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Our Inefficient Acres 
 
 Hea VN DE RITP 
 
 PRESIDENT THE NATIONAL Crty BANK OF NEw YoRK 
 
 ADDRESS BEFORE 
 THE AMERICAN COTTON 
 MANUFACTURERS ASSOCIATION 
 APRIL 27, 1914 
 NEw YORK 
 
Digitized by the Internet Archive 
 in 2021 with funding from 
 University of Illinois Urbana-Champaign Alternates 
 
 https://archive.org/details/ourinefficientacOOvand_0 
 
Our Inefficient Acres 
 
 The plan which your chairman has outlined for the creation of a 
 comprehensive warehouse system, to be operated in a manner which 
 will give the broadest currency to credit obligations based on cotton 
 stored in these warehouses, is both interesting and significant. It is in- 
 teresting as showing the tendency toward an important movement in the 
 cotton trade. It is significant in indicating an awakening on the part of 
 business men to certain distinctions in banking credit that are of great 
 importance. 
 
 During the discussion connected with the enactment of the new 
 banking law, there has been much education of bankers and business men 
 alike on the subject of ideal banking credit. Not having reached, in all 
 respects, the settled commercial status that we find in some of the Euro- 
 pean countries, we have failed here to draw the distinction that is so 
 clearly drawn in most European banking centers between loans for capital 
 purposes and loans of a self-liquidating character, the funds for the re- 
 payment of which must naturally and almost inevitably come promptly 
 into the hands of the borrower in the seasonal course of his business. 
 
 Our new banking act was designed to accomplish various things. 
 In the minds of some of its advocates, the things sought to be accom- 
 plished I fear were not entirely economic. But the fundamental economic 
 principles back of the idea which led to this legislation prominently in- 
 cluded the creation of a discount market. That is to say, the creation of 
 a form of bankable paper which would be so secured through the names 
 of acceptors and endorsers that the credit risk disappeared and the paper 
 would find a ready market wherever there was money to loan, even 
 though there existed in those quarters no knowledge regarding the credit 
 of the original maker. Whatever will tend toward the creation of such a 
 discount market will be helpful in lowering the rate of interest which the 
 commerce of the country must pay. Whatever will tend to give broad 
 currency to commercial paper, a currency wider than any knowledge of 
 the maker’s credit, will tend toward an equalization of rates, toward 
 sounder banking conditions, and toward a lowering charge on commerce 
 for interest. Such a proposition as has been here presented for giving 
 a wide currency to loans made against cotton in warehouses, is a funda- 
 mental movement, the first among a good many others now gathering 
 force, I believe, that will eventually lead to a great discount market, 
 where idle funds from the whole country and, indeed, from international 
 money centers, may find sound investment in short term commercial 
 credits. 
 
It seems to me admirable that you men who are interested in cotton 
 manufacturing are thinking of some improvements in underlying methods 
 which may help you in the conduct and extension of your business. The 
 business of cotton spinning and weaving cannot be cited as one of the 
 phenomenal industrial developments of America, at least not in its recent 
 years of history. Your business has grown and it would be easy to present 
 statistics that would be flattering to your management. On the whole, 
 however, looked at from a world point of view, the cotton manufacturing 
 business in America in recent years only about held its own in compari- 
 son with world development. While great growth is shown, quite as great 
 growth is exemplified in the statistics of some other countries. With all 
 the advantages of location in the midst of the production of two-thirds 
 of the world’s supply of raw material, with the greatest homogenious 
 market in the world right at your hand, and that protected from foreign 
 competition by high tariff, with the advantage of having the lowest rates 
 of transportation of any country in the world, and of being historically 
 a people of the greatest mechanical genius,—in spite of all these ad- 
 vantages, we have not seen the cotton manufacturing business in this 
 country forge ahead as have many great lines of industry. 
 
 The United Kingdom, importing every pound of cotton she manu- 
 factures, is still the world’s great cotton mill. British spinners export as 
 great an aggregate of cotton manufactures in a month as you do in a 
 year. In fact, the United States takes its place alongside of India in its 
 ability to supply the outside world with manufactured cotton goods. 
 Germany exports well over twice as much as we do, and our total is ex- 
 ceeded by Belgium, France, and even little Switzerland. In the light 
 of these facts, it is obvious that while in a protected market of gigantic 
 extent, we have been able to build up the greatest spinning business of 
 any country in the world, we still are not fully supplying our own do- 
 mestic market, importing over $60,000,000 worth of cotton goods annu- 
 ally, and the advantage of great manufacturing units have not enabled 
 us to get our costs down to a point to make us even a factor of the first 
 order in the world’s markets for manufactured cotton. It well behooves 
 you who are interested in this business, therefore, to think broadly and 
 deeply on fundamental subjects in a way that may tend to cheapen your 
 cost of production, and put you in line with the other great cotton manu- 
 facturing nations for world competition. 
 
