c. Significance of the Upward Tendency of
Rent
Now, what is the meaning of this tendency of Rent to
rise with social progress, while Wages tend to fall? Is
it not a plain promise that if Rent be treated as common
property, advances in productive power shall be steps in
the direction of realizing through orderly and natural
growth those grand conceptions of both the socialist and
the individualist, which in the present condition of
society are justly ranked as Utopian? Is it not likewise
a plain warning that if Rent be treated as private
property, advances in productive power will be steps in
the direction of making slaves of the many laborers, and
masters of a few land-owners? Does it not mean that
common ownership of Rent is in harmony with natural law,
and that its private appropriation is disorderly and
degrading? When the cause of Rent and the tendency
illustrated in the preceding chart are considered in
connection with the self-evident truth that God made the
earth for common use and not for private monopoly, how
can a contrary inference hold? Caused and increased by
social growth, 97 the benefits of which should be common,
and attaching to land, the just right to which is equal,
Rent must be the natural fund for public expenses. 98
97. Here, far away from civilization, is
a solitary settler. Getting no benefits from
government, he needs no public revenues, and none of
the land about him has any value. Another settler
comes, and another, until a village appears. Some
public revenue is then required. Not much, but some.
And the land has a little value, only a little; perhaps
just enough to equal the need for public revenue. The
village becomes a town. More revenues are needed, and
land values are higher. It becomes a city. The public
revenues required are enormous, and so are the land
values.
98. Society, and society alone, causes
Rent. Rising with the rise, advancing with the growth,
and receding with the decline of society, it measures
the earning power of society as a whole as
distinguished from that of the individuals. Wages, on
the other hand, measure the earning power of the
individuals as distinguished from that of society as a
whole. We have distinguished the parts into which
Wealth is distributed as Wages and Rent; but it would
be correct, indeed it is the same thing, to regard all
wealth as earnings, and to distinguish the two kinds as
Communal Earnings and Individual Earnings. How, then,
can there be any question as to the fund from which
society should be supported? How can it be justly
supported in any other way than out of its own
earnings?
If there be at all such a thing as design in the
universe — and who can doubt it? — then has
it been designed that Rent, the earnings of the
community, shall be retained for the support of the
community, and that Wages, the earnings of the
individual, shall be left to the individual in proportion
to the value of his service. This is the divine law,
whether we trace it through complex moral and economic
relations, or find it in the eighth commandment.
d. Effect of Confiscating Rent to Private
Use.
By giving Rent to individuals society ignores this
most just law, 99 thereby creating social disorder and
inviting social disease. Upon society alone, therefore,
and not upon divine Providence which has provided
bountifully, nor upon the disinherited poor, rests the
responsibility for poverty and fear of poverty.
99. "Whatever dispute arouses the
passions of men, the conflict is sure to rage, not so
much as to the question 'Is it wise?' as to the
question 'Is it right?'
"This tendency of popular discussions to
take an ethical form has a cause. It springs from a law
of the human mind; it rests upon a vague and
instinctive recognition of what is probably the deepest
truth we can grasp. That alone is wise which is just;
that alone is enduring which is right. In the narrow
scale of individual actions and individual life this
truth may be often obscured, but in the wider field of
national life it everywhere stands out.
"I bow to this arbitrament, and accept
this test." — Progress and Poverty, book vii, ch.
i.
The reader who has been deceived into
believing that Mr. George's proposition is in any
respect unjust, will find profit in a perusal of the
entire chapter from which the foregoing extract is
taken.
Let us try to trace the connection by means of a
chart, beginning with the white spaces on page 68. As
before, the first-comers take possession of the best
land. But instead of leaving for others what they do not
themselves need for use, as in the previous
illustrations, they appropriate the whole space, using
only part, but claiming ownership of the rest. We may
distinguish the used part with red color, and that which
is appropriated without use with blue. Thus: [chart]
But what motive is there for appropriating more of the
space than is used? Simply that the appropriators may
secure the pecuniary benefit of future social growth.
