The Project Gutenberg eBook, Distributive Justice, by John A. (John Augustine) Ryan

DISTRIBUTIVE JUSTICE

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DISTRIBUTIVE JUSTICE
The Right and Wrong of Our
Present Distribution of Wealth

BY
JOHN A. RYAN, D.D.
Associate Professor of Political Science at the
Catholic University of America; Professor of
Economics at Trinity College; Author of
"A Living Wage," "Alleged Socialism of the
Church Fathers," Joint Author with Morris
Hillquit of "Socialism: Promise or Menace?"

New York
THE MACMILLAN COMPANY
1916
All rights reserved

Nihil Obstat.
REMIGIUS LAFORT, S. T. D.,
Censor.

Imprimatur.
JOHN CARDINAL FARLEY,
Archbishop of New York.

Copyright, 1916,
By THE MACMILLAN COMPANY
Set up and electrotyped. Published November, 1916.

TO
ARCHBISHOP IRELAND
in
Admiration and Gratitude

PREFACE

Five of the nine members of the late Federal Commission on Industrial Relations united in the declaration that the first cause of industrial unrest is, "unjust distribution of wealth and income." In all probability this judgment is shared by the majority of the American people. Regarding the precise nature and extent of the injustice, however, there is no such preponderance of opinion. Even the makers of ethical and economic treatises fail to give us anything like uniform or definite pronouncements concerning the moral defects of the present distribution. While the Socialists and the Single Taxers are sufficiently positive in their statements, they form only a small portion of the total population, and include only an insignificant fraction of the recognised authorities on either ethics or economics.

The volume in hand represents an attempt to discuss systematically and comprehensively the justice of the processes by which the product of industry is distributed. Inasmuch as the product is actually apportioned among landowners, capitalists, business men, and labourers, the moral aspects of the distribution are studied with reference to these four classes. While their rights and obligations form the main subject of the book, the effort is also made to propose reforms that would remove the principal defects of the present system and bring about a larger measure of justice.

Many treatises have been written concerning the morality of one or other element or section of the distributive process; for example, wages, interest, monopoly, the land question; but, so far as the author knows, no attempt has hitherto been made to discuss the moral aspects of the entire process in all its parts. At least, no such task has been undertaken by any one who believes that the existing economic system is not inherently unjust. That the present essay in this field falls far short of adequate achievement the author fully realises, but he is sustained by the hope that it will provoke discussion, and move some more competent person to till the same field in a more thorough and fruitful way.

John A. Ryan.

The Catholic University of America,
Washington, D. C., June 14, 1916.

CONTENTS

INTRODUCTORY CHAPTER

THE ELEMENTS AND SCOPE OF THE PROBLEM

Distributive justice is primarily a problem of incomes rather than of possessions. It is not immediately concerned with John Brown's railway stock, John White's house, or John Smith's automobile. It deals with the morality of such possessions only indirectly and under one aspect; that is, in so far as they have been acquired through income. Moreover, it deals only with those incomes that are derived from participation in the process of production. For example; it considers the labourer's wages, but not the subsidies that he may receive through charity or friendship. Its province is not the distribution of all the goods of the country among all the people of the country, but only the distribution of the products of industry among the classes that have taken part in the making of these products.

These classes are four, designated as landowners, capitalists, undertakers or business men, and labourers or wage earners. The individual member of each class is an agent of production, while the instrument or energy that he owns and contributes is a factor of production. Thus, the landowner is an agent of production because he contributes to the productive process the factor known as land, and the capitalist is an agent of production because he contributes the factor known as capital; while the business man and the labourer are agents not only in the sense that they contribute factors to the process, but in the very special sense that their contributions involve the continuous expenditure of human energy. Now the product of industry is distributed among these four classes precisely because they are agents of production; that is because they own and put at the disposal of industry the indispensable factors of production. We say that the agents of production "put the factors of production at the disposal of industry," rather than "exercise or operate the factors," because neither the landowner nor the capitalist, as such, expend continuous energy in the productive process. All that is necessary to enforce a claim upon the product is to contribute an instrument or factor without which production cannot be carried on.

The product distributed in any country during a single year is variously described by economists as the national product, the national income, the national dividend. It consists not merely of material goods, such as houses, food, clothing, and automobiles, but also of those non-material goods known as services. Such are the tasks performed by the domestic servant, the barber, the chauffeur, the public official, the physician, the teacher; or any other personal service "that is valued, as material commodities are valued, according to their selling prices." Even the services of the clergyman are included in the national income or product, since they are paid for and form a part of the annual supply of good things produced and distributed within the country. In the language of the economist, anything that satisfies a human want is a utility, and forms part of the national wealth; hence there can be no sufficient reason for excluding from the national income goods which minister to spiritual or intellectual wants. The services of the clergyman, the actor, the author, the painter, and the physician are quite as much a part of the utilities of life as the services of the cook, the chambermaid, or the barber; and all are as clearly utilities as bread, hats, houses, or any other material thing. In a general way, therefore, we say that the national product which is available for distribution among the different productive classes comprises all the utilities, material and non-material, that are produced through human agents and satisfy human desires.

In the great majority of instances the product is not distributed in kind. The wheat produced on a given farm is not directly apportioned among the farmers, labourers, and landowners that have co-operated in its production; nor are the shoes turned out by a given factory divided among the co-operating labourers and capitalists; and it is obvious that personal services cannot be returned to the persons that have rendered them. Cases of partial direct distribution do, indeed, occur; as when the tenant takes two-thirds and the landowner one-third of the crop raised by the former on land belonging to the latter; or when the miller receives his compensation in a part of the flour that he grinds. To-day, however, such instances are relatively insignificant. By far the greater part of the material product is sold by the undertaker or business man, and the price is then divided between himself and the other agents of production. All personal services are sold, and the price is obtained by the performers thereof. The farmer sells his wheat, the miller his flour, and the barber his services. With the money received for his part in production each productive agent obtains possession of such kinds and amounts of the national product as his desires dictate and his income will procure. Hence the distribution of the product is effected through the conversion of producers' claims into money, and the exchange of the latter for specific quantities and qualities of the product.