 One important element in the cost of production, of course, must 
 always be the cost of capital, and you are undoubtedly taking a step in the 
 right direction when you endeavor to give a more universal character 
 to that part of your credit operations which can be based directly on 
 stored raw material, and by doing that make that portion of your capi- 
 tal cost you less, because the security for your loans will be more broadly 
 understood and the capital attracted to them come from wider fields. 
 
 Broadly speaking, the cost of a manufactured product up to the 
 point of distribution is made up of the price of raw material, expense of 
 transportation and the actual cost of manufacture. The cost of raw ma- 
 terial at its point of production is substantially the same to all users. 
 The cost of transportation from field to mill is measured approximately 
 by distance, and here you have great advantage over all your foreign 
 competitors. The cost of manufacture is made up of many elements, but 
 
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among the principal ones are the cost of capital, the perfection of 
 mechanical equipment, and the price and efficiency of labor. 
 
 On the side of the cost of labor, you cannot hope, nor should you 
 hope, to make that item in your cost sheet at all comparable with the 
 same item in the cost sheets of your foreign competitors. At the risk 
 of sounding a discordant note, I will say that in my opinion you will 
 not permanently reduce your labor cost by trying to compete through 
 the employment of child labor with the lower labor level of other 
 countries. I believe you must find ways of meeting world competition 
 other than in the per diem cost of the labor item. Whether or not you 
 have done everything you can in the perfection of mechanical equip- 
 ment is a technical question, of which you are a far better judge than 
 I can be, but it is at least obvious to a layman that the United States 
 is not taking the great lead in inventive appliances in cotton manufac- 
 turing that it has in some other fields, and it would seem, therefore, 
 that there might be opportunity there to do something toward meeting 
 foreign competition. 
 
 The great advantage which you hold is in cost of transportation. 
 In view of high labor cost, there are impressive obstacles in the way 
 of your meeting world competition by reducing the cost of manufacture. 
 If the cost of raw material were reduced, however, the importance 
 of the element where you have the advantage over all the world, the 
 cost of transportation, would in time be further emphasized. Would 
 it not seem, therefore, that one of the directions toward which this 
 country might best turn its attention in any effort to take its place in 
 world competition in this field should be in the reduction of the cost of 
 raw material? 
 
 Although we supply nearly two-thirds of the raw cotton of the 
 world, I still believe that we present, in our methods of cotton pro- 
 duction, one of the most gigantic examples of incompetency to be 
 found anywhere. The huge and rapidly growing totals of our cotton 
 crop are sources of satisfaction until we examine them in connection 
 with our acreage. That examination discloses four-tenths of a bale 
 an acre is about the average of our production. In that figure, I believe 
 is to be found an important indictment against the United States, 
 although it is by no means a type of indictment that lies solely against 
 the cotton planters of America. 
 
 The great bankers of Europe have a practice, that I think might 
 well be copied in this country, of issuing annual reports in which are 
 to be found a broad and stimulating discussion of current, financial and 
 economic conditions. I have just been reading the annual report of the 
 Deutsche Bank, the great financial institution in Germany. After pre- 
 senting some statistics of imports and exports of the leading countries 
 of the world, showing Germany in a position second only to Great 
 Britain, and away ahead of the United States, and indicating how, owing 
 largely to favorable trade balances, the stock of gold held by the Reisch- 
 bank increased during the year under review by nearly $100,000,000, 
 there occurs this paragraph: 
 
 “Tt is not to favorable climatic conditions alone that Ger- 
 man agriculture is indebted for plentiful and increased returns. 
 The following comparison of the produce of the leading agri- 
 cultural countries will show to what extent progress has been 
 
 x 
 
made in the development of German soil through industrious 
 
 work as well as through expenditure of capital in the shape of 
 
 artificial fertilizers, machinery and electrical power.” 
 
 In the table which follows, the crop returns are shown for the 
 leading countries of the world and for the principal agricultural prod- 
 ucts. We must remember that Germany is not a fertile country. What- 
 ever German agriculture wins from the soil must come through hard 
 work and intelligent methods. That country has nothing comparable to 
 the natural advantages which we enjoy. These comparative crop returns, 
 therefore, are all the more significant. 
 
