The Online Library of Liberty

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• Political Economy
• Part I.: Character and Logical Method of Political Economy.
• Part II.: Production.
• Chapter I.: Land and Natural Agents.
• Chapter II.: Labor.
• Chapter III.: Capital: Its Origin and Office.
• Chapter IV.: The Productive Capability of a Community.
• Part III.: Exchange.
• Chapter I.: The Theory of Value.
• Chapter II.: The Theory of International Exchanges.
• Chapter III.: Money and Its Value.
• Chapter IV.: Money and Its Value—continued—debased Coin: Seigniorage.
• Chapter V.: Inconvertible Paper Money.
• Chapter VI.: Bank Money.
• Chapter VII.: The Reaction of Exchange Upon Production.
• Part IV.: Distribution.
• Chapter I.: The Parties to the Distribution of Wealth.
• Chapter II.: Rent.
• Chapter III.: Interest.
• Chapter IV.: Profits.
• Chapter V.: Wages.
• Chapter VI.: Wages.—continued.
• Chapter VII.: Two Other Shares In Distribution.
• Chapter VIII.: The Reaction of Distribution Upon Production.
• Part V.: Consumption.
• Chapter I.: Subsistence: Population.
• Chapter II.: The Appearance of New Economic Wants.
• Chapter III.: Consumption: the Dynamics of Wealth.
• Part VI.: Some Applications of Economic Principles.
• I.: Usury Laws.
• II.: Industrial Co-operation.
• III.: Political Money.
• IV.: Pauperism.
• V.: The Doctrine of the Wage-fund.
• VI.: The Multiple Or Tabular Standard of Deferred Payments.
• VII.: Trade Unions and Strikes.
• VIII.: The Knights of Labor.
• IX.: Attacks On the Doctrine of Rent.
• X.: The Nationalization of the Land.
• XI.: The Banking Functions.
• XII.: The Present Banking System of the United States.
• XIII.: Foreign Exchanges.
• XIV.: Bi-metallism.
• XV.: The Revenue of the State.
• XVI.: The Principles of Taxation.
• XVII.: Protection Vs. Freedom of Production.
• XVIII.: Socialism.

X.

the nationalization of the land.

493. The Law of Rent Re-stated.—We have seen what is the nature of Rent. It represents the surplus of the produce over the cost of cultivation on the poorest lands actually contributing to the supply of the market at the time.

We saw (par. 262–4) that, conceding the private ownership of land, rent is merely a question between landlord and tenant; that so far as economic forces are concerned, rent must remain in the hands of the landlord; that, setting violence aside, it can only come into the hands of the tenant by gift from the landlord; that, were it, by virtue of the landlord's generosity, to reach the tenant, it would, so far as economic forces are concerned, go no further. It could only be carried to the agricultural laborer or to the consumer of agricultural produce, by another gift or series of gifts.

494. The Equities of Rent, as between Landlord and Tenant.—So much for the economics of rent; let us look a moment at the equities of it.

Certainly, as between the landlord and the tenant, the latter can set up no claim to any portion of rent. This is shown in the following way: It is, as we have seen, of the very essence of rent that it represents, and is measured by, the surplus of produce over the cost of cultivation on the poorest (or most distant) lands under cultivation for the supply of the same market. Now, these poorest or most distant lands have occupiers who must be presumed to be industrially, and, if you please, morally, just as meritorious as those who cultivate the better lands or the lands nearer the market. The several classes of tenants are only put on an equality when rent is exacted according to the Ricardian formula. It would clearly be inequitable that one body of occupiers should receive back, in the price of their products, only the actual cost of cultivation, while another should receive large sums in addition to this, as would be the case were rents to be remitted.

495. As between Landlord and the Agricultural Laborer.—In the same way it may be shown that the agricultural laborers on lands which bear a rent have no claim, in equity, to any portion of that rent. Why should they receive any more for their services than the laborers who cultivate the no-rent lands?

Clearly, then, as against either the tenant or the agricultural laborer, the landlord has an easy case. He can prove that neither of the two has any claim whatever to any part of what he receives as rent.

496. As between the Landlord and the Community at Large.—But suppose the issue to be raised between the landlord and the whole community, can the acquisition by individuals of the surplus of the produce above the cost of cultivation on the poorest soils, be so successfully defended on grounds either of political equity or of political expediency?

As this question has within the past few years become a “burning” question, I think it but right to present the argument of those who urge that “the unearned increment of land” should go to the State and not to individuals. This argument can not be better presented than in the language of John Stuart Mill, who, in his later days, became President of the English Land Tenure Reform Association, whose professed object was to agitate this question.

497. Mr. Mill's Argument.—“Suppose,” says Mr. Mill, “that there is a kind of income which constantly tends to increase without any exertion or sacrifice on the part of the owners, these owners constituting a class in the community whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case there would be no violation of the principles on which private property is founded, if the State should appropriate this increase of wealth, or any part of it, as it arises. This would not properly be taking any thing from any body; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class.

“Now this is actually the case with rent. The ordinary progress of a society which increases in wealth, is at all times tending to augment the income of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were, in their sleep, without working, risking or economizing.”

In the paper from which the foregoing paragraphs are extracted, Mr. Mill expressly excepted the present value of the land in possession of individuals at the time the system of the public acquisition of the increment of the land should go into effect. Such an act should, in his view, have reference only to future increase.