While the national product as a whole is divided among the four productive classes, not every portion of it is distributed among actually distinct representatives of these classes. When more than one factor of production is owned by the same person, the product will obviously not go to four different classes of persons. For example; the crop raised by a man on his own unmortgaged land, with his own instruments, and without any hired assistance; and the products of the small shopkeeper, tailor, and barber who are similarly self sufficient and independent,—are in each case obtained by one person, and do not undergo any actual distribution. Even in these instances, however, there occurs what may be called virtual distribution, inasmuch as the single agent owns more than one factor, and performs more than one productive function. And the problem of distributive justice in such cases is to determine whether all these productive functions are properly rewarded through the total amount which the individual has received. Where the factors are owned by distinct persons, or groups of persons, the problem is to determine whether each group is properly remunerated for the single function that it has performed.

The problem of the morality of industrial incomes is obviously complex. For example; the income of the farmer is sometimes derived from a product which he must divide with a landowner and with labourers; sometimes from a product which he shares with labourers only; and sometimes from a product which he can retain wholly for himself. The labourer's income arises sometimes out of a product which he divides with other agents of production; sometimes out of a product which he divides with other labourers as well as other agents; and sometimes out of a product of which he receives the full money equivalent. The complexity of the forces determining distribution and income indicate a complexity in the forces affecting the morality of income. Moreover, there is the more fundamental ethical question concerning the titles of distribution: whether mere ownership of a factor of production gives a just claim upon the product, as in the case of the landowner and the capitalist; whether such a claim, assuming it to be valid, is as good as that of the labourer and the business man, who expend human energy in the productive process; whether different kinds of productive activity should be rewarded at different rates; and if so in what proportion. Why should the capitalist receive six per cent., rather than two per cent., or sixteen per cent.? Why should the locomotive engineer receive more than the trackman? Why should not all persons be compensated equally? Should all or any of the benefits of industrial improvements go to the consumer? Such are typical questions in the study of distributive justice. They are sufficient to give some idea of the magnitude and difficulty of the problem.

Scarcely less formidable is the task of suggesting means to correct the injustices of the present distribution. The difficulties in this part of the field are indicated by the multiplicity of social remedies that have been proposed, and by the fact that none of them has succeeded in winning the adhesion of more than a minority of the population. We shall be obliged not only to pass moral judgment upon the most important of these proposals, but to indicate and advocate a more or less complete and systematic group of such reforms as seem to be at once feasible and righteous.

GENERAL REFERENCES

Taussig: Principles of Economics. Macmillan; 1911.

Devas: Political Economy. Longmans; 1901.

Hobson: The Industrial System. Longmans; 1909.

Clark: The Distribution of Wealth. Macmillan; 1899.

Smart: The Distribution of Income. London; 1899.

Willoughby: Social Justice. Macmillan; 1900.

Carver: Essays in Social Justice. Harvard University Press; 1915.

Ely: Property and Contract in Their Relations to the Distribution of Wealth. Macmillan; 1914.

Nearing: Income. Macmillan; 1915.

Streightoff: The Distribution of Incomes in the United States. Longmans; 1912.

Wagner: Grundlegung der Nationaloekonomie. Leipzig; 1892-1894.

Pesch: Lehrbuch der Nationaloekonomie. Freiburg; 1905-1913.

Antoine: Cours d'Économie Sociale. Paris; 1899.

Hitze: Capital et Travail. Louvain; 1898.

Hollander: The Abolition of Poverty. Houghton Mifflin Company; 1914.

Ellwood: The Social Problem. Macmillan; 1915.

Garriguet: The Social Value of the Gospel. Herder; 1911.

Parkinson: A Primer of Social Science. Devin-Adair Co.; 1913.

Vermeersch: Quaestiones de Justitia. Bruges; 1901.

King: The Wealth and Income of the People of the United States. Macmillan; 1915.

Commission on Industrial Relations. Final Report; 1915.

SECTION I
THE MORALITY OF PRIVATE LANDOWNERSHIP AND RENT

DISTRIBUTIVE JUSTICE

CHAPTER I
THE LANDOWNER'S SHARE OF THE NATIONAL PRODUCT

That part of the national product which represents land, and is attributed specifically to land, goes to the landowner. It is called economic rent, or simply rent. We say that rent "is attributed specifically to land," rather than "is produced specifically by land," because we do not know what proportion of the joint product of the different factors of production exactly reflects the productive contribution of any factor. Economic rent represents the productivity of land in so far as it indicates what men are willing to pay for land-use in the productive process. In any particular case rent comes into existence because the land makes a commercially valuable contribution to the product; and it goes to the landowner because this is one of the powers or rights included in the institution of private ownership. And the landowner's share is received by him precisely in his capacity as landowner, and not because he may happen to be labourer, farmer, or proprietor of agricultural capital.

It is perhaps superfluous to observe that not all land produces rent. While almost all land is useful and productive, at least potentially, there is in almost every locality some land which in present conditions does not warrant men in paying a price for its use. If the crop raised on very sandy soil is so small as to cover merely the outlay for labour and capital, men will not pay rent for the use of that soil. Yet the land has contributed something to the product. Herein we have another indication that rent is not an adequate measure of land productivity. It merely represents land value,—at a given time, in given circumstances.

