a. Explanation of Wages and Rent

Differences in the desirableness of land divide Wealth into the two funds, Wages and Rent. Labor naturally applies its forces to that land from which, considering all the existing and known circumstances, most Wealth can be produced with least expenditure of labor force. Such land is the best. So long as the best land exceeds demand for it, laborers are upon an equality of opportunity, and the entire product goes to them as Wages in proportion to the labor force they respectively expend. But when the supply of the best land falls below demand for it, some laborers must resort to land where with an equal expenditure of labor force they produce less wealth than those who use the best land. The laborers thus excluded from the best land naturally offer a premium for it, or what is the same thing, offer to work for its owners for what they might obtain by working for themselves upon the poorer land. This condition differentiates Rent from Wages. Rent goes to land-owners as such, irrespective of whether they labor or not; Wages go to laborers as such, irrespective of whether they own land or not.85

85. Land of every kind may vary in desirableness from other land of the same kind. Certain farming land, for example, is so fertile that it will yield to a given application of labor two bushels of wheat to every bushel that certain other farming land will yield; and it is obvious that, other things being equal, farmers would prefer the more fertile land. But some fertile land lies so far away from market that less fertile land lying nearer is more productive, because it costs less to exchange its products for what their producer demands; in such cases farmers would prefer the less fertile land. The same principle applies to all kinds of land. Building lots at or near a center of residence or business are preferable for most purposes of residence or business to lots equally good in other respects which are far away.

Now, the land that is preferable is of course most in demand; and if it be all in use, with demand for it unsatisfied, competition for the preference sets in, and gives value to it.

All land cannot be equally desirable. Some excels in fertility. Some is rich with mineral deposits, a species of fertility. On some, towns and cities settle, thereby adding to the productiveness of the labor that uses it, because these sites are thus made centers of co-operation or trade. And yet production in the civilized state requires that the producer shall have exclusive possession of the land lie needs. This necessity inevitably gives to some people more desirable land than others have, even though all should have an abundance. Consequently the returns to equal labor are unequal. The man who has land that is more fertile or better located than that of another gets more wealth than the other in return for a given expenditure of labor. If, for example, one with given labor produces 10 bushels of corn from fertile land, equal, say, to $5 worth of any kind of wealth in the market, and the other with the same labor produces 8 bushels of corn, or $4 worth of any kind of wealth in the market, the first receives 2 bushels (or $1) more for his labor than the other receives for his, though each labors with equal effort, skill, and intelligence. Or, if the fertility of the land be the same, but its situation in reference to the market be such that the cost of transportation still preserves the relation of $5 to $4, the same inequality of wages results. It is this phenomenon that gives rise to Rent. Rent is the market value of just such differences in opportunity as are here illustrated. It is a premium for choice land, for preferential locations, for site, for space.

This premium is a very different thing from compensation for labor. Nor is the difference modified when premium owners first obtain Wages for work and with them buy the premium-commanding land. Rent can no more be turned into compensation for labor by exchanging labor products for the power to exact it, than a man can be turned into Wealth by exchanging Wealth for him. Whether the fruits of purchase or of conquest, or of fraud, Rent always constitutes that part of Wealth which is deducted from current production as premiums for superior opportunities for production.

Wages and Rent are both drawn from Wealth, and both go often to the same individual and in the same form of payment, as when a freehold farmer enjoys the use of the grain he raises from more fertile land than his neighbors have, or a city freeholder occupies or receives hire from his house and lot: but Wages flow from Wealth to labor as compensation for production, while Rent flows from Wealth to land-owners in premiums for allowing labor to produce Wealth from superior locations. Wages are appurtenant to Labor; Rent is appurtenant to Land. It is as laborer that the individual takes Wages, but as land-owner that he takes Rent.

