the Federal act of 1862, either as land or "scrip," the following comparison is made: Colleges of thirty States reporting in 1891-92 the income from grant of 1862 Decrease...... $444,938 435,092 9.846 In four years there has been a decrease of 2 per cent in the income. Still these years, it is to be remarked, are considered to have been years of great financial depression. Had the income of Michigan been excluded, the decrease would have By Mr. Wellford Addis, specialist in the Bureau for obtaining and collating information relating to colleges of agriculture and the mechanic arts. *Excluding $7,710 withheld by the State of Kentucky for the college for white students at Lexington, and about $1,800 not received by the University of Nevada. The latter deficit is not included in the $617,506. been 5 per cent. In eleven States the figures are exactly the same for 1892 and 1896, which seemingly indicates a guaranty by the State of a fixed rate of interest which has not been changed during the four years included in the comparison above. In Michigan there has been an increase of $16,918 in the income derived from the State fund, or 65 per cent, while in New York there has been a decrease of over 41 per cent ($7,500) and in Missouri a decrease of 20 per cent. The income received by the Kentucky Agricultural and Mechanical College has been reduced, at least for 1895-96, to nearly one-fourth of what it has been-that is to say, has been reduced to $2,190. But this is not due to any loss of the fund, as the State holds unimpaired the original fund of $165,000, upon which it has hitherto paid an interest of 6 per cent per annum. As remarked above, the Federal law of 1862 requires the fund derived from the land granted by the act to be invested in safe stocks yielding an interest of not less than 5 per cent per annum on their par value. Considering, therefore, that the States, in accepting the conditions imposed by the Federal law, have guaranteed interest at that rate, the income of 1895-96, $617,506, would represent, if capitalized, a principal of $12,263,000 as the product of the sale of the 9,600,000 acres of public lands granted in 1862, not counting the unsold lands of Michigan, Nebraska, Missouri, etc. At the close of the year 1890, however, 5 per cent would have been too small an interest upon which to capitalize the principal. At that date, perhaps, even 6 per cent would have been too low, though most of the States gave that interest to their respective agricultural and mechanical colleges or agricultural and mechanical departments in their universities. Assuming, then, that the income of $617,506 derived from the fund created by the Federal act of 1862 is probably about 6 per cent of that fund, the fund would then amount to $10,219,000. It is safe to assume that the fund is in the neighborhood of $10,000,000, which, therefore, constitutes the present permanent and productive endowment of colleges for the benefit of agriculture and the mechanic arts. Such an amount at 5 per cent, the lowest legal rate, will produce $500,000 annually for the support of the institutions endowed with the Federal land grant of 1862, by the legislatures of thirty-eight States, including the new State of North Dakota, but none other admitted since January 1, 1889. The new States of the upper Missouri and Rocky Mountain region are obligated, by the provisions of the law admitting them into the Union, to hold the lands granted them for educational purposes until those lands will realize $10 an acre. Such a provision in the act of 1862 would have realized $96,000,000, or an income, at 5 per cent, of $4,800,000. II. STATE AID. The main sources of support of the colleges of agriculture and the mechanic arts are the funds created by the Federal acts of 1862 and 1890 and, indirectly, or rather, so to speak, sympathetically, the fund created by the act of 1887 for State experiment stations which, with two exceptions, are part of the college in the same State. But these colleges are State institutions as well as national. Like the citizen of a State, they have a double function in the Republic. Congress, however, in subsidizing them, has left the control in the hands of the State or of the Territory. It is to be expected, therefore, that the State or Territory will feel an interest in the colleges practically created and in a large measure maintained for them and through them by the national purse. In Delaware, in New Jersey, in New York, and in Tennessee it is to be remarked that this interest is not represented by appropriations of money, at least during the year 1895-96, and the appropriations in Oregon and Florida are for repair of the buildings, the latter State appropriating rather liberally in view of the great disaster it experienced during the unprecedented frosts of the winter of 1894-95. In the case of New York, Nevada, Minnesota, and Florida the fund, it appears, has been invested in Government and State bonds paying "less than 5 per cent." |