Effect of Urban and Industrial Development on Agricultural Finance

Abstract

AT LEAST two basic approaches could be taken on a paper under this title. The discussion might be confined to basic agricultural finance problems in the periphery of urban and industrial areas where the urban population is expanding into rural areas. This outward movement causes farm real estate values to rise due to competition for home and industrial sites. It creates problems of taxation. Should tax assessments be based on value of the property for agricultural purposes or for urban and industrial purposes. As these urban and industrial areas expand, farm people living in peripheral areas have increasing opportunities for nonfarm income. The situation also creates need for financial and credit services for parttime farmers and others in such areas. The financial aspects of the rural development program, which is receiving increasing emphasis throughout the country, could also be considered. On the other hand, a broader approach might be taken by considering the financial problems of American agriculture in the face of urban and industrial development. We have a tendency to look constantly at credit needs, the role of credit institutions, and other credit factors with reference to agriculture, both as a whole and by individual segments such as long-term, intermediate, and short-term credit. Each year the annual meeting is replete with detailed observations with reference to credit to improve agriculture. However, agricultural finance involves much more than agricultural credit. In addition, if we consider the effect of urban and industrial development on agricultural finance, this involves projecting trends and examining structural changes taking place in agriculture and the possible effect of these changes on financing in agriculture as we move forward. Two recent research contributions by the National Bureau of Economic Research, entitled Patterns of Farm Financial Structure and Capital in Agriculture: Its Formation and Financing Since 1870, give evidence of the great need to focus our attention on the over-all question of agricultural finance as contrasted with agricultural credit alone. The latter publication includes interesting and important findings with reference to the source of gross funds for replacement and additions to physical capital and working cash in agriculture.' Internal financing, largely from gross