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7th November, 1914 HEN we denounced the Brazil coffee valorization scheme as an extortionate monopoly, we did not dream that we should within less than three years give serious consideration to a similar scheme for sustaining cotton prices. Still further were we from dreaming that out of the non-interventionist South would arise a movement for the introduction of a method of economic control that may be of more varied and far-reaching possibilities than any now regularly employed by the government. Yet such has been one of the results of the crisis in the cotton trade. Our cotton growers and all the miscellaneous interests based upon cotton production have been placed in a situation analogous with that of the Brazilian coffee producers at the opening of this century. And, political traditions to the contrary notwithstanding, the South is ready to demand governmental intervention of a nature very similar to that which has been employed in Brazil.

Four-fifths of the coffee of the world comes from Brazil; not far from three-fourths of the cotton comes from the United States. 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. In the evil years of the opening century, when coffee dropped as low as 3.55 cents (August, 1903) mortgaged plantations in great numbers fell under the hammer, merchants were ruined and banks failed. 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.

The huge coffee crop of 1906-1907 (twenty million bags, as compared with an average crop of twelve millions) forced upon the attention of the Brazilian mercantile community and the state government, the inadequacy of a lassex-faire policy in the matter of this chief staple. The present European war, with its attendant disorganization of markets consuming one-third of the world's cotton supply, is producing a similar effect upon American opinion. As was the case in Brazil, it is assumed here that the emergency to be met is temporary, that a restoration of normal conditions cannot be long delayed. The experience of Brazil has proved, however, that such an assumption is fallacious. We might corner the existing supply of cotton and force prices to a high level; but if production goes on unchecked we shall find that the impounding of supplies is a disastrous policy. 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 second place, shipments on private account are checked by a heavy export duty. 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. Accordingly, in so far as the cotton depression is likely to prove chronic unless production is readjusted, we appear to be quite without effective lawful remedies for the evils of the situation. Whatever palliative measures we may adopt, it seems that we must endure the slow and painful process of adjustment through the action of individual producers under the crushing weight of ruinous prices.

Certainly such would be the course of events if we possessed no other means of industrial control that the repressive or the subsidizing activities of the traditional organs of government. 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. 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. 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