Economic Rent Always Goes to the Landowner

All land that is in use, and for the use of which men are willing to pay a price yields rent, whether it is used by a tenant or by the owner. In the latter case the owner may not call the rent that he receives by that name; he may not distinguish between it and the other portions of the product that he gets from the land; he may call the entire product profits, or wages. Nevertheless the rent exists as a surplus over that part of the product that he can regard as the proper return for his labour, and for the use of his capital-instruments, such as, horses, buildings, and machinery. If a farmer employs the same amount and kind of labour and capital in the cultivation of two pieces of land, one of which he owns, the other being hired from some one else; if his net product is the same in both cases, say, 1,000 dollars; and if he must pay 200 dollars to the owner of the hired land,—then, 200 of the 1,000 dollars that he receives from his own land, is likewise to be attributed specifically to his land rather than to his capital or labour. It is rent. While the whole product is due in some degree to the productive power of land, 200 dollars of it represents land value in the process of production, and goes to him solely in his capacity as landowner. The rent that arises on land used for building sites is of the same general character, and goes likewise to the owner of the land. The owner of the site upon which a factory is located may hire it to another for a certain sum annually, or he may operate the factory himself. In either case he receives rent, the amount that the land itself is worth for use, independently of the return that he obtains for his expenditure of capital and labour. Even when a person uses his land as a site for a dwelling which he himself occupies, the land still brings him economic rent, since it affords him something for which he would be obliged to pay if his house were located on land of the same kind owned by some one else.

Economic Rent and Commercial Rent

It will be observed that the landowner's share of the product, or economic rent, is not identical with commercial rent. The latter is a payment for land and capital, or land and improvements, combined. When a man pays nine hundred dollars for the use of a house and lot for a year, this sum contains two elements, economic rent for the lot, and interest on the money invested in the house. Assuming that the house is worth ten thousand dollars, and that the usual return on such investments is eight per cent., we see that eight hundred dollars goes to the owner as interest on his capital, and only one hundred dollars as rent for his land. Similarly the price paid by a tenant for the use of an improved farm is partly interest on the value of the improvements, and partly economic rent. In both cases the owner may reckon the land as so much capital value, and the economic rent as interest thereon, just as the commercial rent for the buildings and other improvements is interest on their capital value; but the economist distinguishes between them because he knows that they are determined by different forces, and that the distinction is of importance. He knows, for example, that the supply of land is fixed, while the supply of capital is capable of indefinite increase. In many situations, therefore, rent increases, but interest remains stationary or declines. Sometimes, though more rarely, the reverse occurs. As we shall see later, this and some other specific characteristics of land and rent have important moral aspects; consequently the moralist cannot afford to confuse rent with interest.

The Cause of Economic Rent

The cause of economic rent is the fact that land is limited relatively to the demand for it. If land were as plentiful as air mere ownership of some portion of it would not enable the owner to collect rent. As landowner he would receive no income. If he cultivated his land himself the return therefrom would not exceed normal compensation for his labour, and normal interest on his capital. Since no one would be compelled to pay for the use of land, competition among the different cultivators would keep the price of their product so low that it would merely reimburse them for their expenditures of capital and labour. In similar conditions no rent would arise on building sites. The cause of the amount of rent may also be stated in terms of scarcity. At any given time and place, the rent of a piece of land will be determined by the supply of that kind of land relatively to the demand for it. However, the demand itself will be regulated by the fertility or by the location of the land in question. Two pieces of agricultural land equally distant from a city, but of varying fertility, will yield different rents because of this difference in natural productiveness. Two pieces of ground of equal natural adaptability for building sites, but at unequal distances from the centre of a city, will produce different rents on account of their difference of location. The absolute scarcity of land is, of course, fixed by nature; its relative scarcity is the result of human activities and desires.

The definition of rent adopted in these pages, "what men are willing to pay for the use of land," or, "what land is worth for use," is simpler and more concrete, though possibly less scientific, than those ordinarily found in manuals of economics, namely: "that portion of the product that remains after all the usual expenditures for labour, capital, and directive ability have been deducted;" or, "the surplus which any piece of land yields over the poorest land devoted to the same use, when the return from the latter is only sufficient to cover the usual expenses of production."

The statement that all rent goes to the landowner supposes that, in the case of hired land, the tenant pays the full amount that would result from competitive bidding. Evidently this was not the case under the feudal system, when rents were fixed by custom and remained stationary for centuries. Even to-day, competition is not perfect, and men often obtain the use of land for less than they or others might have been willing to give. But the statement in question does describe what tends to happen in a system of competitive rents.

Before discussing the morality of the landowner's income, and of rent receiving, we may with profit glance at the history of land tenure. Thus we shall get some idea, first, of the antiquity of the present system, and, second, of its effects upon individual and social welfare. Both these considerations have an important bearing upon the moral problem; for length of existence creates a presumption in favour of the social, and therefore the moral, value of any institution; and past experience is our chief means of determining whether an institution is likely to be socially beneficial, and therefore morally right, in the future.

CHAPTER II
LANDOWNERSHIP IN HISTORY

Thirty or thirty-five years ago, the majority of economic historians seemed to accept the theory that land was originally owned in common.[1] They held that in the beginning the community, usually a village community, was the landowner; that the community either cultivated the land as a corporation, and distributed the product among the individual members, or periodically divided the land among the social units, and permitted the latter to cultivate their allotments separately. The second of these forms of tenure was the more general. The primitive time to which the theory referred was not the period when men got their living by hunting and fishing, or by rearing herds, but the agricultural stage of economic development, when life had become settled. Of the arguments upon which the theory was based, some consisted of ambiguous statements by ancient writers, such as Plato, Cæsar, and Tacitus, and others were merely inferences drawn from the existence of certain agrarian institutions: family ownership of land; common pasture lands and woodlands; periodical distribution of land among the cultivators, as in the German Mark, the Russian Mir, the Slavonic Zadruga, and the Javanese Dessa. All these practices have been interpreted as "survivals" of primitive common ownership. Only on this hypothesis, it is argued, can they be satisfactorily explained.

