"Age of Excess"

. . . Of the 7,700,000 farmers and farm laborers in the United States in 1880, about a million lived in the newly opened regions west of the Mississippi and east of the Rockies: in Minnesota, Iowa, Missouri, Kansas, Nebraska, the Dakotas. It was there, and in the South, that the farm revolt reached its highest pitch. Farmers suffered severely at times from natural hazards-drought, grasshoppers, blizzards. Even more serious were the falling prices of their chief cash crops.  Cotton sold for 16.5 cents a pound in 1869; for 4.6 cents in 1894. Wheat sold for $2.06 a bushel in l866; for 48.9 cents in 1894. Corn brought 65.7 cents a bushel in 1866; 21.4 cents in 1896.

The general price level was falling, too, through those years. But some prices did not fall. Farmers were most conscious of the burden, fixed in dollar terms and therefore growing in terms of their effort, of paying the interest and principal on their debts. Once a man signed a mortgage,' he was stuck. If he borrowed $500 for five years at 10 percent in 1877, when wheat was selling for $1.08 a bushel, he was borrowing in effect about 500 bushels of wheat. But if the price of his wheat crop fell 50 per cent, he had to sell 100 bushels every year to pay $50 interest, and he had to sell 1,000 bushels in 1882 to pay off his $500 principal. For twice as much work, he got no more.

So farmers roared with agony and rage, because most of them were debtors. Why did they borrow? To buy land, many of them. Supposedly anybody could get 160 acres of public land without charge under the Homestead Act of 1862. Later Federal laws, including the Timber Culture Act of 1873, and Desert Land Act of 1877, and the Timber and Stone Act of 1878, offered an equal or greater quantity of land free to any person meeting certain conditions. But these laws did not work out as the land reformers and poor farmers had hoped. Much of the public domain was obtained illegally by speculators and monopolists. Settlers often found it advantageous to pay a railroad or state for land that was better or that was closer to transportation that the available
Federal land.

The total land in farms more than doubled from 1860 to 1900-itself a major cause of the plummeting prices of farm products. But Fred A. Shannon has concluded that at most about a sixth of the new acreage was "land that came as a gift from the government." The price of raw land was often $3 or more an acre, so that even 80 acres of unbroken land would cost $240. And that size was the bare minimum for farming on the prairies, where the aridity dictated an extensive mode of cultivation. The advantages of being a big farmer were further increased by the mechanization of agriculture that was going on: large-scale methods were most economical for the cultivation of corn and even more so of wheat.

The "cash capital costs" of settling a farm were probably higher on the plains of western Kansas or Nebraska than they had been on the prairies of eastern Kansas or Illinois. Yields per acre were lower, the chance of crop failure was greater- a farmer was virtually forced to farm more land less intensively by using large horsedrawn machinery. The editor of the Prairie Farmer estimated in 1885 that $500 would buy "a good span of working horses, first rate farm wagon, plows, harness, seeder, etc. almost anywhere in the West," and that the cost of the building first erected on government land was usually $250 or less. The cash cost of breaking sod through the 1880's ran from $1.50 an acre up. In 1879 a farmer spent some, $200 to run two strands of Glidden barbed wire around a quarter section in Kansas. A well cost some $2.00 a foot, and the average well in the state might be 40 feet deep.

Thus the farmer who got 160 acres of free land in Kansas, put buildings on it, bought horses and machinery, fenced his farm, drove a well for water, and hired somebody to break a mere 40 acres of sod (a job that took more than one team on the plains), incurred cash outlays of more than $1,000. In addition, he had to support his family for at least a year. So-he often borrowed.

The resulting problems and conflicts have been clarified by Allan G. Bogue, whose researches in business manuscripts have yielded far more reliable evidence than was previously available. Most commonly the farmer turned for funds to a broker of land mortgages-essentially a middleman between Western farmers and Eastern or English investors. Such a firm was J. B. Watkins and Company, founded at Lawrence, Kansas, in 1873, The ensuing depression proved favorable to Watkins, for it destroyed the confidence of persons of means in other forms of investment.  Railroad stocks and bonds shrank in value; frequent failures of insurance companies aroused
distrust; savings banks ended up in trouble. The steady decline in long-term rates of interest in the following years caused investors to look favorably to the promise of higher yields in the West, backed by the most tangible and meritorious security of all-the soil.

