Alvin S. Johnson

“ If the government enters upon a policy of supporting the cotton market with its credit, it will never be able to withdraw without loss unless, like Brazil, it resorts to methods of controlling production.
The Brazilian method of control of the coffee market consists, in the first place, in the warehousing of the existing supply, and the limitation of shipments from the government warehouses to such amounts as will not depress prices unduly. ”

“ In the single Brazilian state of Sao Paolo is produced one-half of the world's supply of coffee; in our own state of Texas, between one-sixth and one-fifth of the world's supply of cotton. The whole economic life of Sao Paolo is bound up with the price of coffee. In the years 1897 and 1898, when coffee sold at an average of sixteen cents, existing plantations prospered and new plantations were laid out at an astonishing rate. ”

“ But we have in our banking system an unacknowledged governmental organ, perhaps the more potent because it is developing spontaneously to meet the public need. In recent years there have been occasions when banking associations, believing that crops were being held off the market unwisely, have forced more rapid movement through limitations upon credit. ”

“ By its control of the conditions under which coffee is accepted at the warehouses, the State is able to keep production within bounds. Those who are urging the Federal and State governments to "valorize" cotton overlook the fact that existing constitutional restrictions make it impossible for us to control production through direct State action. It may be constitutional to warehouse the existing supply, and thus postpone the final slump in prices or distribute the loss over several years. But we cannot restrict production through export duties nor, probably, through excises. ”

“ The great financial houses have frequently exerted a steadying influence upon industry through restraint upon projects that were designed to inject a cut-throat competition into a situation otherwise satisfactory.
The banks hold the key to the cotton situation. If the banks choose, the area planted to cotton next year can be reduced in such proportion as they may deem wise. The suggestion that they should thus assume control of the industry has already been made in unexpected quarters. ”

“ It would refuse credit for the expansion of an overdeveloped branch of the production, but it would also extend credit for the introduction of new branches and for the expansion fo those unduly neglected. Its influence would indeed be confined to those producers who depend upon borrowed capital; but these, as the weakest producers, are the ones most likely to follow slavishly the branch of production to which they are accustomed. They are also the ones who suffer most severely from the consequences of overproduction, and would therefore most properly be subjected to control. ”

“ Secretary of Agriculture Houston is credited with the proposal that the merchants should lay down the rule that they will not extend advances to any farmer who does not reduce the acreage devoted to cotton, and that the bankers should refuse to lend to merchants who do not impose such restrictions on the farmers. ”

“ The history of every modern state shows that the higher the degree of banking development, the closer the relation with government. The banks of England, France and Germany are frequently forced by the government ot subordinate their private interests to the public welfare. ”

“ No part of our own country, it is true, is specialized to cotton production to the extent that Sao Paolo is specialized to coffee. Nevertheless, twelve-cent cotton means prosperity throughout the South, and six-cent cotton would mean widespread distress, especially in the state of Texas. ”