More recent writers have subjected the various arguments for this theory to a searching criticism.[2] To-day the great majority of scholars would undoubtedly accept the conclusion of Fustel de Coulanges, that the arguments and evidence are not sufficient to prove that in the earliest stages of agricultural life land was held in common; and a majority would probably take the more positive ground that common ownership in the sense of communal cultivation and distribution, never existed for any considerable length of time among any agricultural people. The present authoritative opinion on the subject is thus summarized by Professor Ashley:

"From the earliest historical times, in Gaul and Germany, very much land was owned individually, and wealth on one side and slavery on the other were always very important factors in the situation.

"Even in Germany, communal ownership of land was never a fundamental or generally pervasive social institution; there was something very much like large private estates, worked by dependents and slaves, from the very earliest days of Teutonic Settlement.

"As to England, it is highly probable that we shall not find anything that can fairly be called a general communal system of landowning, combined with a substantial equality among the majority of the people, under conditions of settled agriculture. To find it in any sense we shall have to go back to an earlier and 'tribal' condition, if, indeed, we shall find it there!"[3]

No Private Ownership in Pre-Agricultural Conditions

Whenever and wherever men got their living by hunting and fishing, there was no inducement to own land privately, except possibly those portions upon which they built their huts or houses. "Until they become more or less an agricultural people they are usually hunters or fishermen or both, and possibly also to a limited extent keepers of sheep and cattle. Population is then sparse and unoccupied territory is plentiful, and questions of the ownership of particular tracts of land do not concern them."[4] In any region occupied by a group or tribe, all portions of the land and the water were about equally productive of game and fish; the amount obtainable by any individual had no relation to labour on any particular piece of soil; and it was much easier for each to range over the whole region in common with his fellows than to mark off a definite section upon which he would not permit others to come, but beyond which he himself would not be permitted to go. In such conditions private ownership of land would have been folly. Tribal or group ownership was, however, in vogue, especially among those groups that were in control of the better grounds or streams. Even this form of proprietorship was comparatively unstable, since the people were to a considerable degree nomadic, and were willing to abandon present possessions whenever there was a prospect of obtaining better ones elsewhere. Among men who got their living by rearing herds, the inducement to hold land in exclusive private control would be somewhat stronger. The better grazing tracts would be coveted by many different persons, especially in the more populous communities. And there would always be the possibility of confusion among the different herds, and contention among their owners. In such circumstances the advantages of exclusive control would sometimes outweigh the benefits of common use and ownership. In the thirteenth chapter of Genesis we are told that, owing to strife between the herdsmen of Abram and Lot, the brothers separated, and agreed to become the exclusive possessors of different territories. Nevertheless, it is probable that tribal ownership was the prevailing form of land tenure so long as people remained mainly in pastoral conditions.

It is likewise probable that the same system continued in many cases for some time after men began to cultivate the soil. At least, this would seem to have been the natural arrangement while land was plentiful, and the methods of cultivation crude and soil-exhausting. It would be more profitable to take up new lands than to continue upon the old. Within historical times this system prevailed among the ancient Germans, some of the tribes of New Zealand, and some of the tribes of Western Africa. Where land was not so plentiful it was sometimes redistributed among individuals or heads of families, as often as a death occurred or a new member arrived in the community. Some of the tribes and peoples who observed this practice were the ancient Irish, the aborigines of Peru, Mexico, and parts of what is now the United States, and Australia, and some of the tribes of Africa, India, and Malaysia.[5] Whether the most primitive agricultural systems of every people were of this nature we have, of course, no means of knowing, but the supposition is antecedently probable; for agriculture must have begun very gradually, and been for some time practised in connection with the more primitive methods of obtaining a livelihood. As the land had been held for the most part in common during the hunting and fishing stage and during the pastoral stage, the same arrangement would probably continue until the people found it necessary to cultivate the same tracts of land year after year, and conceived the desire to retain their holdings in stable possession and to transmit them to their children. Moreover, so long as the members of the clan remained strongly conscious of their kinship, and realised the necessity of acting as a unit against their enemies, there would be a strong incentive to clan ownership of the land, and clan allotment of it among the individual members. In other words, the clan would, in these circumstances, have the same motives for common ownership that exist to-day in the family.

The oldest historical peoples, the Israelites, Egyptians, Assyrians, Babylonians, and Chinese, had private ownership of land at the beginning of their recorded history. Most of them, however, had been cultivating land for a considerable length of time, and had acquired a considerable degree of civilisation, before the earliest period of their existence of which we have any knowledge. It is quite possible that those among them that had passed through the hunting and fishing or the pastoral stage of existence, had practised tribal or common ownership during the earlier portion of their agricultural life.

How the Change Probably Took Place

The change from tribal to private landownership could have occurred in a great variety of ways. For example, the chief, patriarch, or king might have gradually obtained greater authority in making the allotments of land among the members of the tribe or group, and thus acquired a degree of control over the land which in time became practical ownership; he might have seized the holdings of deceased persons, or of those who were unable to pay him the tax or tribute that he demanded, or of those who were for any reason obnoxious to him. Again, the taxes paid to the chief man in a community for his services as ruler might have come in time to be regarded as a payment for the use of the land, and therefore as an acknowledgment that the chief was also the landlord. Even in the Middle Ages the rents received by the feudal lords were in great measure a return for social and political services, just as are the taxes received to-day from private landowners by the State. In primitive times, as well as later on, the chief would naturally do his best to convert this institution of tax paying or tribute paying into rent paying, and to add the position of landowner to his other prerogatives. After all, the transition from tribal ownership, with private cultivation and private receipt of the produce of individual allotments, to overlordship and landlordism, would not have been greater than that which actually took place in England between the fifteenth and the nineteenth centuries, when the lords became absolute owners of land that they had previously held with their tenants in a sort of divided or dual ownership. In a word, tribal ownership could have been displaced by landlordism through the same methods that have been used everywhere by the powerful, the ambitious, and the greedy against the weak, the indifferent, and the upright. Nor must we forget the influence of conquest. Most of the countries that appear in historical times with a system of private ownership had at some previous period been subjugated by an alien people. In many of these the conquerors undoubtedly introduced a considerable degree of individual ownership, the more powerful among them becoming landlords, while their weaker companions and the mass of the conquered population were established in a condition of tenancy.