In another place, while expressing a general respect for the rights of property, Mr. Mill proceeds:

“Some people ask, But why single out the land? Does not all property rise in value with the increase of prosperity? I answer, No. All other property fluctuates in value, now up, now down. I defy any one to show any kind of property, not partaking of the soil, and sufficiently important to be worth considering, which tends steadily upward, without any thing being done by the owners to give it increased value. So far from it, that the other of the two kinds of property that yield income, namely, capital, instead of increasing, actually diminishes in value as society advances. The poorer the country, or the further back we go in history, the higher we find the interest of money to be. Land alone—using land as a general term for the whole material of the earth—has the privilege of steadily rising in value from natural causes; and the reason is that land is strictly limited in quantity; the supply does not increase to meet the constant increase of demand …

“Well would it have been if this diversion of the public wealth had been foreseen and guarded against long ago; let us at least prevent any more gigantic fortunes∗ from being built up in a similar manner. The Association claims for the State the right to impose special taxation upon the land, equivalent to its special advantage.”

“Those countries are fortunate,” remarks Mr. Mill, “or would be fortunate, if decently governed, in which, as in a great part of the East, the land has not been allowed to become the permanent property of individuals, and the State consequently is the sole landlord. So far as the public expenditure is covered by the proceeds of the land, those countries are untaxed, for it is the same thing as being untaxed to pay to the State only what would have to be paid to private landlords if the land were appropriated.

“The principle that the land belongs to the Sovereign, and that the expenses of government should be defrayed by it, is recognized in the theory of our own ancient institutions. The nearest thing to an absolute proprietor whom our laws know of, is the freeholder, who is a tenant of the Crown, bound originally to personal service, in the field or at the plow, and when that obligation was remitted, subject to a land tax intended to be equivalent to it.”

498. The Feudal Burdens of Land in England.—In the paragraph last quoted, Mr. Mill contemplates the feudal obligations of the tenant by military and other service as approximately the equivalent of an annual rent, which would be made, rudely indeed, to increase with the increasing value of land due to the growth of population and the progress of trade and manufactures. The chief of these obligations, as formulated by law and custom in England, are thus stated by Sir Edward S. Creasy, in his work on “The English Constitution.”

The king, as feudal lord of his barons, and other military tenants, had a right to exact from them military service, or a pecuniary payment in lieu thereof; and it seems to have been optional with the king to claim the money, whether the vassal wished to serve in person or not, and even to exact both money and personal service. This war tax is called escuage or scutage, and the constant wars and troubles of the times always furnished a ready pretext for demanding it. Other exactions of money payments, under the name of aids, were continually practiced. Besides these, the heir, on succeeding to his estate, was required to pay a sum of money to the lord, under the title of a “relief.” If the heir was a minor, the lord took possession of the land, as guardian, and used or abused it as he pleased, till the heir obtained his majority. Even then the heir was obliged to pay a fine on suing out his livery, that is, on obtaining the delivery of the land from his guardian to him. The lord also had the right of nominating and tendering a wife to his male ward, or a husband to his female ward. And if the ward declined to marry the person so selected, the ward forfeited to the lord such a sum of money as the alliance was considered worth. The lord was entitled to a fine upon alienation: that is, if the tenant disposed of the land, or any part of it, to any third party. If the tenant died without heirs the land reverted to the lord. This was termed escheat (par. 573), and, as the right of devising real property did not exist in England after the Conquest, till Henry VIII's time, escheats were numerous. The lord also claimed to take back the land whenever the tenant committed any of a numerous list of crimes or acts of feudal misconduct. Such criminality or misconduct on the tenant's part was held to work a forfeiture.

499. Composition for the Feudal Burdens Upon Land.—On the restoration of Charles II., the land-owning class secured their release from the strictly feudal burdens, the consideration received by the Crown being solely an excise upon beer; and thus the vast possibilities of revenue to be derived from the composition of the feudal obligations of the landowning class were sacrificed. In the revolution of 1688, however, there was, as Mr. Mill notes, a reaction against this sacrifice of the rights of the public revenue. Indeed, the revolution of 1688 was, in Mr. Mill's view, “a revolution made by the towns against the country gentlemen. One of the fruits of it was a tax on the land of four shillings in the pound, which, at that time, may have been an equivalent for the burdens which had been taken off the landlords.”

In 1692, accordingly, the lands of England were valued for the purposes of the land tax.

This land tax was to be a tax, not upon the community, not upon raw produce, not upon commercial agencies and manufacturing operations, but solely a tax upon landlords, in reduction of their rents: a resumption by the State, for its own benefit and for the corresponding relief of other classes, of a portion of the rents arising from the increase of population and the progress of trade and manufactures.

The following is Mr. Ricardo's statement of the incidence of a land tax:

“A land tax, levied in proportion to the rent of land,∗ and varying with every variation of rents, is, in effect, a tax on rent, and, as such a tax will not apply to that land which yields no rent, nor to the produce of that capital which is employed on the land with a view to profit merely and which never pays rent, it will not, in any way, affect the price of raw produce, but will fall wholly on the landlords.”

But if the revolution of 1688 was, indeed, as Mr. Mill conceives it, a revolt of the towns against the country gentlemen, the force of that movement was soon exhausted. The landowners resumed control of English legislation; the valuation of 1692 has remained to this day as the basis of the land tax, while the rate of that tax was in 1798 made permanent at 4 shillings in the pound on the valuation of that date. It was by this series of acts that the right of the State to participate in the increase of the rental value of the lands of the kingdom was relinquished, in consideration of an annual payment, forever, of about £2,000,000.