What will enable them to secure that? Our system of
confiscating Rent from the community that earns it, and
giving it to land-owners who, as such, earn
nothing.100
100. It is reported from Iowa that a few
years ago a workman in that State saw a meteorite fall,
and. securing possession of it after much digging, he
was offered $105 by a college for his "find." But the
owner of the land on which the meteorite fell claimed
the money, and the two went to law about it. After an
appeal to the highest court of the State, it was
finally decided that neither by right of discovery, nor
by right of labor, could the workman have the money,
because the title to the meteorite was in the man who
owned the land upon which it fell.
Observe the effect now upon Rent and Wages. When other
men come, instead of finding half of the best land still
common and free, as in the corresponding chart on page
68, they find all of it owned, and are obliged either to
go upon poorer land or to buy or rent from owners of the
best. How much will they pay for the best? Not more than
1, if they want it for use and not to hold for a higher
price in the future, for that represents the full
difference between its productiveness and the
productiveness of the next best. But if the first-comers,
reasoning that the next best land will soon be scarce and
theirs will then rise in value, refuse to sell or to rent
at that valuation, the newcomers must resort to land of
the second grade, though the best be as yet only partly
used. Consequently land of the first grade commands Rent
before it otherwise would.
As the sellers' price, under these circumstances, is
arbitrary it cannot be stated in the chart; but the
buyers' price is limited by the superiority of the best
land over that which can be had for nothing, and the
chart may be made to show it: [chart]
And now, owing to the success of the appropriators of
the best land in securing more than their fellows for the
same expenditure of labor force, a rush is made for
unappropriated land. It is not to use it that it is
wanted, but to enable its appropriators to put Rent into
their own pockets as soon as growing demand for land
makes it valuable.101 We may, for illustration, suppose
that all the remainder of the second space and the whole
of the third are thus appropriated, and note the effect:
[chart]
At this point Rent does not increase nor Wages fall,
because there is no increased demand for land for use.
The holding of inferior land for higher prices, when
demand for use is at a standstill, is like owning lots in
the moon — entertaining, perhaps, but not
profitable. But let more land be needed for use, and
matters promptly assume a different appearance. The new
labor must either go to the space that yields but 1, or
buy or rent from owners of better grades, or hire out.
The effect would be the same in any case. Nobody for the
given expenditure of labor force would get more than 1;
the surplus of products would go to landowners as Rent,
either directly in rent payments, or indirectly through
lower Wages. Thus: [chart]
101. The text speaks of Rent only as a
periodical or continuous payment — what would be
called "ground rent." But actual or potential Rent may
always be, and frequently is, capitalized for the
purpose of selling the right to enjoy it, and it is to
selling value that we usually refer when dealing in
land.
Land which has the power of yielding Rent
to its owner will have a selling value, whether it be
used or not, and whether Rent is actually derived from
it or not. This selling value will be the
capitalization of its present or prospective power of
producing Rent. In fact, much the larger proportion of
laud that has a selling value is wholly or partly
unused, producing no Rent at all, or less than it would
if fully used. This condition is expressed in the chart
by the blue color.
"The capitalized value of land is the
actuarial 'discounted' value of all the net incomes
which it is likely to afford, allowance being made on
the one hand for all incidental expenses, including
those of collecting the rents, and on the other for its
mineral wealth, its capabilities of development for any
kind of business, and its advantages, material, social,
and aesthetic, for the purposes of residence." —
Marshall's Prin., book vi, ch. ix, sec. 9.
"The value of land is commonly expressed
as a certain number of times the current money rental,
or in other words, a certain 'number of years'
purchase' of that rental; and other things being equal,
it will be the higher the more important these direct
gratifications are, as well as the greater the chance
that they and the money income afforded by the land
will rise." — Id., note.