 This table of comparative yield shows that Germany produces per 
 acre 18 hundredweight of wheat against 8% in the United States; 14.7 
 hundredweight of rye against 8.4 in the United States; 15% hundred- 
 weight of oats against 10.7 in the United States, and 120 hundred- 
 weight of potatoes against just half that figure in the United States. 
 The United States and European Russia fall into the lowest class of 
 production, and even Canada in every item shows a greater yield 
 than do our own acres. Europe produces no cotton and therefore a 
 similar unfortunate comparison cannot be made with our cotton yield, 
 but what is perhaps still better, we can make comparison of our acreage 
 yield with the easy possibilities under intelligent cultivation of what 
 our own acres have been made to produce. 
 
 We are now devoting about 35,000,000 acres to the production of 
 cotton and a good crop. is about 200 pounds of ginned cotton an acre. 
 The Department of Agriculture, which seems to be the one arm of our 
 government truly devoted to upbuilding and intelligent development of 
 our resources, has demonstrated beyond any question what a shame- 
 fully small average yield this is. 
 
 At the present time, the government has an arrangement with 
 about 525 county agents in Southern territory where cotton is the 
 principal crop. These county agents carried on demonstrations with 
 12,000 individual farmers last year. The area involved was 104,000 
 acres. On these acres, the Department’s instructions were carried out 
 by the farmers with their own tools, teams, labor and fertilizer, the 
 Department merely furnishing the instructions. The result was an 
 average yield of 1,005 pounds of seed cotton per acre. In the states 
 where these experiments were carried on, the present average yield 
 is 546 pounds of seed cotton per acre. It is, therefore, claimed by the 
 Department of Agriculture that as a direct result of. the instructions 
 given to a limited number of farmers, the number of pounds of seed 
 cotton produced was increased by approximately 95%. 
 
 As an illustration of what can be done, the Department of Agri- 
 culture cites the case of an old negro farmer near Marion, Alabama. 
 This old colored man by economy and hard work covering a number 
 of years, acquired a farm of 163 acres, but his land was poor, and 
 not infrequently he found it did not produce even enough for seed. 
 It occurred to him he might get better results by confining his efforts 
 to a smaller acreage. He selected two acres near his cabin and prac- 
 tically abandoned the remainder of his farm. For years he has devoted 
 himself to increasing the producing capacity of this small area. He 
 went to work first to fertilize the two acres. He hauled into the field 
 and plowed under dead leaves and other decaying vegetation from the 
 
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nearby woods, cotton stalks and corn stalks, until he had brought the 
 fertility of this little plot of ground up to a high state. So that in one 
 year recently he succeeded in growing five hundred and six pounds 
 of cotton on a measured one-eighth of an acre. This is at the rate of 
 eight bales per acre, and although this man is advanced in years, his 
 ambition yet is to produce nine bales of cotton to an acre, and the 
 Department of Agriculture is inclined to think that he will accomplish 
 that result. 
 
 The Department of Agriculture has been sending experts into the 
 cotton belt who have taught the planters the benefits of good cultiva- 
 tion, rotation of crops, care and selection of seed, and the advantage 
 of co-operation among the farmers themselves in securing uniformity 
 in the kind and quality of the cotton raised. The results so far obtained 
 are filled with promise. In many instances, the acreage yield has been 
 increased to as high as two bales per acre. 
 
 The boll weevil continues its ravages through a large section of 
 the cotton belt. The total loss in cotton production in the United States 
 due to the boll weevil up to this time is believed to be in excess of 
 10,000,000 bales, which at the low value of $50 per bale, not counting 
 the loss of seed and cost of fighting the pest, represents a loss of 
 $500,000,000. This estimate covers only the loss incurred in acres 
 planted to cotton and takes no account of the reduction in production 
 due to fear of the ravages of this insect. 
 
 The experts are making progress in fighting the boll weevil, prin- 
 cipally through the new methods of cultivation. Through their efforts 
 in many sections of the infested regions, planters have been able to 
 secure an average crop. 
 
 In the agricultural appropriation bill now pending in Congress 1s 
 an item of $46,000 to continue the Department’s efforts to control dis- 
 ease of cotton and other crops. Another paragraph appropriates $180,000 
 for investigating the ginning, handling, grading, baling, gin compressing 
 and the establishment and demonstration of standards for the different 
 grades of cotton. Of this sum, $60,000 is to be used in testing the waste, 
 tensile strength, and bleaching qualities of the cotton as standardized 
 by the government. Another section appropriates $628,240 for farmers’ 
 co-operative demonstrations for the best methods of meeting the ravages 
 of the boll weevil. 
 