500. Mr. Cobden's Denunciation.—It was to this relinquishment of the rights of the revenue by parliaments composed of country gentlemen, for the benefit of landlords, at the expense of the general community, that Richard Cobden alluded in his somewhat threatening speech of December 17, 1845.

“I warn ministers and I warn landowners and the aristocracy of this country against forcing upon the attention of the middle and industrious classes the subject of taxation.

“If they make it understood by the people of this country how the landowners here one hundred and fifty years ago deprived the sovereign of his feudal rights over them; how the aristocracy retained their feudal rights over the minor copyholders: how they made a bargain with the king to give him four shillings in the pound upon their landed rentals, as a quit charge for having dispensed with these rights of feudal service from them; if the country understand, as well as I think I understand, how afterwards this landed aristocracy passed a law to make the valuation of their rental final, the bargain originally being that they should pay four shillings in the pound of the yearly rateable value of their rental, as it was worth to let for, and then stopped the progress of the rent by a law making the valuation final; that the land has gone on increasing ten-fold in many parts of Scotland, and five-fold in many parts of England, while the land tax has remained the same as it was one hundred and fifty years ago; … if they force these things to be understood, they will be making as rueful a bargain as they have already made by resisting the abolition of the Corn Law.”

501. Mr. Mill's Land-Tenure Reform Agitation.—What Mr. Cobden thus threatened in 1845, Mr. Mill undertook about 1870: an agitation of the whole question of taxation, and an active inquiry into the right of the landlord class to receive the progressive increase of rents.

The following is an extract from the programme of the Land-Tenure Reform Association, of which Mr. Mill was President:

“(IV.) To claim for the benefit of the State, the Interception by Taxation of the Future Unearned Increase of the Rent of Land (so far as the same can be ascertained), or a great part of that increase, which is continually taking place without any effort or outlay by the proprietors, merely through the growth of population and wealth; reserving to owners the option of relinquishing their property to the State, at the market value which it may have acquired at the time when this principle may be adopted by the Legislature.”

502. What Shall be Said of the Equity of this Proposal?—In their appeal alike to history and to political equity, I can not see that the Land-Tenure Reformers, under Mr. Mill's leadership, were wrong. That (1), by the original Teutonic constitutions the land belonged to the tribe or the community, and not to individuals, and was generally cultivated and enjoyed in common or by rotation of tenure, that (2), even when permanence of individual possession was established and titles were created, the occupation of land was charged with duties to the State, both of fiscal contribution and of personal service, which were onerous, and which tended to increase as the needs of the State increased and as the rental value of the land increased; that (3), in Europe, generally, when the occupiers of land were released from these duties to the State, it was upon a consideration wholly inadequate or upon no consideration at all; while that release was conceded by the landowning class, as the ruling class, to themselves as parties in interest, in a way which in this age would be regarded as corrupt; and that (4), the unqualified ownership of land, thus established, enables the land-owning class to reap an unearned benefit, at the expense of the community: these propositions seem to me indisputable.

503. What of its Expediency?—As a measure of political expediency, however, the scheme of the assumption by the State of the increment of land, appears to me fatally defective.

In the first place, it must be observed that a large part, at best, of the possible mischief has already been done, beyond repair, in the surrender of the rights of the community to individuals. As that surrender is now generations, even centuries old, and as much of the land has changed owners, sometimes over and over again in the interval, many of the present possessors having paid the full price of to-day, in good faith, under existing arrangements which were fully sanctioned by law, it would be simple robbery∗ for the State to reassert its interest in the land without fully indemnifying owners. This the English Land-Tenure Reform Association, in their programme already quoted, fully acknowledged. They proposed to “reserve to owners the option of relinquishing their property to the State at the market value which it may have acquired at the time when this principle may be adopted by the Legislature.”

It is only, then, to the future increase in the value of land that this scheme would apply. Such a limitation of its scope would not only greatly reduce the importance of the benefit to be derived by the State in every community, but would deprive it of all significance in many communities∗ where land has doubtless already reached its maximum value.

But, secondly, government could, by the confession of the Association, not realize through this scheme all that is left after the foregoing deduction has been made. Inasmuch as the State is bound to be very careful and solicitous not to do injustice, the appraisement of the present rental value, or capital value of estates, in the administration of such a scheme, must be very conservative. This, again, is admitted by Mr. Mill. “It is not necessary,” he says, “to enforce the rights of the State to the utmost farthing. A large margin should be allowed for possible miscalculation.”† Yet such an allowance would diminish, by just so much, the inducement to the State to assert its interest in the lands now held by individuals.

504. How About Depreciating Property?—Thirdly, it is clear, that the State, if it will claim the benefit of all increase in the value of lands resulting from the growth of demand, due to general causes affecting the increase of the community in numbers or productive power, is bound in equity, to make good all losses arising from the decrease in the value of lands which results from the decline of demand due to general causes acting in the opposite direction. If the so-called proprietor of land is not to be allowed to reap any gain not brought about by his own exertions, he must, in simple fairness, be protected against losses which no vigilance or effort of his could have averted. “Heads I win: tails you lose,” is not a game at which the State can, in fairness or decency, play with its citizens.