Where a somewhat widely diffused private ownership succeeded the primitive system, it was probably due to the free action of the cultivators, as soon as they came to realise the inconveniences of ownership in common. "Any enclosed land round their permanent dwellings, and any land outside the settlement which was cleared, reclaimed, and cultivated, or occupied with cattle by individuals or families, was recognised as their personal property. Only those who were industrious, enterprising, and courageous enough would clear, occupy, retain, cultivate, and defend waste land. They would become personal owners of cattle, and would gradually acquire wealth which would enable them to employ others and still further improve their position. As their power increased, and as population grew, the bravest, wealthiest, and most capable fighting men amongst them would become chiefs or a species of nobles, and the force of circumstances, often no doubt aided by force and fraud, would eventually make them the landowners of the greater part of the district, with the more or less willing acquiescence and consent of the community amongst whom they lived, and to whom they extended their protection."[6]

Limited Character of Primitive Common Ownership

A great deal of the opposition to the theory of primitive common ownership of agricultural land, seems to be based upon an exaggerated conception of the scope of that institution. The average man who thinks or speaks of ownership to-day has in mind the Roman concept and practice of private property. This includes the unrestricted right of disposal; that is, the power to hold permanently, to transfer or transmit, to use or to abuse or not to use at all, to retain the product of the owner's use, to rent the property to any person and for any period that the owner chooses, and to obtain a price in return called rent. Any man who takes the theory of primitive common ownership to imply that the community or tribe exercised all these powers over its land, will have no difficulty in proving that the evidence is overwhelmingly against any such theory. Even among those people that are certainly known to have practised so-called common ownership of land, there are very few instances of communal cultivation, or communal distribution of the product. Yet these are included in the Roman concept of ownership. The usual method seems to have been periodical allotment by the community of the land among individuals, individual cultivation of the allotted tracts, and individual ownership of the product. Moreover, there was always a chief or patriarch who exercised considerable authority in the distribution of the land, frequently collected a rent or tax from the cultivators, and almost invariably exercised something like private ownership of a portion of the land for his direct and special benefit. Sometimes other men of importance in the community possessed land which was not subject to the communal allotment. Primitive ownership of land in common was, therefore, very far from vesting in the community all the powers that inhere in the private proprietor of land according to the Roman law and usage.

Private Ownership General in Historical Times

So much for land tenure in prehistoric times. During the historical period of the existence of the race, almost all civilised peoples have practised some form of private ownership in the matter of their arable lands. While differing considerably at various times and places, it has always excluded communal allotment of land and communal distribution of the product, and has always included private receipt of the product by the owner-user, or private receipt of rent when the owner transferred the use to some one else. But it did not always include the right to determine who should be the user. In the later centuries of the feudal system, for example, the lord could not always expel the tenants from the land, nor prevent them from transmitting the use of it to their children. Moreover, the rent that he received was customary and fixed, not competitive and arbitrary, and it was looked upon in great measure as a return to the lord for social, military, and political services, as well as a payment for the use of land. This system was private ownership, indeed, but if we apply the Roman notion of ownership we shall find it difficult to decide whether the tenant or the lord should more properly be called the owner. At any rate, the right of ownership possessed by the lord was greatly limited by restrictions which favoured the masses of the cultivators. In every community there were common wood lands and pasture lands for the free use of all the inhabitants. Among other restrictions of private ownership and control in favour of the principle of equal access to the land by all persons, we may mention the division of the English villein's holding into several portions, intermingled with those of his neighbours, so that each would have about the same amount of good land; and the ancient Hebrew law whereby alienated land was returned to the descendants of its original owners every fifty years.[7]

Reckoning the feudal lord, and all other overlords who had the same control over land, as private proprietors, we may say that in historical times the arable land of every country has been owned by a minority of the population. Since the downfall of feudalism, the tendency in most regions of the Western world has been toward an increase in the number of owners, and a decrease in the number of great estates. This tendency has been especially marked during the last one hundred years. It will, however, need to continue for a very long time, or else to increase its pace very rapidly, before land ownership will be diffused in anything like the measure that is necessary if its benefits are to be shared by all the people. Even in the United States, where the distribution is perhaps more general than in any other country, only 38.4 per cent. of the families in towns and cities owned, in 1910, the homes in which they lived, and therefore the land upon which their homes were located. In the rural districts the per cent. of home-owning families was only 62.8.

Conclusions from History

What conclusions does history warrant concerning the social and moral value of private landownership? Here we are on very uncertain ground; for different inferences may be drawn from the same group of facts if a different section of them be selected for emphasis. Sir Henry Maine and Henry George both accepted the theory of primitive agrarian communism, but the former saw in this assumed fact a proof that common ownership was suited only to the needs of rude and undeveloped peoples, while the latter regarded it as a sure indication that common ownership was fundamentally natural and in accordance with permanent social welfare. The fact that practically all peoples whose history we know discarded communal for private ownership as soon as they had acquired a moderate degree of proficiency in methods of cultivation and in the arts of civilised life does, indeed, create a presumption that the latter system is the better for civilised men. To this extent Sir Henry Maine is right. Against this presumption Henry George maintained that common ownership was abandoned solely because of the usurpation, fraud, and force employed by the powerful and privileged classes. Undoubtedly this factor played a great part in bringing about the private ownership that has existed and still exists, but it does not account for the institution as a whole and everywhere. If chiefs, kings, and other powerful personages had never usurped control of the land, if no people had ever conquered the territory of another, it is probable that private ownership would have taken place to the same extent, although it would have been much more widely diffused. For the system of periodical repartition of land, to say nothing of communal cultivation and communal distribution of the product, does hinder that attachment to a particular portion of the soil and that intensive cultivation which are so necessary to the best interests of the cultivator, the most productive use of the land, and therefore the welfare of society.

