i know way, way back, in the 19th century i think, they would save fabric scraps and then sell them to a scrap person and then the scrap person would make them into paper. or is it possible to just make it at home? because if i got paid for scraps, i would be rich.
I am not sure what kind of scraps you are talking about, but here is a link to make your own recycled paper out of newspaper scraps http://pbskids.org/zoom/activities/sci/recyclingpaper.html
rag paper is still made, esp for the art market and archival photo market. the rag today is usually from trshpickers, and usually not in Western Europe/ USA/ Canada/ Australia New Zealand.