The range of this consideration is not a narrow one. In almost every community, even the most flourishing, the phenomenon of declining values is seen side by side with that of rising values. Notwithstanding the large increase during the past twenty years in the aggregate value of real estate in the city of Boston, for instance, there are extensive sections where houses will not bring any thing near their price at the beginning of this period. Now if, in 1867, the principle of collecting for public uses all excess of rents above those prevailing at that date, or, at the option of the owner, paying the capital value of the property and assuming the ownership, had been adopted by competent authority in and for the city of Boston, the city would now be paying to thousands of property holders considerable annuities, representing deficiencies in rental value which have occurred since 1867, or else it would, which is more probable, have come into possession of street on street of houses and stores whose owners preferred to surrender their property at their capital value in 1867.

505. Fourthly:—Practical objections might be multiplied; but it will be sufficient to refer to the official jobbery, trickery, and corruption which would be involved in the management by the state of all the landed property of the country, either in an attempt to administer it productively, or in the occasional re-valuation and re-leasing of it in parcels to suit the occasions of individuals. To my view, the condition of things that would result would be simply intolerable. When we contemplate the history of even petty transactions of a like character, on the part of our national government, or of the several state governments, it seems impossible to believe that any inducement should ever draw the American people, traditionally jealous of the enlargement of governmental powers, on to the adoption of such a measure.

mr. henry george's crusade.

506. The proposals for the nationalization of the land, offered, as we have stated, by Mr. Mill in 1870, while they received much serious consideration from economists and publicists, aroused no popular excitement. In 1879, Mr. Henry George, then of San Francisco, published a work entitled “Progress and Poverty,” which, about 1883, began to command public attention in an extraordinary degree. During and since that year, the agitation of the question of the public or private ownership of the soil, has gone forward with increasing vehemence, until now (1887), both in Great Britain and in the United States, large bands of enthusiastic disciples, call themselves by the name of the author of “Progress and Poverty.”

Mr. George's practical proposals require but brief notice. They differ from those of Mr. Mill∗ only in the single respect that, while Mr. Mill, like an honest man, contemplated the full compensation of the existing body of owners of land, according to the value of their several properties, at the time the scheme should be adopted and proclaimed by adequate authority, Mr. George repudiates any such obligation on the part of the State, and proposes to confiscate the entire value of the land. The attempted justification for this precious price of villainy is found in the mere, bald assertion of Mr. Henry George, that the State never had the power to give a title to any parcel of land to any person, for any purpose; and that, therefore, all land titles are, from the beginning, void. Under this scheme, alike the man who cultivates broad tracts for profit, and the man who occupies a corner with his humble dwelling; the man who inherited land from his ancestors, and the man who has bought land with the savings from years of labor, would find themselves dispoiled without redress or recompense. Even where the government itself sold the land and put the proceeds into its treasury, Mr. George would have the government confiscate the property, without refunding the price!

Mr. George is, indeed, good enough to say that he will allow improvements on the land to remain the property of those who made them, although, as he justly remarks, improvements made by any person on land not his own, appertain to the land and pass with it. The gratification naturally felt at this magnanimous proposal is, however, qualified by the reflection that, if the sovereign authority of a nation, with the full concurrence and glad consent of all its citizens, generation after generation, can not, as Mr. George assures us, avail to give the faintest title to the smallest parcel of land, possibly Mr. George's single permission to the unhappy intruder to retain possession of his improvements might not prove conclusive. In another generation, or perhaps another year, some new apostle of a regenerated humanity might become a candidate for the Mayoralty of New York, on the issue of confiscating land improvements.

So much for Mr. George's practical proposals. I will not insult my readers by discussing a project so steeped in infamy.

507. Mr. George's View of Rent.—In supporting these proposals, however, Mr. George has put forward a theory of the relation of Rent to the other shares of the product of industry, which has imposed upon so many persons that I deem it worth while to state and refute it here. Mr. George's view of Rent, as a factor in distribution, affords the key to the collocation of the words, Progress and Poverty, in the title of his work. The subject of that work is Rent; and Progress and Poverty is, in his opinion, an appropriate title for a treatise on that subject, inasmuch as, according to his theory, all social and industrial progress does, so long as land remains private property, that is, so long as rent is paid to any but the State, not only naturally but necessarily and inevitably, cause poverty to increase, at a constantly accelerating ratio. To use his own language: “Irrespective of the increase of population, the effect of improvements in methods of production and exchange is to increase rent.” The proof of this proposition is as follows:—

“Demand is not a fixed quantity that increases only as population increases. In each individual it rises with his power of getting the things demanded….

“The amount of wealth produced is nowhere commensurate with the desire for wealth; and desire mounts with every additional opportunity for gratification.

“This being the case, the effect of labor-saving improvements will be to increase the production of wealth. Now, for the production of wealth, two things are required, labor and land. Therefore, the effect of labor-saving improvements will be to extend the demand for land, and wherever the limit of the quality of land in use is reached, to bring into cultivation lands of less natural productiveness, or to extend cultivation on the same lands to a point of lower natural productiveness. And thus, while the primary effect of labor-saving improvements is to increase the power of labor, the secondary effect is to extend cultivation, and, where this lowers the margin of cultivation, to increase rent….

“Thus, where land is entirely appropriated, as in England, or where it is either appropriated or is capable of appropriation as rapidly as it is needed for use, as in the United States, the ultimate effect of labor-saving machinery or improvements is to increase rent, without increasing wages or interest.

“It is important that this be fully understood, for it shows that effects attributed by current theories to increase of population are really due to the progress of invention, and explains the otherwise perplexing fact that labor-saving machinery everywhere fails to benefit laborers.”

