COOPERATION FOR CREDIT

Even though a farmer be thrifty, industrious, and honest, the conditions of farm business are such that it has not always been easy for him to borrow capital. Here again cooperation helps. In some of our states the law permits the organization of CREDIT UNIONS. The members are farmers of a neighborhood or district and, therefore, are acquainted with one another. Each member must buy shares of stock, which provides a certain amount of funds. The union may also receive deposits of money, paying interest on them as a savings bank would do. This increases the funds and also encourages thrift on the part of the farmer. Idle money, or money that might otherwise be spent unwisely, is thus made productive.

In some unions, as in Ma.s.sachusetts, children are encouraged to deposit their small savings, and in some cases half the capital of the union is made up of such small savings deposits. From these funds loans are made to members of the union on reasonable terms, provided they are to be used for productive purposes. The union may also borrow money from the bank in town on the COLLECTIVE CREDIT of its members for the improvement of agricultural conditions in the neighborhood.

NATIONAL AID TO THE FARMERS' CREDIT

Similar aid to the farmers' credit has been given by the national government through the Federal Farm Loan Act of 1916. This Act created a Federal Farm Loan Board in the Treasury Department, and twelve Federal Land Banks, one in each of twelve districts into which the United States was divided for that purpose. Through the organization provided by the board and the banks, a farmer may now borrow money on more favorable terms, but only on condition that he agrees to use the money for the purchase and improvement of land or for equipment, and to engage in the actual cultivation of the farm for the development of which he desired the money.

The provisions of the Federal Farm Loan Act afford an excellent ill.u.s.tration of how government promotes citizen cooperation. The government does not lend the money to the farmers; it merely provides the machinery by which the farmers may cooperate among themselves, and also secure the cooperation of investors in all parts of the country, to obtain capital necessary for the proper development of the land. As a rule the farmer can borrow money from the land bank only by being a member of a local "national farm loan a.s.sociation." His dealings with the bank are through this a.s.sociation. His membership in the a.s.sociation gives him better standing and secures for him better terms than he could get if acting separately. Moreover, the money that the bank lends to the farmer comes from the farmers who belong to the a.s.sociation, and from investors in all parts of the country, who buy shares of stock in the bank and bonds issued by the bank on the security of the farmers' land and equipment. The whole scheme is one of cooperation which would be impossible but for the legislation, financial support, and supervision of the government at Washington.

PARTNERSHIP IN THE NATION'S BUSINESS

It will be seen then that much of the capital that a farmer uses is borrowed, and is made up of small savings of other people--some of them his neighbors, others in distant places. The same is true with respect to the capital used in all other businesses. The enormous capital of railroads is derived chiefly from the savings of millions of people, some of whom buy shares of railroad stock directly, but most of whom deposit their savings in banks or other inst.i.tutions which, in turn, lend it to the railroads or invest it in their stock. The farmer or the school boy who has a savings account in a neighboring bank thus may become a partner in various business enterprises of the country. His dollars or dimes, added to the dollars and dimes of many other people, are used to buy machinery and tools and materials, and to pay labor. Because of the service performed by his savings he receives interest on his money.

OPPORTUNITIES FOR INVESTMENT

There are many opportunities for young people to invest savings in productive enterprises,--perhaps more in rural communities than elsewhere. The different kinds of boys' and girls' clubs ill.u.s.trate the variety of channels through which money may be both earned and invested. As soon as a boy invests a little money in a pig, or a calf, or garden tools, he becomes a capitalist to that extent. It is to be hoped that not many have the experience of the boy described in the following lines: [Footnote: Read by R.H.

Wilson, in an address before the National Council of Education, N.E.A. PROCEEDINGS, 1917, p. 133.]

Johnnie bought a little pig with money he had earned, He named her Nell and fed her well, and lots of tricks she learned.

But Nellie grew to be a sow, had piggies quite a few, Then father up and sold them, and kept the money, too.

Johnnie took a little calf as pay for hoeing corn, He loved the calf and the calf loved him as sure as you are born.

The calfie grew to be a cow, as all good calfies do, Then father up and sold her, and kept the money, too.

Now, Johnnie loved his little pets, but father loved the pelf, So Johnnie left his father's farm and struck out for himself.

Said Johnnie's pa, one summer day, "I often wonder why Boys don't like life upon the farm, 'the city' is their cry."

"It always will be strange to me," continued Johnnie's pa, "It only goes to prove, though, how ungrateful children are."

When Johnnie heard what father said, he gave a bitter laugh, And thought of his empty childhood and of his pig and calf.

Savings may be deposited in savings banks, which accept small deposits and pay compound interest, usually at a rate of 3 per cent or 3 1/2 per cent. Such banks operate in accordance with state or national laws to protect the depositor against loss. Many schools conduct school savings banks. The pupils bring their small amounts to the teacher or to some pupil acting as "teller," the collected funds then being deposited in some bank in the community. These school banks promote habits of thrift and afford experience in business methods, besides bringing into use in the world's work many small amounts of money that would otherwise be lying idle or spent unwisely.