"Value . . . means not utility, not any
quality inhering in the thing itself, but a quality
which gives to the possession of a thing the power of
obtaining other things, in return for it or for its
use. . . Value in this sense — the usual sense
— is purely relative. It exists from and is
measured by the power of obtaining things for things by
exchanging them. . . Utility is necessary to value, for
nothing can be valuable unless it has the quality of
gratifying some physical or mental desire of man,
though it be but a fancy or whim. But utility of itself
does not give value. . . If we ask ourselves the reason
of . . . variations in . . . value . . . we see that
things having some form of utility or desirability, are
valuable or not valuable, as they are hard or easy to
get. And if we ask further, we may see that with most
of the things that have value this difficulty or ease
of getting them, which determines value, depends on the
amount of labor which must be expended in producing
them ; i.e., bringing them into the place, form and
condition in which they are desired. . . Value is
simply an expression of the labor required for the
production of such a thing. But there are some things
as to which this is not so clear. Land is not produced
by labor, yet land, irrespective of any improvements
that labor has made on it, often has value. . . Yet a
little examination will show that such facts are but
exemplifications of the general principle, just as the
rise of a balloon and the fall of a stone both
exemplify the universal law of gravitation. . . The
value of everything produced by labor, from a pound of
chalk or a paper of pins to the elaborate structure and
appurtenances of a first-class ocean steamer, is
resolvable on analysis into an equivalent of the labor
required to produce such a thing in form and place;
while the value of things not produced by labor, but
nevertheless susceptible of ownership, is in the same
way resolvable into an equivalent of the labor which
the ownership of such a thing enables the owner to
obtain or save." —
Perplexed Philosopher, ch. v.
The figure 1 in parenthesis, as an item of Rent,
indicates potential Rent. Labor would give that much for
the privilege of using the space, but the owners hold out
for better terms; therefore neither Rent nor Wages is
actually produced, though but for this both might be.
In this chart, notwithstanding that but little space
is used, indicated with red, Wages are reduced to the
same low point by the mere appropriation of space,
indicated with blue, that they would reach if all the
space above the poorest were fully used. It thereby
appears that under a system which confiscates Rent to
private uses, the demand for land for speculative
purposes becomes so great that Wages fall to a minimum
long before they would if land were appropriated only for
use.
In illustrating the effect of confiscating Rent to
private use we have as yet ignored the element of social
growth. Let us now assume as before (page 73), that
social growth increases the productive power of the given
expenditure of labor force to 100 when applied to the
best land, 50 when applied to the next best, 10 to the
next, 3 to the next, and 1 to the poorest. Labor would
not be benefited now, as it appeared to be when on page
73 we illustrated the appropriation of land for use only,
although much less land is actually used. The prizes
which expectation of future social growth dangles before
men as the rewards of owning land, would raise demand so
as to make it more than ever difficult to get land. All
of the fourth grade would be taken up in expectation of
future demand; and "surplus labor" would be crowded out
to the open space that originally yielded nothing, but
which in consequence of increased labor power now yields
as much as the poorest closed space originally yielded,
namely, 1 to the given expenditure of labor force.102
Wages would then be reduced to the present productiveness
of the open space. Thus: [chart]
102. The paradise to which the youth of
our country have so long been directed in the advice,
"Go West, young man, go West," is truthfully described
in "Progress and Poverty," book iv, ch. iv, as follows
:
"The man who sets out from the eastern
seaboard in search of the margin of cultivation,
where he may obtain land without paying rent, must,
like the man who swam the river to get a drink, pass
for long distances through half-titled farms, and
traverse vast areas of virgin soil, before he reaches
the point where land can be had free of rent —
i.e., by homestead entry or preemption."
