I recently commented on Penelope Trunk’s blog that my blog was an intersection between ethics, money and the life. So I was very pleased when I encountered a passage in Secrets of the Temple that shed some light into the relationship between money and food from a historical perspective.

My current knowledge of the U.S. food system begins in the Dust Bowl era as described by Timothy Egan in Hard Times. But I wondered about what the food system was like before the dust storms became a regular feature of the midwestern landscape. The excerpt below gives me some insight into that question, along with the reasons behind  why people from the southern states still bear resentment toward northerners or other outsiders. The excerpt also sheds light on why the Civil War is still a hot button topic for many. Reading arduous’ recent post on perceptions by rural people and/or southerners reminded me to post this excerpt:

Across the cotton states, small farmers existed in a state of virtual peonage, their everyday lives held in bondage by the crop-lien system, an American version of the medieval usurer. In every hamlet, the "furnishing merchant" provided farm families with staples and supplies and took a lien on the farmer’s cotton crop as security. If a farmer bought something for cash, he paid one price, but if he purchased on credit, he would pay 25 to 50 percent more. At the end of the season, when his crops were sold and his account settled, the "furnishing man" would add another 33 percent or so for interest. The real interest rate, thus, approached or exceeded 100 percent. There was nowhere else to turn; other merchants or banks would not extend credit to someone who was already indebted. With falling cotton prices, it was impossible for farmers to "pay out," and so the merchants took notes against the farmers’ land. As the debt mounted and forfeiture was inescapable, tens of thousands of farmers - eventually millions of people - "decended into the world of landless tenantry," as Lawrence Goodwyn wrote. They became hired hands, sharecropping on the farms they had once owned, or displaced immigrants who streamed to the cities. This wholesale liquidation was entwined in the South’s bitter memory of Reconstruction, the legacy that led Populist legislators, once they had gained power in places like Arkansas, to write stringent prohibitions of usury into their state laws and constitutions.

Usurious lending also afflicted farmers in the Middle West, though less dramatically, as they struggled to stay ahead of falling prices. The age of mechanization was opening and farmers were advised that the only way to maintain their income levels was to increase their efficiency - to produce greater yields from the same land and labor. The new machines they purchased on credit typically carried annual interest rates of 18 to 36 percent - chattel mortgages they would have to pay off in steadily appreciating dollars. When the farmers went to ship their grain, the railroads squeezed them further with arbitrary freight rates. "The farmer in the West," Goldwyn wrote, "felt there was something wrong with a system that made him pay a bushel of corn in freight costs for every bushel he shipped."

That’s all I am going to type for now. But the chapter goes on to say how farmers had to obtain loans from local financial organizations which then asked banks and financial organizations (investment houses?) on Wall Street to back their loans. Since the currency in existence was backed by gold (Chile recommended this short documentary that is well worth watching to get the general idea of currency backing), any sort of loan guarantee had to have backing in gold as insurance…even though collateral was often taken from the farmers in the form of land. Since it was banks in NYC that made or broke the farmers in rural areas, there was a growing resentment that has never quite gone away. In fact the ongoing subprime crisis stems from decisions made from lower level flunkies all over the globe to the higher level paper pushers sitting in Wall Street firms again affecting millions of people including those living in rural areas. So I can see how one can be resentful toward those at Wall Street.