Meanwhile investment funds were accumulating rapidly-in the Northeast. Big fortunes were being made. Even more important to Watkins, modest competences were piling up in the hands of thrifty farmers like Joseph Cook's father, of merchants who could not profitably use all their funds in their own firms, of lawyers and doctors and ministers. Watkins advertised his mortgages in the New York Weekly Tribune and the Springfield Republican, but from the start he relied chiefly on
the Protestant religious press. To manage his branch office in New York he hired an expatriate Englishman who was a Quaker. Another friend in Ferrisburg, Vermont, handled mortgages for Watkins. With many Quaker contacts in the Northeast and Britain, he began advertising in Quaker papers in London and Glasgow. In 1878 he opened a London office, also with a Friend in charge.

Watkins was only one of many mortgage companies located in the West, selling their paper chiefly in the East or abroad. By 1880, when some 40 major companies were operating in Kansas, the biggest of them was the Corbin Banking Company of New York and New Hampshire. The Hartford insurance companies put millions of dollars a year-! into farm mortgages in the plains states-certainly more than the $8-12 million a year that the investors of Massachusetts were putting into Western Mortgages in the period around 1885. The shortage of alternative chances for investment that seemed promising was Yet another reflection of pervasive excess capacity: by
driving interest rates down and making loans readily available to farmers, it enabled many of them to venture into unsound situations and helped set the stage for the farm revolt. . . .

[The] farmers had legitimate grievances. Their efforts to control the cost of loans by setting a legal maximum rate of interest proved largely ineffective. The legal maximums themselves were high: 12 per cent in Kansas; 12 per cent in Nebraska, lowered to 10 per cent in 1879; 10 per cent in Illinois, lowered to 8 per cent in 1879. But the legal maximums meant little, because the borrower usually paid several other charges when he got the loan: (a) commission to the mortgage company; (b) commission to the company's local agent; (c) an examination fee; (d) clerics fees for drawing the mortgage papers; (e) cost of the abstract; (f) recording fees. In 1874 these service charges could total 15 per cent of the face value of the loan in Kansas, where interest was 12 per cent.  Loans at the time were usually made for three years, so the farmer in effect was paying 17 per cent to borrow money.

If farmers got little relief from the usury laws, they did benefit from competition among the lenders. By 1878 loans at 12 per cent had ceased to be the rule in Kansas, and Ira Davenport began pulling his funds out of the state and investing them in Michigan timberland or in Wall Street. That year an investors' agent at Cedar Rapids wrote that in Iowa "There were plenty of funds offered at eight per cent and coms of three to five per cent." By 1880 Watkins was lending money in Missouri at a straight 10 per cent and absorbing the commissions. He decided the time had come to form a combination among lending agencies to maintain rates, but his efforts met with no success.  Total charges trended downward to as little as 8 per cent in central Kansas by 1886 and 1887.

But that was just when the years of disastrous crops began, and, in spite of the reluctance of most lenders to foreclose, more and more farmers lost their land. Of the mortgages taken in one township in central Kansas in those two years, nearly half ended in failure. A company official estimated that 9 out of 10 mortgages in the western part of the state were foreclosed. The fact that Watkins went into bankruptcy was no consolation to the farmers who tried in vain to pay off their debts so they could keep their land. . . .

A farmer on the Western plains could mortgage his land if he wanted to borrow. But in many areas of the South land was almost impossible to mortgage because, in the words of a Mississippi merchant, land would "be an encumbrance to own." Nobody wanted it, except Negroes and whites who could not even get a bare subsistence from any other occupation. Hence arose the croplien system; that is, the practice of mortgaging a crop when it was planted in order to get credit from the crossroads supply merchant for seed, for sowbelly and corn meal and molasses, for overalls
and maybe a little tea or coffee. The farmer drew his pittance at the store, and paid exorbitant prices for it and he sweated and strained through the hot summer, and when he harvested his crop he might owe more than the crop was worth. "The basest fraud on earth is agriculture," wrote a farmer in Mississippi. "No wonder Cain killed his brother. He was a tiller of the ground."

Merchant and planter often became the same man. If a man prospered in farming, he opened a store; if he prospered as a storekeeper, he took over land at bargain prices. But the local storekeeper did not keep all he squeezed from the farmer. He in turn paid high prices and high rates of interest to the factors and wholesalers who supplied him on credit. The factors and wholesalers in turn split what they got with manufacturers and bankers, usually in the Northeast or in Europe. In his Origins of the New South, C. Vann Woodward concludes: "The merchant was only a bucket on an endless chain by which the agricultural well of a tributary region was drained of its flow." Six decades earlier a Populist orator in Kansas, Mrs. Mary Ellen Lease, had shouted: "The great common people of this country are slaves, and monopoly is the master. The west and South are bound and prostrate before the manufacturing East."