On the other hand, the limitations on the right of private ownership which have been established in so many places and times in favour of those who were not owners, show that men have very generally looked upon land as in some measure the inheritance of all the people. Hence arises the presumption that this conviction is but the reflection of fundamental and permanent human needs.

Summing up the matter, we may say that the history of land tenure points on the whole to the conclusion that private ownership is socially and individually preferable to agrarian communism, but that it should be somewhat strictly limited in the interest of the non-owners, and of the community as a whole.

CHAPTER III
THE ARGUMENTS AGAINST PRIVATE LANDOWNERSHIP

If land were not privately owned there would be no receiving of rent by individuals. Therefore, the morality of the landlord's share of the national product is intimately related to, and is usually treated in connection with, the morality of private ownership.

Substantially all the opponents of private property in land to-day are either Socialists or disciples of Henry George. In the view of the former, land as well as the other means of production should be owned and managed by the State. Although they are more numerous than the Georgeites, their attack upon private landownership is less conspicuous and less formidable than the propaganda carried on by the Henry George men. The Socialists give most of their attention to the artificial instruments of production, dealing with land only incidentally, implicitly, or occasionally. The followers of Henry George, commonly known as Single Taxers or Single Tax men, defend the private ownership of artificial capital, or capital in the strict economic sense, but desire that the control of the community over the natural means of production should be so far extended as to appropriate for public uses all economic rent. Their criticism of private ownership is not only more prominent than that made by the Socialists, but is based to a much greater extent upon ethical considerations.

Arguments by Socialists

Indeed, the orthodox or Marxian Socialists are logically debarred by their social philosophy from passing a strictly moral judgment upon property in land. For their theory of economic determinism, or historical materialism, involves the belief that private landownership, like all other social institutions, is a necessary product of economic forces and processes. Hence it is neither morally good nor morally bad. Since neither its existence nor its continuance depends upon the human will, it is entirely devoid of moral quality. It is as unmoral as the succession of the seasons, or the movement of the tides. And it will disappear through the inevitable processes of economic evolution. As expressed by Engels: "The growing perception that existing social institutions are unreasonable and unjust, that reason has become unreason, and right wrong, is only proof that in the modes of production and exchange changes have taken place, with which the social order, adapted to earlier economic conditions, is no longer in keeping."[8]

Frequently, however, the individual Socialist forgets this materialistic theory, and falls back upon his common sense, and his innate conceptions of right and wrong, of free will and responsibility. Instead of regarding the existing land system as a mere product of blind economic forces, he often denounces it as morally wrong and unjust. His contentions may be reduced to two propositions: The proprietor who takes rent from a cultivator robs the producer of a part of his product; and no one has a right to take for his exclusive use that which is the natural heritage and means of support for all the people. Referring to the receipt of 35,000,000 pounds a year in rent by 8,000 British landlords, Hyndman and Morris exclaim: "Yet in the face of all this a certain school still contend that there is no class robbery."[9] Since the claim that the labourer has a right to the full product of his labour applies to capital as well as to land, it can be more conveniently considered when we come to treat of the income of the capitalist. With regard to the second contention, the following statement by Robert Blatchford may be taken as fairly representative of Socialist thought: "The earth belongs to the people.... So that he who possesses land possesses that to which he has no right, and he who invests his savings in land becomes the purchaser of stolen property."[10] Inasmuch as this argument is substantially the same as one of the fundamental contentions in the system of Henry George, it will be discussed in connection with the latter, in the pages immediately following.

Henry George's Attack on the Title of First Occupancy

Every concrete right, whether to land or to artificial goods, is based upon some contingent fact or ground, called a title. By reason of some title a man is justified in appropriating a particular farm, house, or hat. When he becomes the proprietor of a thing that has hitherto been ownerless, his title is said to be original; when he acquires an article from some previous owner, his title is said to be derived. As an endless series of proprietors is impossible, every derived title must be traceable ultimately to some original title. Among the derived titles the most important are contract, inheritance, and prescription. The original title is either first occupancy or labour. The prevailing view among the defenders of private landownership has always been that the original title is not labour but first occupancy. If this title be not valid every derived title is worthless, and no man has a true right to the land that he calls his own. Henry George's attack upon the title of first occupancy is an important link in his argument against private property in land.

"Priority of occupation give exclusive and perpetual title to the surface of a globe in which, in the order of nature, countless generations succeed each other!... Has the first comer at a banquet the right to turn back all the chairs, and claim that none of the other guests shall partake of the food provided, except as they make terms with him? Does the first man who presents a ticket at the door of a theatre, and passes in, acquire by his priority the right to shut the doors and have the performance go on for him alone?... And to this manifest absurdity does the recognition of the individual right to land come when carried to its ultimate that any human being, could he concentrate in himself the individual rights to the land of any country, could expel therefrom all the rest of the inhabitants; and could he concentrate the individual rights to the whole surface of the globe, he alone of all the teeming population of the earth would have the right to live."[11]