And he concludes, after repeating and further illustrating this view of the effect of productive improvements and inventions, with the following italicized proposition: “Wealth, in all its forms, being the product of labor applied to land, or the products of land, any increase in the power of labor, the demand for wealth being unsatisfied, will be utilized in procuring more wealth, and thus increase the demand for land.” And so, to use his own phrase, labor can not reap the benefits which advancing civilization brings, because they are “intercepted,” that is, intercepted by rent.

That it may not be supposed that I am misrepresenting Mr. George, or omitting any qualification of his propositions, I quote another extended paragraph.

“Land being necessary to labor, and being reduced to private ownership, every increase in the productive power of labor but increases rent,—the price that labor must pay for the opportunity to utilize its powers; and thus all the advantages gained by the march of progress go to the owners of land and wages do not increase. Wages can not increase; for, the greater the earnings of labor, the greater the price that labor must pay out of its earnings for the opportunity to make any earnings at all. The mere laborer has thus no more interest in the general advance of productive power than the Cuban slave has in advance in the price of sugar. And just as an advance in the price of sugar may make the condition of the slave worse, by inducing the master to drive him harder, so may the condition of the free laborer be positively, as well as relatively, changed for the worse by the increase in the productive power of his labor. For, begotten of the continuous advance of rents, arises a speculative tendency which discounts the effect of future improvements by a still further advance of rent.”

508. The Second Count of the Indictment.—The last sentence introduces Mr. George's second count in his arraignment of rent, as the great social criminal.

Please carefully to note the point. The necessary, immediate and direct effect of any addition, from whatever source, to the productive power of labor, is to increase rents by just that amount, so that nothing is left to go either into enhanced wages or enhanced profits, the landlord taking the entire increase, whatever that may be.

But now another force enters, actually to deplete the already starving laborer. This is the speculative advance in land, owing to the expectation of further increments of value at the expense of the community.

“We have,” says Mr. George, “hitherto assumed, as is generally assumed in elucidations of the theory of rent, that the actual margin of cultivation always coincides with what may be termed the necessary margin of cultivation,—that is to say, we have assumed that cultivation extends to less productive points only as it becomes necessary from the fact that natural opportunities are at the more productive points fully utilized. This, probably, is the case in stationary or very slowly progressing communities; but in rapidly progressing communities, where the swift and steady increase of rent gives confidence to calculations of further increase, it is not the case. In such communities, the confident expectation of increased prices produces, to a greater or less extent, the effects of a combination among land-holders, and tends to the withholding of land from use, in expectation of higher prices, thus forcing the margin of cultivation farther than required by the necessities of production.”

509. The Third Count.—But this is not the end of the mischief attending the private ownership of land. We have now the third and final count in this arraignment. The speculative holding of land, just described, becomes, in turn, the cause of incessant industrial disturbance, and of those great periodic convulsions of production and trade which involve the laboring classes, poor, inert, and unapt to travel or to change of occupation, in the deepest distress.

“Production,” says Mr. George, in explanation of an assumed industrial crisis, “has somewhere been checked, and this reduction in the supply of some things has shown itself in cessation of demand for others, the check propagating itself through the whole framework of industry and exchange. Now, the industrial pyramid manifestly rests on the land.

“The primary and fundamental occupations, which create a demand for all others, are evidently those which extract wealth from nature, and hence, if we trace from one exchange point to another, and from one occupation to another, this check to production, which shows itself in decreased purchasing power, we must ultimately find it in some obstacle which checks labor in expending itself on land.

“And that obstacle, it is clear, is the speculative advance in rent, or the value of land, which produces the same effects as (in fact, it is) a lock-out of labor and capital by landowners. This check to production, beginning at the basis of interlaced industry, propagates itself from exchange point to exchange point, cessation of supply becoming failure of demand, until, so to speak, the whole machine is thrown out of gear, and the spectacle is everwhere presented of labor going to waste while laborers suffer from want.”

510. This concludes Mr George's arraignment of private property in land.∗ If these successive counts can be sustained, he is fully borne out in his conclusion that “the necessary result of material progress—land being private property—is, no matter what the increase in population, to force laborers to wages which give but a bare living;” or, as he elsewhere expresses it, that “material progress does not merely fail to relieve poverty, it actually produces it;” or, again, that, “whatever be the increase of productive power, rent steadily tends to swallow up the gain and more than the gain;” or, again, that “the ownership of the land on which and from which a man must live, is virtually the ownership of the man himself, and in acknowledging the right of some individuals to the exclusive use and enjoyment of the earth, we condemn other individuals to slavery, as fully and as completely as though we had formally made them chattels.”

To a man who believed but a small fraction of this, the conclusion which Mr. George announces at the close of the following paragraph would appear irresistible:—

“As long as this institution exists, no increase in productive power can permanently benefit the masses, but, on the contrary, must tend to still further depress their condition. … Poverty deepens as wealth increases, and wages are forced down while productive power grows, because land, which is the source of all wealth and the field of all labor, is monopolized. To extirpate poverty, to make wages what justice commands they should be, the full earnings of the laborer, we must therefore substitute for the individual ownership of land a common ownership.”

511. Examination of Mr. George's Propositions.—I believe I have presented, in the foregoing extracts, every essential feature of Mr. George's economic system, without suppression or perversion. Let us now take up, in inverse order, Mr. George's three capital propositions. And, first, how much is there in the view that commercial disturbance and industrial depression are chiefly due to the speculative holding of land?