To illustrate: On the following page are four closed spaces representing land which varies in productiveness to a given expenditure of labor force, 86 from 4 down to 1. There is also an open space at the right, representing land that is yet so poor as to yield nothing to the given expenditure of labor force. Thus: [chart]

86. A unit of labor cannot be definitely measured save by the value of some labor product. The day's labor of one man may produce less than an hour's labor of another. But for purposes of illustration it is competent to refer to a unit of labor force as an abstraction, intending thereby to denote all the labor of muscle and brain requisite to acquire the necessary knowledge and skill and to produce wealth to a given value from given natural sources.

For simplicity let the market be equally convenient to each space. Let it be assumed also that one space is as accessible to labor as another, and that the differences in their productiveness are known. Now, to which space would labor first resort? Obviously to that which would yield most Wealth to the given expenditure of labor force — the space to the extreme left.

Suppose, then, that labor appropriates only as much of the best space as is required for use — say half of it. We may note the fact with red color upon the chart: [chart]

Here we see that Wages are 4 and Rent 0. The laborers, as such, take the entire product, dividing it among themselves in proportion to their services. There is no Rent because other laborers find equally good opportunities to produce in the uncolored part of the space; the supply of the best land exceeds the demand for it, and of course it commands no premium.87

87. "No land ever pays rent unless in point of fertility or situation it belongs to those superior kinds which exist in less quantity than the demand." — Mill's Prin., book ii, ch. xvi, sec. 2.

"The produce of labor constitutes the natural recompense or wages of labor. In that original state of things, which precedes both the appropriation of land and the accumulation of stock, the whole produce of labor belongs to the laborer." — Smith's Wealth of Nations, book i, ch. viii.

"Rent or land value does not arise from the productiveness or utility of land. It in no wise represents any help or advantage given to production, but simply the power of securing a part of the results of production. No matter what are its capabilities, land can yield no rent and have no value until some one is willing to give labor or the results of labor for the privilege of using it; and what any one will thus give, depends not upon the capacity of the land, but upon its capacity as compared with that of land that can be had for nothing. I may have very rich land, but it will yield no rent and have no value so long as there is other land as good to be had without cost. But when this other land is appropriated, and the best land to be had for nothing is inferior, either in fertility, situation, or other quality, my land will begin to have a value and yield rent. And though the productiveness of my land may decrease, yet if the productiveness of the land to be had without charge decreases in greater proportion, the rent I can get, and consequently the value of my land, will steadily increase. Rent, in short, is the price of monopoly, arising from the reduction to individual ownership of natural elements which human exertion can neither produce nor increase." — Progress and Poverty, book iii, ch. ii.

But if demand for land should continue until the best space was monopolized, 88 and some laborers were forced to resort to the next, the best space would command a premium; 89 Rent would rise and Wages would fall. Even though but few laborers were forced to the poorer space, they would be perpetual bidders for the advantages of the other space. The effect may be illustrated by indicating with red in our chart the overflow of labor from the first into the second space: [chart]

88. "Rent is the effect of a monopoly; though the monopoly is a natural one, which may be regulated, which may even be held as a trust for the community generally, but which cannot be prevented from existing. . . If all the land of the country belonged to one person he could fix the rent at his pleasure. . . The effect would be much the same if the land belonged to so few people that they could and did act together as one man and the rent by agreement among themselves . . . The only remaining supposition is that of free competition. — Mill's Prin., book ii, ch. xvi, sec. I.

Rent "considered as the price paid for the use of the land is naturally a monopoly price." — Smith's Wealth of Nations, book o, ch. xi.

89. The line of separation between the poorest land thus commanding a premium, and the best land for which labor will not pay a premium, was formerly called "the margin of cultivation," probably because the law of rent was not understood with reference to any but agricultural land; but it is now more generally called "the margin of production," since it is understood that the law of rent applies to all kinds of land, including, of course, the building lots of cities.

The premium for land falls not into the fund termed Wages, but into the fund termed Rent. Henceforth Wages consist not of the entire product of labor, but of so much of that product as might with the same expenditure of labor force be produced from the best land that commands no premium. The remainder goes to the owners of the land from which it is in fact produced, in proportion to the advantages which their land respectively contributes to its production. This excess is the premium. It is what constitutes Rent as distinguished from Wages. And both the amount of the general fund Rent, and the amount of rent which each land-owner obtains, are determined by the competition of labor for superior opportunities.

