"MONEY for the farmers,” they call it. As the glib phrase appears in the daily newspapers it reads very much as if some generous soul were about to distribute manna from the skies. As a matter of fact, there will be unsophisticated individuals in the Dominion, no doubt, who will look to it as such.

Can it be that Ottawa is merely making a political gesture, and that, as such, the current rural credits proposal may be quickly dismissed from the minds of our business men? Or is it true that Ottawa is about to make a definite excursion into economics, unmindful of the financial •hoals which the provinces of Saskatchewan and Manitoba, for instance, encountered?

Manitoba to be specific has lost some $670,000 on a $3,000,000 rural credits undertaking. Saskatchewan (without information as to the actual extent of the losses throughout rural credits) at least reached the conclusion, as voiced by Premier Dunning, “that the farmer borrowers from the Province paid their debts to the Government last of all.” So much then for paternalistic credit measures.

There is a good deal of the spoiled son in the best of us when it comes to the loans we get from dad! Or, as the moralist recently wrote: “You can legislate in all else but you cannot legislate in honor.”

A joint parliamentary committee has under advisement at Ottawa the question of rural credits under federal sponsorship. To provide that committee with something definite to work upon, a tentative bill has been drafted by Dr. H. M.Tory, who has made two reports for the federal government on the subject. Newspaper despatches indicate that the Tory draft provides for long term farm credits, at the rate of seven per cent., and there is a suggestion that administration of the proposed federal credits shall follow the system of the United States land banks. It is also proposed to establish regional organizations in each province, these to loan money either to farm loan societies or to the farmers direct. The shares in these regional organizations, according to the tentative plan, would be held partly by the federal government, partly by the provincial governments and partly by the participating farmers. To set up the required machinery it is proposed to ask parliament for $5,000,000.

Urgency of Proposal

JUST why there should be this urgency at Ottawa for a rural credits structure is not entirely clear. There is no outstanding evidence that the farmers of Canada to-day are not being supplied with ample funds for their farming operations, so far as their assets reasonably warrant. The problem of financing his operations was a serious one, without doubt, for the western farmer in those lean years which immediately followed the war, and, looking back, it is not surprising that in those circumstances agitation for governmental assistance resulted in the erection of unsound credit machines in several of our provinces.

Indeed, it would not have been altogether surprising if the “corner store” merchants throughout the West had demanded similar government assistance. Their credit status wai equally “desperate.”

But it is by no means clear that at the present time the same urgent need for farmer funds exists. It is by no means sufficiently acute to warrant the federal government plunging into an expensive

rural credits experiment. As a matter of fact after the good crops of the last three years there is a tendency to consider that the necessity of governmental assistance for the farming community has to a considerable extent passed over, if not entirely disappeared.

Then, too, there is the pertinent—even impertinent!—question: can the Government afford to risk five million dollars in a farm credit experiment? The experiences of our provinces is not an encouraging precedent. Paternalism in Manitoba has been a costly venture for the whole of the people of Manitoba. Is it the part of sound business for Ottawa to venture into the farming business, benefiting a single class when the whole of the public may be called upon to foot the bill?

We have had one example of the costliness of our federal government experimenting with business—our venture into railroading, which is costing us some fifty million dollars, annually, or the equivalent of the federal income tax.

If the government wants an insight into the possible financial hazards surrounding rural credits, it will secure data in possession of Canadian bankers relative to agricultural losses which the chartered banks have been required to write off in the last decade. Have the Ottawa politicians stopped to consider that the Dominion has been financing billion dollar crops up to the present with the chief financing agencies, the chartered banks and the incorporated loaning companies? Canada’s banking system, whatever its other faults, has been the subject of international admiration for its elasticity in financing the vast cereal out-turn of “bumper” years.

Chartered bankers answering the charges of inadequate farm credit have based their argument upon the irrefutable statistics which clearly showed that Canadian banks, “have loaned the three western provinces more than the sum total of the deposits received in those provinces.”

The Elimination of Politics

BUT this resume of the situation is by no means to be interpreted as a brief for our chartered banks, admirable as I regard their financial care of the farming community to have been over a period of years.

Rather, it should be urged upon Ottawa to decide upon a rural credits structure designed, first of all, with every regard for sound business—and to be divorced completely from politics. We have had enough of paternalism. Dr. Tory, himself, in the report which he sent to the Government a year ago, sounded a warning in this very regard. He warned specifically against the tendency found among those who have secured rural credits loans from provincial governments “to regard lightly their responsibility to the Government.” In these days when tax pruning is vital to national progress no Canadian government can properly undertake any financing scheme which is not strictly the part of sound economics.

If, however, Ottawa decides upon a system of farm credits entirely through public participation, then the whole scheme of rural credits immediately enters the possibilities of practical business. The risk to federal funds is discounted.

The problem of farm finance in this country has for far too long been a political football. Invariably, it has been presented as a quarrel between the chartered Continued on paçe 7

Continued from page b banks and the farmers. Is it not, rather, a problem independent of the banks? Is it not as distinctly removed as the financing of any great industry?

Business men accept it as entirely logical that the steel industry or the pulp and paper industry should be financed by the public—by public issue of bonds and stocks. Why not the agricultural industry, the country’s greatest producer?

There is a broadening belief that the future will demonstrate the feasibility of farm financing of this characti r. Even so conservative a banking mind as Sir John Aird has expressed the conviction that the plan of farm financing “by long term securities rather than by monies payable on demand is unquestionably sound from the economic point of view.”

Might it not be the part of good business for the parliamentary committee at Ottawa to study along these lines—and avoid the pitfalls known to exist for government-sponsored farm finance?