If we assume that 1 for the given expenditure of labor
force is the least that labor can take while exerting the
same force, the downward movement of Wages will be here
held in equilibrium. They cannot fall below 1; but
neither can they rise above it, no matter how much
productive power may increase, so long as it pays to hold
land for higher values. Some laborers would continually
be pushed back to land which increased productive power
would have brought up in productiveness from 0 to 1, and
by perpetual competition for work would so regulate the
labor market that the given expenditure of labor force,
however much it produced, could nowhere secure more than
1 in Wages.103 And this tendency would persist until some
labor was forced upon land which, despite increase in
productive power, would not yield the accustomed living
without increase of labor force. Competition for work
would then compel all laborers to increase their
expenditure of labor force, and to do it over and over
again as progress went on and lower and lower grades of
land were monopolized, until human endurance could go no
further.104 Either that, or they would be obliged to
adapt themselves to a lower scale of living.105
103. Henry Fawcett, in his work on
"Political Economy," book ii, ch. iii, observes with
reference to improvements in agricultural implements
which diminish the expense of cultivation, that they do
not increase the profits of the farmer or the wages of
his laborers, but that "the landlord will receive in
addition to the rent already paid to him, all that is
saved in the expense of cultivation." This is true not
alone of improvements in agriculture, but also of
improvements in all other branches of industry.
104. "The cause which limits speculation
in commodities, the tendency of increasing price to
draw forth additional supplies, cannot limit the
speculative advance in land values, as land is a fixed
quantity, which human agency can neither increase nor
diminish; but there is nevertheless a limit to the
price of land, in the minimum required by labor and
capital as the condition of engaging in production. If
it were possible to continuously reduce wages until
zero were reached, it would be possible to continuously
increase rent until it swallowed up the whole produce.
But as wages cannot be permanently reduced below the
point at which laborers will consent to work and
reproduce, nor interest below the point at which
capital will be devoted to production, there is a limit
which restrains the speculative advance of rent. Hence,
speculation cannot have the same scope to advance rent
in countries where wages and interest are already near
the minimum, as in countries where they are
considerably above it. Yet that there is in all
progressive countries a constant tendency in the
speculative advance of rent to overpass the limit where
production would cease, is, I think, shown by recurring
seasons of industrial paralysis." — Progress and
Poverty, book iv, ch. iv.
105. As Puck once put it, "the man who
makes two blades of grass to grow where but one grew
before, must not be surprised when ordered to 'keep off
the grass.' "
They in fact do both, and the incidental disturbances
of general readjustment are what we call "hard times."
106 These culminate in forcing unused land into the
market, thereby reducing Rent and reviving industry. Thus
increase of labor force, a lowering of the scale of
living, and depression of Rent, co-operate to bring on
what we call "good times." But no sooner do "good times"
return than renewed demands for land set in, Rent rises
again, Wages fall again, and "hard times" duly reappear.
The end of every period of "hard times" finds Rent higher
and Wages lower than at the end of the previous
period.107
106. "That a speculative advance in rent
or land values invariably precedes each of these
seasons of industrial depression is everywhere clear.
That they bear to each other the relation of cause and
effect, is obvious to whoever considers the necessary
relation between land and labor." — Progress and
Poverty, book v, ch. i.
107. What are called "good times" reach a
point at which an upward land market sets in. From that
point there is a downward tendency of wages (or a rise
in the cost of living, which is the same thing) in all
departments of labor and with all grades of laborers.
This tendency continues until the fictitious values of
land give way. So long as the tendency is felt only by
that class which is hired for wages, it is poverty
merely; when the same tendency is felt by the class of
labor that is distinguished as "the business interests
of the country," it is "hard times." And "hard times"
are periodical because land values, by falling, allow
"good times " to set it, and by rising with "good
times" bring "hard times" on again. The effect of "hard
times" may be overcome, without much, if any, fall in
land values, by sufficient increase in productive power
to overtake the fictitious value of land.
The dishonest and disorderly system under which
society confiscates Rent from common to individual uses,
produces this result. That maladjustment is the
fundamental cause of poverty. And progress, so long as
the maladjustment continues, instead of tending to remove
poverty as naturally it should, actually generates and
intensifies it. Poverty persists with increase of
productive power because land values, when Rent is
privately appropriated, tend to even greater increase.
There can be but one outcome if this continues: for
individuals suffering and degradation, and for society
destruction.
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