That land, in its own degree, shares with other species of property in the speculative impulses of exchange, is a matter of course. Every body knows it; no one ever thought of denying it. Mr. George makes no point against private property in land, however, unless he can show that it is, of all species of property, peculiarly the subject of speculative impulses. Now, this is so far from being either self-evident or established by adequate induction, that the contrary is the general opinion of economic writers. Of all species of property, land, especially agricultural land, starts latest and stops earliest in any upward movement of prices, as induced, for instance, by a paper-money inflation, which perhaps affords the best opportunity for the study of purely speculative impulses.

512. We now come to Mr. George's second count. The allegation that the enhancement of the value of land, above what should be regarded as the capitalized value of its present productive or income-yielding power, withdraws large bodies of land from cultivation, thus driving labor and capital to poorer and more distant soils, in order to secure the needed subsistence of the community, can only be characterized, so far as all the agricultural∗ uses of land are concerned, as a baseless assumption, for which not a particle of proper statistical proof can be adduced, and which is directly contrary to the reason of the case.

Because, forsooth, a man is holding a tract of land in the hope of a rise in its value, years hence, does that constitute any reason why he should refuse to rent it, this year or next, and get from it what he can, were it no more than enough to pay his taxes and a part of the interest on the money borrowed to “carry” the property? How unreasonable to assume that men owning good productive land will refuse to allow it to be cultivated now, simply because they can not get for it a rent which corresponds to what they look forward ultimately to realize as its capital price!

Undoubtedly the speculative treatment of building lots does cause a certain amount of city real estate to be held out of use. Nobody needed Mr. George to tell him this; but that the amount of land so reserved is such as seriously to retard the development of population, trade, or manufactures, except in a craze like that which seized the people of San Francisco in 1868,∗ seems highly improbable.

513. Progress and Poverty?—Let us now proceed to deal with Mr. George's main proposition, the proposition to which the others are subsidiary. If this be established, it really does not matter much whether the others are true or not, since the condition of humanity under the grinding pressure of this main force will be about as bad as it could be; while, if this be disproved, Mr. George's whole system must break down ridiculously, leaving it to matter little whether the minor evils attributed to the private ownership of land be found to have any real existence or not. This it is which constitutes the original feature of Mr. George's book, the proposition, namely, that, “irrespective of the increase in population, the effect of improvements in methods of production and exchange is to increase rent;” this effect being carried so far that “all the advantages gained by the march of progress go to the owners of land, and wages do not increase,” the laboring man having “no more interest in the general advance of productive power than the Cuban slave has in advance in the price of sugar,” capital also, in its turn, suffering, and to an equal extent, since, as Mr. George states, the effect of labor-saving machinery or improvements is to increase rent without increasing either wages or interest.

Now this is not only false, but ridiculously false, blunder being piled on blunder, to reach a conclusion so monstrous.

514. In the first place, the proposition is contradicted by plain facts of common observation and by unimpeachable testimony of industrial statistics. The laborer has gained in wages through the labor-saving inventions and improvements of modern times. Speaking of England, Sir James Caird says: “The laborer's earning power in procuring the staff of life cost him five days' work to pay for a bushel of wheat in 1770, four days' in 1840, and two and a half days' in 1870.” So much for bread. “Thirty years ago,” says Sir James, “probably not one-third of the people of this country consumed animal food more than once a week. Now, nearly all of them eat it in meat or cheese or butter, once a day.” The same high authority adds: “The laborer is better lodged than he ever was before.” We need no one to tell us that the laborer's power to purchase manufactured articles has increased, since 1770, much more rapidly than his power to purchase agricultural produce, whether animal or vegetable.

To the assertion of Mr. George that even the capitalist gains nothing by inventions and improvements in the agencies of trade or manufactures, because the landlord usurps and absorbs all possible increase of productive power, what better answer can we give than that of Professor Emile de Lavelèye, himself a qualified advocate of the state ownership of land?

“Who occupy the pretty houses and villas which are springing up in every direction in all prosperous towns? Certainly, more than two-thirds of these occupants are fresh capitalists. The value of capital engaged in industrial enterprise exceeds that of land itself, and its power of accumulation is far greater than that of ground rents. … We see, then, that the increase of profits and of interest takes a much larger proportion of the total value of labor, and is a more general and powerful cause of inequality, than the increase of rent.”∗

515. So much for industrial statistics and facts of common observation. Let us now turn to the reason of the case. And, first, let us recite Mr. George's own argument. “The effect,” he says, “of labor-saving improvements will be to increase the production of wealth. Now, for the production of wealth, two things are required—labor and land. Therefore the effect of labor-saving improvements will be to extend the demand for land.”

A pretty piece of reasoning this! Two things are needed for the production of wealth, land and labor; therefore an increase of production will “extend” the demand for land, for-sooth! But why not also for labor, since both are concerned in production?

But Mr. George is further in error, even, than would so far appear. He has got the thing exactly wrong. It is not only true that an increased production of wealth may involve an enhanced demand for labor as well as for land; but it is also incontestably true that the increased production of wealth rarely if ever causes an increased demand for land without a corresponding demand for labor, while, on the contrary, an increased production of wealth may cause an enormous increase in the demand for labor without enhancing the demand for the products of the soil in any degree whatsoever.