Thus, in the beginnings all Wealth would be Wages; but as labor was forced from better to poorer lands, or, what is the same thing in its principle of operation, as greater capabilities attached to particular lands in consequence of social development, good government, industrial improvement, etc. Rent would arise, and as a proportion of the gross Wealth-product, would increase as labor was forced to poorer land or new capabilities were added to land by society. The law derived from these phenomena is known as Ricardo's law of rent. Henry George formulates it as follows:

"The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use." — Progress and Poverty, book iii, ch. ii.

As will be noticed, the law is the law of Wages as well as the law of Rent. For whatever determines the proportion of Wealth to be taken as Rent necessarily determines the proportion to be left as Wages.

This illustrates the elementary principle of Distribution, that Wages fall and Rent rises as demand for land forces labor to land of lower productiveness.90 The principle may be more graphically illustrated by supposing that demand for spaces in the chart advances so far as to include all the closed spaces, except part of the poorest one. Thus: [chart]

90. Though figures are used, these charts are to be understood not as mathematical demonstrations, but simply as illustrations.

We now find that all Wages have fallen to the level of Wages on the poorest land that yields anything to the given unit of labor force; while the Rent of all but that has, at the expense of Wages, risen in proportion to its superior productiveness.91

91. The labor that was forced to the poorest lands would continually bid for the opportunities that the better lands offered, until an equilibrium was reached at the point shown in the preceding chart, where the given expenditure of labor is as well compensated in one place as in another.

If laborer and land-owner be different persons, the laborer receives what is distinguished as Wages, and the land-owner what is distinguished as Rent. If the same person, he receives Wages as laborer and Rent as land-owner.

Reflection will convince us that this must be so. Wages for a given expenditure of labor force are no more anywhere, for any length of time, all things considered, than the same expenditure of labor force will produce from the best land to be had for nothing. Rent absorbs the difference.92

92. But we must not jump to the conclusion that there is any essential wrong in Rent. Rent is nature's method of measuring the value of the differences in natural opportunity which different laborers, owing to variations in land, are obliged to accept. And, what in practice is more important, it is nature's method of measuring the value to each individual of those advantages which consist in accumulations of common knowledge, in co-operative effort, in good government, in a word, in the benefits that society as a whole confers as distinguished from those which each individual earns. The question is not one of the rightfulness or the wrongfulness of Rent. Personal freedom necessitates Rent, for it necessitates the private possession of land, and private possession of land makes Rent inevitable. Nothing short of communism could abolish it. The real question is, What shall society do with Rent? Shall it give it to individuals, or use it for common purposes?

"Were there only one man on earth, he would have a right to the use of the whole earth.

"When there is more than one man on earth, the right to the use of land that any one of them would have, were he alone, is not abrogated; it is only limited. . . It has become by reason of this limitation, not an absolute right to use any part of the earth, but (1) an absolute right to use any part of the earth as to which his use does not conflict with the equal rights of others (i. e., which no one else wants to use at the same time), and (2) a co-equal right to the use of any part of the earth which he and others may want to use at the same time." — Perplexed Philosopher, p. 45.

It is in adjustment of this co-equal right that rent occurs.

b. Normal Effect of Social Progress upon Wages and Rent

In the foregoing charts the effect of social growth is ignored, it being assumed that the given expenditure of labor force does not become more productive.93 Let us now try to illustrate that effect, upon the supposition that social growth increases the productive power of the given expenditure of labor force as applied to the first closed space, to 100; as applied to the second, to 50; as applied to the third, to 10; as applied to the fourth, to 3, and as applied to the open space, to 1. 94 If there were no increased demand for land the chart would then be like this: [chart]

93. "The effect of increasing population upon the distribution of wealth is to increase rent .. . in two ways: First, By lowering the margin of cultivation. Second, By bringing out in land special capabilities otherwise latent, and by attaching special capabilities to particular lands.