 An important work is being done by the cotton experts of the 
 government in the introduction of long fibre Egyptian cotton in the 
 southwest, especially in Arizona. This work may increase the area of 
 our cotton belt. A year ago the Arizona farmers in and about the Salt 
 River Valley planted approximately 4,500 acres in Egyptian cotton. 
 About 3,500 acres came to maturity the next year. The remaining 
 1,000 acres failed by reason of lack of water, poor cultivation and other 
 hazards. But of the acreage which survived, the total yield was 2,200 
 bales for the 3,500 acres. Of this high-grade cotton, the United States 
 imports each year about 100,000,000 pounds, at a cost of approximately 
 $20,000,000, the price per pound in many cases being 50% more than the 
 average American cotton, except the Sea Island varieties 
 
 The planters in the southwest, in consequence of the fact that 
 the yield per acre of the 1% inch fibre Egyptian cotton is fully as 
 
 7 
 
great as cotton in the Southern States, with the price much higher, 
 have planted this year about 15,000 acres. The prospect is that this 
 acreage will be greatly increased during the next few years. 
 
 From the demonstration which the Department of Agriculture 
 has made, covering wide territory and many seasons, it is, I believe, 
 a safe assertion that thoroughly efficient methods of cultivation would 
 double our cotton crop on the same acreage now devoted to that staple. 
 The world will be ready to consume that increase as soon as, under 
 the most optimistic view, we may hope that it will be accomplished. 
 I believe there is no more important service that you men who are 
 engaged in the cotton manufacturing business can perform looking 
 to the development of the cotton industry than to do all that you can 
 to awaken public sentiment to the need for efficient methods of cotton 
 cultivation. A realization of such improvements in methods as this 
 branch of the government is trying to bring about will do more toward 
 the upbuilding of your business, it seems to me, than you are likely to 
 accomplish with the same effort in any other direction. 
 
 We are today a nation grown critical of business methods and 
 resentful of business accomplishment. By far the greater part of govern- 
 ment energies, as related to business, are directed toward destructive 
 rather than constructive and creative ends. Business men have been 
 called to account by Congress, commissions and courts, and are being 
 punished for past deeds and hampered in present activities. The man- 
 agers of railroads, although they have given to the public an average 
 freight rate much less than what similar service costs in other countries, 
 are bound with ever increasing bonds of hampering regulations, and are 
 held to the strictest accountability for any failure of administration 
 which falls below a hundred per cent. of efficiency. Directors of railroad 
 property are told what they owe to the people in the way of wise and 
 efficient management, and in spite of results attained, with which the 
 results in no other country are comparable, they are held up to the pub- 
 lic almost in the light of criminals, compelled to perform their daily task 
 under the regulating eye of agents of the government. If that is a fair 
 measure of the duty to society which the managers of public utilities 
 may rightfully be expected to perform, and I do not wish to be considered 
 as denying that the public has a right to exact wise and efficient manage- 
 ment, then why should not society demand wise and efficient conduct 
 of the great agencies of production? If a railroad manager is culpable 
 and is answerable to society for anything less than a hundred per cent. 
 of efficiency what of the farmer and planter, holding the great agency 
 of production—land—and utilizing it with but forty per cent. of effici- 
 ency? That is the indictment that stands against no small part of the 
 agricultural community—a conduct of their business on a basis of forty 
 per cent. of efficiency. It will not do to say that railroad managers 
 and corporation heads are the representatives of publicly subscribed 
 capital and are therefore subject, in the interests of society, to a sur- 
 veillance that applies only to the affairs of a public corporation, while 
 farmers represent only personal investment and may be left to work 
 out with such ignorance or intelligence as they choose to bring to bear 
 the conduct of their own affairs. Farmers and planters also owe some- 
 thing to society in the way of intelligently conducting their. business. 
 They hold the means of production in their control. The public interest 
 
 8 
 
and the common good demand that they exercise that trust with intelli- 
 gence, efficiency and thrift, quite as rightly as does public opinion 
 demand efficiency and honesty in business administration. Prices of 
 produce go up in answer to the inexorable law of supply and demand; 
 values of the great agency of production—farm lands—have risen in 
 our memory two or three hundred per cent., not because those lands 
 were more efficiently managed, but because the demands of hungry 
 mouths and backs to be clothed have made prices that permitted much 
 increased values, even when not accompanied by increased efficiency 
 of management. 
 