In passing, it may be observed that Henry George was not the first distinguished writer to use the illustration drawn from the theatre. Cicero, St. Basil, and St. Thomas Aquinas all employed it to refute extravagant conceptions of private ownership. In reply to the foregoing argument of Henry George, we point out: first, that the right of ownership created by first occupancy is not unlimited, either extensively or intensively; and, second, that the historical injustices connected with private ownership have been in only a comparatively slight degree due to the first occupation of very large tracts of land. The right of first occupancy does not involve the right to take a whole region or continent, compelling all subsequent arrivals to become tenants of the first. There seems to be no good reason to think that the first occupant is justified in claiming as his own more land than he can cultivate by his own labour, or with the assistance of those who prefer to be his employés or his tenants rather than independent proprietors. "He has not the right to reserve for himself alone the whole territory, but only that part of it which is really useful to him, which he can make fruitful."[12] Nor is the right of private landownership, on whatever title it may rest, unlimited intensively, that is, in its powers or comprehension. Though a man should have become the rightful owner of all the land in a neighbourhood, he would have no moral right to exclude therefrom those persons who could not without extreme inconvenience find a living elsewhere. He would be morally bound to let them cultivate it at a fair rental. The Christian conception of the intensive limitations of private ownership is well exemplified in the action of Pope Clement IV, who permitted strangers to occupy the third part of any estate which the proprietor refused to cultivate himself.[13] Ownership understood as the right to do what one pleases with one's possessions, is due partly to the Roman law, partly to the Code Napoléon, but chiefly to modern theories of individualism.

In the second place, the abuses which have accompanied private property in land are very rarely traceable to abuses of the right of first occupancy. The men who have possessed too much land, and the men who have used their land as an instrument of social oppression, have scarcely ever been first occupants or the successors thereof through derived titles. This is especially true of modern abuses, and modern legal titles. In the words of Herbert Spencer: "Violence, fraud, the prerogative of force, the claims of superior cunning,—these are the sources to which these titles may be traced. The original deeds were written with the sword, rather than with the pen: not lawyers but soldiers were the conveyancers: blows were the current coin given in payment; and for seals blood was used in preference to wax."[14] Not the appropriation of land which nobody owned, but the forcible and fraudulent seizure of land which had already been occupied, has been one of the main causes of the evils attending upon private landownership. Moreover, in England and all other countries that have adopted her legal system, the title of first occupancy could never be utilised by individuals: all unoccupied land was claimed by the Crown or by the State, and transferred thence to private persons or corporations. If some individuals have got possession of too much land through this process, the State, not the title of first occupancy, must bear the blame. This is quite clear in the history of land tenure in the United States and Australasia.

Henry George's attack upon private landownership through the title of first occupancy is therefore ineffective; for he attributes to this qualities that it does not possess, and consequences for which it is not responsible.

His Defence of the Title of Labour

Thinking that he has shattered the title of first occupancy, Henry George undertakes to set up in its place the title of labour. "There can be to the ownership of anything no rightful title which is not derived from the title of the producer, and does not rest on the natural right of the man to himself."[15] The only original title is man's right to the exercise of his own faculties; from this right follows his right to what he produces; now man does not produce land; therefore he cannot have rightful property in land. Of these four propositions the first is a pure assumption, the second is untrue, the third is a truism, and the fourth is as unfounded as the first. Dependently upon God, man has, indeed, a right to himself and to the exercise of his own faculties; but this is a right of action, not of property. By the exercise of this right alone man can never produce anything, never become the owner of anything. He can produce only by exerting his powers upon something outside of himself; that is, upon the goods of external nature. To become the producer and the owner of a product, he must first become the owner of materials. By what title is he to acquire these? In one passage[16] Henry George seems to think that no title is necessary, and refers to the raw material as an "accident," while the finished product is the "essence," declaring that "the right of private ownership attaches the accident to the essence, and gives the right of ownership to the natural material in which the labour of production is embodied." Now this solution of the difficulty is too simple and arbitrary. Its author would have shrunk from applying it universally; for example, to the case of the shoemaker who produces a pair of shoes out of stolen materials, or the burglar who makes an overcoat more useful (and therefore performs a task of production) by transferring it from a warehouse to his shivering back! Evidently Henry George has in mind only raw material in the strict sense, that which has not yet been separated from the storehouse of nature; for he declares in another place that "the right to the produce of labour cannot be enjoyed without the free use of the opportunities offered by nature."[17] In other words, man's title to the materials upon which he is to exercise his faculties, and of which he is to become the owner by right of production, is the title of gift conferred by nature, or nature's God.

Nevertheless this title is applicable only to those goods that exist in unlimited abundance, not to those parts of the natural bounty that are scarce and possess economic value. A general assumption by producers that they were entitled to take possession of the gifts of nature indiscriminately would mean industrial anarchy and civil war. Hence Henry George tells us that the individual should pay rent to "the community to satisfy the equal rights of all other members of the community."[18] Inasmuch as the individual must pay this price before he begins to produce, his right to the use of natural opportunities is not "free," nor does his labour alone constitute a title to that part of them that he utilises in production. Consequently labour does not create a right to the concrete product. It merely gives the producer a right to the value that he adds to the raw material. His right to the raw material itself, to the elements that he withdraws from the common store, and fashions into a product, say, wheat, lumber, or steel, does not originate in the title of labour but in the title of contract. This is the contract by which in exchange for rent paid to the community he is authorised to utilise these materials. Until he has made this contract he has manifestly no full right to the product into which natural forces as well as his own labour have entered. According to Henry George's own statements, therefore, the right to the product does not spring from labour alone, but from labour plus compensation to the community. Since the contract by which the prospective user agrees to pay this compensation or rent must precede his application of labour, it instead of labour is the original title. Since the contract is made with a particular community for the use of a particular piece of land, the title that it conveys must derive ultimately from the occupation of that land by that community,—or some previous community of which the present one is the legal heir. So far as economically valuable materials are concerned, therefore, the logic of Henry George's principles leads inevitably to the conclusion that the original title of ownership is first occupancy.

