problem of agricultural credit is a pressing one, and each country must do what it can to solve the riddle in its own way: Australia and New Zealand have done it by instituting a system of state loans to farmers-the very antithesis to the purely voluntary systems of self help and co-operation that have done so much good in other lands.

The system is closely akin to the Credit Foncier of France. In a word, the state has gone into the mortgage and loan business, lending at a lower rate than the mortgage companies and saving the borrower as much as possible in fees and preliminary expenses. There is no form of co-operation or mutual liability, each farmer is liable for his own borrowing alone.

While the details differ slightly in the different states of the Commonwealth, yet the broad outlines are sufficiently alike to warrant general statements being made.

The funds for making the advances are raised by the different states generally issuing mortgage bonds at four per cent. and this money is lent out at a uniform rate of five per cent. to the farmers, the security for advances being from one-half to three-quarters of the estimated value of the property offered as security.

One of the most interesting and significant features of the scheme is the schedule of amortization of the loans. Payments of principal and interest are spread over periods ranging from 20 to 361⁄2 years in half-yearly instalments.16 In the majority of the states the borrowers must begin to pay off the principal five years after the loan has been made, but at the option of the borrower advances may be repaid at any time.

The primary reason for the establishment of the system was, to quote Mr. Ross, "the high rates of interest charged by companies and private lenders. In all the states the chief object was to enable applicants to pay off existing encum

16The Saskatchewan Commission states that the period is 42 years in South Australia. As far as I can ascertain it is 25 years.

brances on their properties, and to obviate the frequent renewal of mortgages with coincident expenditure."1

The system came into operation in the State of Victoria in 1896, and in fifteen years the trustees of the Loan Fund (in this case the State Savings Bank) foreclosed on and sold twenty-eight farm properties. Out of these twenty-eight farms, only in one instance, was there a loss, and that a very small amount on the principal advanced by the State.

In June, 1912, the total amount of mortgages to farmers in the State of Victoria was $14,773,000, and the amount repaid was $8,053,900. At that date only ten farmers were in arrears for a total sum of $468. When the land upon which a loan is asked is accessible by rail the inspection fee charged is $12.17, if situated further away a pro rata increase is made in the fee. The total additional charge to the borrower for the registration and preparation of the mortgage deed is $3.65, total expense $15.82.

"The chief contributing factors to the success achieved," says Mr. Ross, "have been the economical expenditure on management and the effective inspection of all properties upon which loans are made. Many applications for loans are rejected, after careful examination of the securities offered, and the character and industry of the applicant are obviously important points towards influencing a loan being made."

The most important point to be observed in this system is the entire lack of any form of co-operation. The state assumes the functions of a mortgage company, and asks no more than sufficient security from its borrowers giving them in return a long term and low interest charges. Could the ordinary mortgage companies do the same there would be nothing to choose between them. The same result might be very easily accomplished in Saskatchewan were the Provincial Government to enter the field and loan at six per cent. But how many would seriously advocate such a scheme under present political conditions?

17With regard to this the evidence of a writer on New Zealand is of interest. G. H. Scholefield in "New Zealand in Evolution," p. 254, speaking of the introduction of the system into the colony, says: "The effect was instant. Hundreds of struggling men transferred their mortgages to the easier conditions of the state mortgages."

RECOMMENDATIONS OF THE AGRICULTURAL CREDIT

COMMISSION.

It will be superfluous to go into the recommendations of the Saskatchewan Commission in any great detail, since in their broad outlines they follow on the lines of the German Landschaften.18 The Commission proposes to organize under Government supervision an association to be known as the Saskatchewan Co-operative Farm Mortgage Association, subdivided into local associations; with an advisory board of 15 members, the members to be appointed "part by the Association acting through its annual general meeting and the remainder by such organizations and institutions in the province as exist to promote agricultural betterment" which is a sufficiently loose and vague phrase to permit of anyone being made a member, whether a member of the Mortgage Association or not.*

At the head of the whole association is to be placed a central commission of three members appointed by the Government, one to be a managing commissioner on a salary, who will devote his whole time to the business of the Association, and is to be apparently the only paid expert in the whole organization. It will be well to compare this proposal with the system of highly trained experts (Syndics) who manage the business of the German Landschaften. In Saskatchewan with no previous experience, and under admittedly difficult circumstances, it would appear that the running of the local associations is to be left to the individual members, while in Germany with all the traditions of nearly a century and a half behind them trained civil servants are still required to keep the associations off financial rocks.