 Is it not time for the maligned business man to direct some atten- 
 tion to the honest farmer, and to ask whether the people, whose demands 
 the politicians are so fond of formulating, should not have directed 
 against them and their small business methods some of the same analyti- 
 cal criticism that it has been the order of the day to direct against big 
 business ? 
 
 I believe that as a nation we have for some years been attacked by a 
 hysteria of criticism against big business, until a majority of the people 
 have come to believe that the way to secure prosperity is through legis- 
 lation, instead of through intelligent hard work, improved methods, and 
 a scientific application of the best knowledge to their own business. If 
 you can do anything to direct the attention of the cotton planters of the 
 south, or of the farmers of the whole country, to the fact that the funda- 
 mental cause of the high cost of living is not to be found in the offices 
 where big business is managed, but rather in the ignorance and ineffici- 
 ency of management of their own farms and plantations, you will have 
 done something to clear the atmosphere and to enable us some time to 
 get ‘started on a new period of true prosperity. 
 
 The particular men who happen for the moment to be occupying 
 official positions in Washington and elsewhere, and who are laying 
 unbearable hardships upon the proper development of business in the 
 United States, are not perhaps primarily to blame. The blame lies back 
 of them in an ill informed and frequently unfair state of public opinion. 
 We have had a period of magazine and political muckraking which has 
 brought about a condition where business success is looked upon as a 
 crime, where the man who has demonstrated that he can manage his 
 business well is excluded from public counsel and where no small part 
 of our government affairs have been put into the hands of men who would 
 be incompetent successfully to manage modest business affairs. 
 
 It is idle to rail at the public representatives of one party or another, 
 or at one administration or another. We have got to get back of all 
 that and create a sounder, a more intelligent, and a more honest pub- 
 lic opinion. That cannot be quickly done, and it will never be done by 
 a policy of silence on the part of those who represent important busi- 
 ness interests. You have got something to do besides run your cotton 
 mills. You and other business men must wake up to the fact that you 
 have a public duty in the education of public opinion, and so long as 
 you refrain from exercising it, you will not only hinder the industrial 
 and commercial development of ‘this whole country, but you will very 
 directly permit your own business to be misunderstood and to be made 
 the subject of unfair and uneconomic legislative attack. We are in a 
 period of industrial and commercial depression. The marvel is not that 
 
 9 
 
in spite of our great resources we are in such a period, but rather, with 
 the terrible misunderstanding and misconception on the part of public 
 opinion, that under a popular government, we are not in a condition of 
 much deeper depression. 
 
 I regret that I cannot at the moment see any marked tendency in the 
 direction of business improvement. We have the promise of great crops, 
 although there is much uncertainty between such an early promise and 
 ultimate fulfillment. Should there be complete fulfillment of that promise, 
 it would, of course, temporarily, at least, bring with it improvement. 
 We may be permitted an increase of railroad rates, and that would be 
 doubly helpful, first on the side of its direct benefit, but even more on 
 the side of a promise of fairer treatment. Business conditions are 
 unsatisfactory, however, on account of fundamental reasons that are 
 deeper than can be cured by one or both of these factors. The incentive 
 for business men to take new risks, to expand their activities, to lead 
 them to the inception of new or greater enterprises has received a seri- 
 ous check from the unfair attitude of public opinion as exemplified in 
 Congress, by commissions, and in the printed page that reflects and 
 molds the state of public opinion. I do not believe that we can hope for 
 permanent relief from the unsatisfactory position in which business is 
 now placed until we can get a public opinion that more truly reflects a 
 fair attitude, based on correct economic principles. It seems to me the 
 highest duty of business men, particularly such an influential group as 
 is represented here, to contribute the best that is in them toward the 
 creation of a wiser, a sounder, and a more intelligent public opinion in 
 regard to business affairs. That can neither be done by silent acquies- 
 cence, nor by dissatisfied grumbling at existing tendencies. You must 
 take your active part in forming public opinion. It is time for business 
 men to speak out. Where errors and mistakes have been made, let them 
 be frankly acknowledged, but insist upon a better understanding of your 
 methods, your problems and your aims. Let your voice be heard and 
 your views expressed with frankness and honesty, and we may then hope 
 that an intelligent and informed public sentiment will give to business 
 men fair play, and to business an enduring foundation upon which sound 
 prosperity may be solidly built. 
 
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