Here is a pound of raw cotton, the production of which makes a certain demand, or drain, upon the land. To that cotton may be applied the labor of one operative for half an hour, worth, say, five cents. Successive demands for the production of wealth may lead to the application of, first, a full hour's labor, then of two hours', then of three, four, or five; finer and finer fabrics being successively produced, until at last the pound of cotton has been wrought into the most exquisite articles. Mr. George says that the whole effect of any increase in the production of wealth is to enhance the demand for land. Here is a large increase of production, two-fold, threefold, tenfold, with no additional demand, or drain, upon the soil.

516. But I go further, and assert, without fear of contradiction, that not only is no increase in the demand for land necessarily involved in an increased production of wealth, but that the enhancement of the demand for land, in the progress of society, habitually falls short of the enhancement of the demand for labor, the increase of production taking two great forms,—one which involves no increase whatever in the materials derived from the soil; the other in which the increased demand for land falls short, generally far short, often almost infinitely short, of the increased demand for labor.

Let us look around. I have cited one instance, that of the use made in the mill of a pound of cotton, manufactured successively into fabrics worth, perhaps, twenty cents a pound, then thirty, then fifty, then one dollar. This is not an extreme case.

Here is the rude furniture of a laborer's cottage, worth perhaps %30. The same amount of wood may be made into furniture worth %200 for the home of the clerk, or into furniture worth %2,000 for the home of the banker. The steel that would be needed to make a cheap scythe worth eighty cents may be rendered into watch-springs, or surgical or philosophical instruments worth %100 or %200. A gentleman of means goes to Delmonico's, and pays two, three or five dollars for a dinner which makes no heavier drain upon the productive essences of the soil than a dinner of corned beef and cabbage for which a laborer pays twenty-five cents. A part of the difference between the prices of the two dinners, to be sure, represents the cost of an expensive business “stand” on Fifth Avenue; but by far the greater part represents service of one kind or another, at one stage or another, in making the dishes exquisite in appearance and flavor, in serving them neatly and elegantly with all the appliances of taste and fashion. Our gentleman, before dining, had perhaps been measured for a pair of boots for which he was to pay %12 or %15, yet containing no more leather, and so making no more draught upon the productive essences of the soil, in the way of nourishing the animal from which the leather was cut, than the laborer's %3 pair of “stogies”; he had also ordered a suit of clothes for %60 or %75, at his tailor's, no thicker, no warmer, containing no more fiber, than the laborer's %15 tweeds. In all these cases (and they fairly represent the facts of personal consumption in modern society) the main cause for the excess of value in products of higher price is not the use of a larger quantity of material, involving a greater demand or drain upon the productive essences of the soil, but the application of more labor to the same quantity of material.

517. How Far Mr. George is in Error.—In contradiction, then, of Mr. George's proposition that the entire effect of an increase of production is expended in raising rents, neither wages nor the interest of capital deriving any gain whatsoever therefrom, rent indeed absorbing the entire gain, “and more than the gain,” we have seen,—

• 1.That an increase of production may enhance the demand for labor equally with the demand for land.
• 2.That, in fact, in those forms of production which especially characterize modern society, the rate of enhancement of the demand for labor tends to far exceed the rate of enhancement of the demand for land.
• 3.That an increased demand for the production of wealth may, and in a vast body of instances does, enhance the demand for labor without enhancing the demand for land in any, the slightest, degree, the whole effect being expended in the elaboration of the same amount of material.
• 4.We have now only to show, in the fourth place, that, instead of all improvements and inventions increasing the demand for land, as Mr. George declares, the most numerous and most important classes of improvements and inventions actually operate powerfully, directly, and exclusively, in reducing the demand for land,—we have, I say, only to show this, to convict this writer of the grossest incompetence for economic reasoning. This it will be easy to do.

518. Influence, upon Rents, of Improvements in Transportation.—With few exceptions, all improvements and inventions fall naturally under one or another of three great classes,—first, those which affect manufacturing industry; second, those which affect transportation; third, those which affect the cultivation of the soil.

Of these three classes it has always been admitted by economists that the first tends to enhance the demand for land, and thus to raise rents, although, as we have just now seen, not necessarily, or indeed usually, without also enhancing the demand for labor and capital, and thus raising wages and interest. The two remaining classes of improvements and inventions tend directly, and indeed operate exclusively,∗ to reduce the demand for land, leaving, thus, the whole advantage of such improvements and inventions to be acquired by either labor or capital, or, in one proportion or another, by both labor and capital.

And, first, of improvements in transportation. I need not waste time in calling to mind the mighty strides which invention has made, during the past fifty years, in this direction, substituting for the sailing vessel of 400 tons, which carried its petty cargo of wheat in forty or sixty days from New York to Liverpool, the steamship of 5,000 tons, which makes the passage in nine days or twelve; substituting for the tedious wagon carriage which in forty or fifty miles, perhaps in twenty or thirty only, ate up the whole value of the freight, carriage by steam cars, drawn on steel rails, which, allowing for transport from Dakota to New York, leaves enough of the value of the freight to pay for the ocean passage and for the support of the producer upon those distant plains. Add the telegraph and the fast mail, for transmitting orders and transacting sales, and one will hardly question the assertion that the greatest of all the classes of improvements and inventions effected within the last half-century, has been that which relates to transportation.

Is it the effect of improvements of this class to enhance rents? Absolutely and exclusively the reverse. Whatever quickens and cheapens transport, acts directly in the reduction of rents, and can not act in any other way, since it throws out of cultivation the poorer lands previously in use for the supply of the market, enabling the better soils at a distance to take their place, thus raising the lower limit, or, as it is called, the “margin” of cultivation, and thus reducing rents.