But it is when we come to the recommendations with regard to the local associations that the real difficulty arises.

18It is curious to note that Senator Duncan U. Fletcher has introduced a Bill into the United States Senate (No. 2909), to set up a system of "national rural banking" in the United States, his proposals following closely on the Raiffeisen system and rejecting the Landschaft.

*The Commission suggests, such organizations as the Grain Growers' Association, the Convention of Agricultural Societies, the Union of Rural Municipalities, the Provincial Winter Fair Board and the University of Saskatchewan.

Local associations are to be set up, the members of which are to be mutually approved by one another, each association to consist of at least ten members, all borrowers with a minimum combined mortgage loan of $5,000, united on the basis of joint and several liability. The liability of the individual as member of a local association or of the central association is to be fixed at not more than 50% greater than the amount of his loan.

In considering these points the following objections may be raised:

1. There is no counterpart in the German Landschaft system for this joint and several liability. In that system the liability is collective for the whole association and the small groups of members in different localities are not liable for the debts of their immediate neighbors.

2. In the Landschaft system there is no mutual consent of other members necessary. Once having established that his land is worth so much the prospective borrower can claim a loan. What need is there for mutual consent? If the loans are going to be limited to 40% of the estimated value of the land there can be no doubt as to the adequacy of the security. The commissioners have evidently been led away by their desire to invest the scheme with a co-operative character into introducing a form of mutual assent which is entirely

unnecessary.

3. Will it be practicable to introduce such local associations? Who will become members and who will be kept out? It is quite possible that the men who will be blackballed for membership will be the very men who are most in need of assistance. Those who have lived in a farming community know that personal feeling may sway such elections, to say nothing of political prejudices. What farmer, who has perhaps only just got his own head above water, will assume a liability for a loan to another farmer whom he may regard as financially unsound, a poor farmer, and a probable failure? The local associations will become hotbeds of intrigue and jealousy. One can easily imagine the state of local feeling when a certain farmer has been blackballed for membership and proceeds to "kick" in consequence.

Indeed this point as to co-operative action raises a very serious question. Are farmers of the West ready and willing to undertake what are most undoubtedly the very serious and onerous responsibilities of co-operation? It may be said that co-operation is already flourishing, witness the Co-operative Elevators in Saskatchewan. But the Co-operative Elevator Company is scarcely more co-operative in character than any joint stock company, and the name "co-operative" is something of a misnomer, when scarcely twenty per cent. of the paid-up capital has been subscribed by members, and eighty per cent. put up by the Provincial Government.

It is true that certain co-operative enterprises are afoot in the West. We hear of carloads of binder twine, coal, &c. being purchased, but such affairs are mere bagatelles when compared with such a great undertaking as is proposed here.

Indeed this point opens up a very serious consideration as to the willingness of the Western Farmers to co-operate at all. In the evidence before the commission several witnesses alluded to this and doubted whether the farmers would ever stand by the spirit of co-operation. The history of cooperation in Canada and the United States is not inspiring, in fact it is a record of failure. The History of Co-operation in the U.S.A., issued by the Johns Hopkins University, tells a tale of disaster, bad management, embezzlement, internal dissensions, and lack of business acumen, and the small pamphlet on "Agricultural Co-operation in Ontario," by S E. Todd, issued by the Ontario Department of Agriculture, is little better. 19

An investigation carried on by the United States Department of Agriculture in which over nine thousand replies were sent in by men in touch with agricultural matters, to the query as to whether the farming class would be willing to try some form of co-operative action in obtaining loans, elicited a remarkable result. Thirty-two per cent. of the replies stated

19It is but fair to add that I was favoured by a letter from Mr. W. L. Smith, Editor of the Weekly Sun of Toronto, a leader in the "Grange" Movement in Ontario, in which he claimed that the co-operative activities of the Grange and Patrons of Industry having achieved their object in having broken down the bad system of long credits at the country stores, died down, their work finished.