POSTAL SAVINGS SYSTEM

In 1910 Congress established the Postal Savings System under which any post office may be a savings bank. Any person over ten years of age may deposit money at the postal savings bank in amounts of from $1.00 to $25.00, receiving from the postmaster POSTAL SAVINGS CERTIFICATES as evidence of the deposit. Provision is made for savings accounts of less than a dollar by selling POSTAL SAVINGS STAMPS at ten cents each, ten of which may be exchanged for a dollar certificate. Two per cent interest is paid on postal savings, but savings certificates may be exchanged for POSTAL SAVINGS BONDS, bearing interest at the rate of 2 1/2 per cent.

LENDING TO THE GOVERNMENT

The purchase of Liberty Bonds or Savings Stamps and Thrift Stamps is a good investment and a patriotic act. The money raised in this way is used for the national defense and for reconstruction after the war. The Savings Division of the United States Treasury Department carries on a campaign of thrift education. Among other things, it promotes the organization of savings societies and thrift clubs, because thrift is a habit which is encouraged by the example and cooperation of others. In Randolph County, Indiana, for example, each consolidated school has its thrift club, and over 75 per cent of the pupils are members. One of these schools sold over $11,000 worth of thrift stamps, and others sold from $1500 to $3500 worth. Savings societies exist among the workmen of many industries, and employers report that these have increased the purchase of homes, and have resulted in a saving of materials and tools because of the habits of thrift established.

INSURANCE

Among the many other agencies to promote thrift we shall only mention BUILDING AND LOAN a.s.sOCIATIONS and INSURANCE. The purpose of building and loan a.s.sociations is to help people of small means to purchase or build homes. Insurance affords a particularly good ill.u.s.tration of organized cooperation. The PREMIUMS paid by thousands of policy holders produce a large sum of money, part of which goes to pay the expenses of the insurance company, but most of which is invested in enterprises that cause the amount rapidly to increase. Out of this fund the occasional losses of individuals are paid. Life insurance is a good form of investment. It provides for the future of the family of the insured in case of his death.

By the ENDOWMENT plan the insured may himself receive, at the end of a specified number of years, all that he has paid in premiums together with interest.

During the war our national government itself insured the soldiers against death or injury. This was known as WAR RISK INSURANCE. At the end of the war the soldier had the privilege of converting the war risk insurance into a regular form of insurance, still provided, however, by the government itself. One of our states also, Wisconsin, sells life insurance to its citizens.

As we proceed with our study we shall encounter other aspects of thrift in various chapters. As a nation we may be thrifty or unthrifty in the use of our resources (see Chapters XIV and XV).

Thrift is as essential in our "community housekeeping," which is carried on by government, as in our homes and business. But we can hardly expect thrift to become a national characteristic unless it first becomes a personal habit.

Are you a capitalist? If so, explain in what way.

What forms does the capital take with which your father does business?

What capital does an Eskimo have? the American Indians when the country was first settled?

Do you belong to a thrift club? Would it be desirable to organize one in your school? Confer with your teacher and princ.i.p.al about it. Write to the Savings Division, U.S. Treasury Department, Washington, D.C., for literature regarding organization.

Is there a credit union, or a savings a.s.sociation, or other organization to promote thrift in your community? If so, find out how it operates.

Write a story on the subject, "What my five dollars may accomplish after I put it in the savings bank, before it comes back to me with interest."

Why are people willing to accept a lower rate of interest from a postal savings bank than from an ordinary savings bank?

READINGS

In LESSONS IN COMMUNITY AND NATIONAL LIFE:

Series A: Lesson 6, Capital.

Lesson 13, U.S. Food Administration.

Lesson 14, Subst.i.tute foods.

Lesson 15, Woman as the family purchaser.

Lesson 21, Borrowing capital for modern business.

Lesson 22, The commercial bank and modern business.

Series B: Lesson 7, An intelligently selected diet.

Lesson 22, Financing the war.

Lesson 23, Thrift and war savings.

Series C: Lesson 7, Preserving foods.

Lesson 8, Preventing waste of human beings.

Lesson 14, The U.S. Fuel Administration.

Lesson 16, The Commercial Economy Board of the Council of National Defense.

Write Savings Division, U.S. Treasury Department, for materials; especially "Ten Lessons in Thrift," and "Teaching Thrift in Elementary Schools." Both of these contain lists of readings.

The Post-Office Department has publications descriptive of the postal savings service.

Farmers' Bulletins, U.S. Department of Agriculture, relating to thrift.

Federal Farm Loan Act, How It Benefits the Farmer, Farmers'

Bulletin 792.

See references in footnotes in this chapter.

Dunn, THE COMMUNITY AND THE CITIZEN, Chapter XIV, "Waste and Saving."