Industrialization had occurred in the Coal mines and steel mills opened in Alabama and Tennessee. Textile mills were built in Georgia and the Carolinas. Yet as late as 1900, 69 per cent of the labor force of South Carolina was in agriculture, less than 4 per cent in manufactures. At that time fewer than one person in 25 in North Carolina lived in a town with 2,500 or more inhabitants. These were states that had led the South in industrialization.

In industry as well as agriculture , men in the South often worked for the benefit of men in the Northeast or in England. When an act of Congress opened to unrestricted cash entry the Federal lands of the five public-land states in the South, Northern capitalists poured into Alabama, Arkansas, Florida, Louisiana, and Mississippi. By 1888 they controlled the best stands of yellow pine and cypress in the South. When a railroad pushed into a region, Northern lumber syndicates were riding the rails before the spikes had cooled. They cut wide swaths through the South. The value of Louisiana's lumber output rose 10 times from 1880 to 1900; in the five Gulf states
together the increase was more than 5 times. And in 1900 a United States forestry expert looked back and saw probably the most rapid and reckless destruction of forests known to history. " But some men got rich, and they did not live in the South anyway. By 1900 they could invest safely in Cuban sugar plantations.

State lands went the same way as Federal lands. Twelve railroads got free from Texas more than 32 million acres-their own Indiana. Florida in 1881 sold 4 million acres to a syndicate headed by Hamilton Disston of Philadelphia, at two bits an acre; the same year Disston resold half the land to an English syndicate. Another English firm bought a big tract in the Yazoo Delta of in Mississippi;  two others bought land in Texas. Most important of all the English firms in the New South was the North American Land and Timber Co., Ltd., which J. B. Watkins promoted among his English investors. The firm, and Watkins personally, bought 1.5 million acres of unsettled land along the Louisiana coast between Vermilion Bay and the Texas border. Much of it was swampland recently granted to the state by the Federal government, and the firm got it for 121/2 to 75 cents an acre.

Watkins hired his brother-in-law, Professor Alexander Thomson, and President Seaman A. Knapp, both of the Iowa State Agricultural College, to show that farming was feasible on his Louisiana holdings. They opened lands for sugar and rice cultivation. By using wheat machinery on the upland prairies they revolutionized methods of rice production; yield per man went up 10 to 20 times, and in 5 years Louisiana was the leading rice state in the country. The company started in
1882, the same year that the Southern pacific linked New Orleans to San Francisco; railroad and syndicate together boomed the area. Watkins planned his own railway-with the marvelous name of the Kansas City, Watkins, and Gulf-and after 1890 he built a section of it in Louisiana. He sent a railroad car filled with Louisiana products on tour of the North Central states. Midwestern settlers came to the Gulf coast; land values boomed. But Watkins had overextended his resources, and the venture did not pay off as quickly as he had hoped; it contributed to his bankruptcy in 1894.

The president of the National Cotton Planters' Association contended in 1881 that fewer than a third of the cotton Plantations in the Mississippi Valley were still held by the men who had owned them in 1865, and that others were passing daily "into the hands of the commission merchants."  Behind many if not most commission merchants stood Northern capitalists. Behind Milton H. Smith, president of the Louisville and Nashville Railroad, stood the New York financiers Jay Gould, Thomas Fortune Ryan, Jacob Schiff, and August Belmont, all members of its board of
directors. Behind the directors stood English investors, reached through the House of Rothschild, which was represented in the United States by Belmont. The rival Alabama and Chattanooga Railroad had among its investors other New York financiers, Russell Sage and Henry Clews. It had also had William D. Kelley, Congress-man from Pennsylvania. Kelley was called "Pig Iron" because of his staunch service to the cause of high tariffs.

The lines of control led to New York and Boston and London and even to Lawrence, Kansas, and the South remained predominantly an agricultural section, and agriculture was losing out. Farmers had gotten nearly 31 per cent of the national income in 1859; less than 16 per cent in 1889. Nearly 40 per cent of the national wealth was in agriculture in 1860; only 20.5 per cent in 1890.

In 1880 the average wealth per person in the states outside the South was $1,086. In the South, it was $376. . . .