519. Influence, upon Rents, of Improvements in Agriculture.—But, secondly, take the case of agricultural improvements and inventions. Here the effect on rents is not so simple. Yet it is perfectly demonstrable that, of the two groups∗ into which such inventions or improvements are divided, all of one kind diminish rent in a certain degree, while all of the other kind diminish it in a much higher degree.

The two kinds of agricultural improvements and inventions referred to are:

First, those which do not actually increase the amount of produce, but diminish the labor and expense by which that amount is obtained, such as the improved construction of tools, or the introduction of new instruments which spare manual labor.

Second, those which enable the land to yield a greater absolute produce, such as the disuse of fallows by means of the rotation of crops, the introduction of new vegetable species, the introduction of new and more powerful fertilizing agents or a better application of familiar manures, and mechanical inventions, like sub-soil plowing or tile-draining.

Now, improvements or inventions of the first class, as, by the supposition, they do not increase the produce of the land, so they do not, supposing them to be equally applicable to all grades of soil, diminish the share of that produce going to the landlords as rent. But while the actual number of pounds, bushels, etc., of agricultural products going to the owners of the soil remains the same, in the face of such improvements and inventions, those products are cheapened through the saving of labor in their production. Thus, while rents remain the same, in kind, their money value, or power to purchase the products of other branches of industry or the services of other classes of producers, is diminished in just so far as such improvements are effectual.

520. Next, it is clear that those agricultural improvements and inventions which enable a given area to yield a greater quantity of produce, act even more directly in diminution of rent. Take, for illustration, the disuse of fallows by rotation of crops. Formerly it was thought necessary to let even the best land lie out of cultivation one year in three or four. On the contrary, it is now perfectly established that, if crops be duly varied, land may be continuously cultivated without exhaustion. It is evident that this discovery is equivalent to increasing the capacity of any tract by one-half or one-third: so that, for a given amount of agricultural produce required for the sustentation of the community and for the raw materials of manufacture, such an improvement would allow vast bodies of the poorer grades of soil to be thrown out of cultivation, thus diminishing (paragraph 257) the aggregate amount to be received, as rents, by landlords, in that community. A similar effect, in a greater or less degree, would be produced by the introduction of new and more powerful fertilizers, or by sub-soil plowing and under-drainage.

521. Summing up.—We thus see that all real agricultural inventions and improvements tend, as all improvements and inventions in transportation tend, directly and exclusively, to diminish rents. So that of the three grand classes into which industrial improvements and inventions are divided, two act in a direction exactly opposite to that in which Mr. George's theory would require them to act. Of the third grand class of improvements and inventions, viz., those relating to manufactures, we have admitted that some do, by calling for larger amounts of raw material, enhance the demand for land; but we have shown, that in these very cases, the increase in the demand for labor is almost always equal to the increase in the demand for land, is often greater, is sometimes vastly greater. We have, also, shown that there are other, still more numerous and more important, improvements and inventions in manufactures which do not enhance the land in any degree, while they call for greater and still greater applications of labor to the same amounts of material.

Can any thing more be required to show how groundless and preposterous is the view of the hitherto unsuspected importance of rent as a factor in the distribution of wealth, which Mr. George has presented as a marvelous discovery in economics, and upon which he has built his pretentious super-structure: the necessary relation of Progress to Ever Increasing Poverty? That such an argument should for a moment have imposed upon anybody, is enough to give one a new conception of the intellectual capabilities of mankind.

[∗]“If the Grosvenor, Portman and Portland estates belonged to the municipality of London, the gigantic incomes of those estates would probably suffice for the whole expense of the local government of the capital. But these gigantic incomes are still swelling; by the growth of London they may again be doubled in as short a time as they have doubled already.”—Ibid. Prof. Adolph Wagner, of the University of Berlin, advocates the assumption by the State of all urban real estate, while deprecating the extension of the principle to agricultural land.

[∗]On the other hand, Mr. Ricardo says, “If a land tax be imposed on all cultivated land, however moderate that tax may be, it will be a tax on produce, and will therefore raise the price of produce.”

[∗]It will be seen from what follows that it is only in this respect that Mr. Henry George's proposal differs from that of Mr. Mill.

[∗]For example, all over England, Ireland and Scotland, agricultural rents have been steadily falling through the past ten years or more. So it has been in many of the States of the American Union.

[†]No one who has studied with care, as Mr. Mill had done, the question of “Unexhausted Improvements” as an element in tenant right, could fail to appreciate the appalling difficulties which would attend the appraisement of real estate for a purpose like that in view of the LandTenure Reform Association.

[∗]Neither Mr. Mill nor Mr. George proposes that the title of land shall pass to the state. They agree on the plan of advancing the taxes upon the land so as to conflscate the successive increments of value.

[∗]The paragraphs following are condensed from my work, Land and Its Rent.

[∗]It will be observed that in the extracts quoted it is cultivation which is spoken of.

[∗]This episode, consequent on the fast approaching completion of the first trans-continental railway, appears to have profoundly affected Mr. George's mind, and have produced in him the belief that what there and then took place, under extraordinary circumstances, is a common incident of land ownership.

[∗]“Contemporary Review,” November, 1882.

[∗]“Irrespective of the increase of population,” to use Mr. George's own voluntary qualification.

[∗]As justly characterized by Mr. J. S. Mill.