"I am disposed to think that the latter mode, to which little attention has been given by political economists, is really the more important." — Progress and Poverty, book iv, ch. iii.

"When we have inquired what it is that marks off land from those material things which we regard as products of the land, we shall find that the fundamental attribute of land is its extension. The right to use a piece of land gives command over a certain space — a certain part of the earth's surface. The area of the earth is fixed; the geometric relations in which any particular part of it stands to other parts are fixed. Man has no control over them; they are wholly unaffected by demand; they have no cost of production; there is no supply price at which they can be produced.

"The use of a certain area of the earth's surface is a primary condition of anything that man can do; it gives him room for his own actions, with the enjoyment of the heat and the light, the air and the rain which nature assigns to that area; and it determines his distance from, and in great measure his relations to, other things and other persons. We shall find that it is this property of land, which, though as yet insufficient prominence has been given to it, is the ultimate cause of the distinction which all writers are compelled to make between land and other things." — Marshall's Prin., book iv, ch. ii, sec. i.

94. Of course social growth does not go on in this regular way; the charts are merely illustrative. They are intended to illustrate the universal fact that as any land becomes a center of trade or other social relationship its value rises.

Though Rent is now increased, so are Wages. Both benefit by social growth. But if we consider the fact that increase in the productive power of labor increases demand for land we shall see that the tendency of Wages (as a proportion of product if not as an absolute quantity) is downward, while that of Rent is upward. 95 And this conclusion is confirmed by observation. 96

95. "Perhaps it may be well to remind the reader, before closing this chapter, of what has been before stated — that I am using the word wages not in the sense of a quantity, but in the sense of a proportion. When I say that wages fall as rent rises, I do not mean that the quantity of wealth obtained by laborers as wages is necessarily less, but that the proportion which it bears to the whole produce is necessarily less. The proportion may diminish while the quantity remains the same or increases." — Progress and Poverty, book iii, ch. vi.

96. The condition illustrated in the last chart would be the result of social growth if all land but that which was in full use were common land. The discovery of mines, the development of cities and towns, and the construction of railroads, the irrigation of and places, improvements in government, all the infinite conveniences and laborsaving devices that civilization generates, would tend to abolish poverty by increasing the compensation of labor, and making it impossible for any man to be in involuntary idleness, or underpaid, so long as mankind was in want. If demand for land increased, Wages would tend to fall as the demand brought lower grades of land into use; but they would at the same time tend to rise as social growth added new capabilities to the lower grades. And it is altogether probable that, while progress would lower Wages as a proportion of total product, it would increase them as an absolute quantity.

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:

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.

e. Effect of Retaining Rent for Common Use

If society retained Rent for common purposes, all incentive to hold land for any other object than immediate use would disappear. The effect may be illustrated by a comparison of the last preceding chart with the following: [chart]

There is but one difference between this chart and the chart immediately preceding. In that Rent is confiscated to private use, whereas in this Rent is retained for common use. All the labor force indicated with red in the first of the two charts would not more than utilize the space to the left and part of the adjoining one, which would elevate Wages to what, with the given labor force, could be produced from the poorer of the two spaces. After that, increase of Rent would not enrich land-owners at the expense of other classes; it would enrich the whole community.108

108. The laborer would receive in Distribution all that he earned and no more than he earned in Production; and that is the natural law.

In social conditions, where industry is subdivided and trade is intricate, it is impossible to say arbitrarily what is the equivalent of given labor. Hence no statute fixing the compensation for labor can really be operative. All that we can say is that labor is worth what men freely contract to give and take for it. But it must be what they freely contract to take as well as what they freely contract to give; and men are not free to contract for the sale of their labor when labor generally is so divorced from land as to abnormally glut the labor market and make men's sale of their labor for almost anything the buyer offers, the alternative of starvation. Laborers may be as truly enslaved by divorcing labor from land as by driving them with a whip.