Even in the case of economically free goods, the original title of ownership is occupancy. Henry George declares that the traveller who has filled his vessels at a free-for-all spring owns the water when he has carried it into a desert, by the title of labour.[19] Nevertheless, in its original place this water belonged either to the community or to nobody. In the former supposition it can become the property of the traveller only through an explicit or implicit gift from the community; and it is this contract, not labour, that constitutes his title to the water. If we assume that the spring was ownerless, we see that the labour of carrying a portion of it into the desert still lacks the qualifications of a title; for the abstracted water must have belonged to him before he began the journey. It must have been his from the moment that he separated it from the spring. Otherwise he had no right to take it away. His labour of transporting it gave him a right to the utility thus added to the water, but not a right to the water when it first found a local habitation in his vessels. Nor was the labour of transferring it from the spring into his vessels the true title; for labour alone cannot create a right to the material upon which it is exerted, as we see in the case of stolen objects. If it be contended that labour together with the natural right to use the ownerless goods of nature have all the elements of a valid title, the assertion must be rejected as unprecise and inadequate. The right to use ownerless goods is a general and abstract right that requires to become specific and concrete through some title. In the case of water it is a right to water in general, to some water, but not a right to a definite portion of the water in this particular spring. The required and sufficient title here is that of apprehension, occupation, the act of separating a portion from the natural reservoir. Therefore, it is first occupancy as exemplified in mere seizure of an ownerless good, not labour in the sense of productive activity, nor labour in the sense of painful exertion, that constitutes the precise title whereby the man acquires a right to the water that he has put into his cup or barrel. Mere seizure is a sufficient title in all such cases as that which we are now considering, simply because it is a reasonable method of determining and specifying ownership. There is no need whatever of having recourse to the concept of labour to justify this kind of property right. In the present case, indeed, the acts of apprehension and of productive labour (the labour of dipping the water into a vessel is productive inasmuch as the water is more useful there than in the spring) are the same physically, but they are distinct logically and ethically. One is mere occupation, while the other is production; and ownership of a thing must precede, in morals if not in time, the expenditure upon it of productive labour.

"The theory which bases the right of property on labour really depends in the ultimate resort on the right of possession and the fact that it is socially expedient, and is therefore upheld by the laws of society. Grotius, discussing this in the old Roman days, pointed out that since nothing can be made except out of pre-existing matter, acquisition by means of labour depends, ultimately, on possession by means of occupation."[20]

Since man's right to his faculties does not of itself give him a right to exercise them upon material objects, productive labour cannot of itself give him a right to the product therefrom created, nor constitute the original title of ownership. Since labour is not the original title to property, it is not the only possible title to property in land. Hence the fact that labour does not produce land, has no bearing on the question of private landownership.

In passing it may be observed that Henry George implicitly admitted that the argument from the labour title was not of itself sufficient to disprove the right of private property in land. Considering the objection, "if private property in land be not just, then private property in the products of land is not just, as the material of these products is taken from the land," he replied that the latter form of ownership "is in reality a mere right of temporary possession," since the raw material in the products sooner or later returns to the "reservoirs provided for all ... and thus the ownership of them by one works no injury to others."[21] But private ownership of land, he continued, shuts out others from the very reservoirs. Here we have a complete abandonment of the principle which underlies the labour argument. Instead of trying to show from the nature of the situation that there is a logical difference between the two kinds of ownership, he shifts his ground to a consideration of consequences. He makes the title of social utility instead of the title of labour the distinguishing and decisive consideration. As we shall see later, he is wrong even on this ground; for the fundamental justification of private landownership is precisely the fact that it is the system of land tenure most conducive to human welfare. At present we merely call attention to the breakdown in his own hands of the labour argument.

To sum up the entire discussion on the original title of ownership: Henry George's attack upon first occupancy is futile because based upon an exaggerated conception of the scope of private landownership, and upon a false assumption concerning the responsibility of that title for the historical evils of the system. His attempt to substitute labour as the original title is likewise unsuccessful, since labour can give a right only to the utility added to natural materials, not to the materials themselves. Ownership of the latter reaches back finally to occupation. Whence it follows that the title to an artificial thing, such as a hat or coat, water taken from a spring, a fish drawn from the sea, is a joint or two-fold title; namely, occupation and labour. Where the product embodies scarce and economically valuable raw material, occupation is usually prior to labour in time; in all cases it is prior to labour logically and ethically. Since labour is not the original title, its absence in the case of land does not leave that form of property unjustified. The title of first occupancy remains. In a word, the one original title of all property, natural and artificial, is first occupancy.

The other arguments of Henry George against private landownership are based upon the assumed right of all mankind to land and land values, and on the contention that this right is violated by the present system of tenure.

The Right of All Men to the Bounty of the Earth

"The equal right of all men to the use of land is as clear as their equal right to breathe the air—it is a right proclaimed by the fact of their existence. For we cannot suppose that some men have a right to be in the world, and others no right.

"If we are here by the equal permission of the Creator, we are all here with an equal title to the enjoyment of his bounty—with an equal right to the use of all that nature so impartially offers.... There is in nature no such thing as a fee simple in land. There is on earth no power which can rightfully make a grant of exclusive ownership of land. If all existing men were to grant away their equal rights, they could not grant away the rights of those who follow them. For what are we but tenants for a day? Have we made the earth that we should determine the rights of those who after us shall tenant it in their turn?"[22]

The right to use the goods of nature for the support of life is certainly a fundamental natural right; and it is substantially equal in all persons. It arises, on the one hand, from man's intrinsic worth, his essential needs, and his final destiny; and, on the other hand, from the fact that nature's bounty has been placed by God at the disposal of all His children indiscriminately. But this is a general and abstract right. What does it imply specifically and in the concrete? In the first place, it includes the actual and continuous use of some land; for a man cannot support life unless he is permitted to occupy some portion of the earth for the purposes of working, and eating, and sleeping. Secondly, it means that in time of extreme need, and when more orderly methods are not available, a man has the right to seize sufficient goods, natural or produced, public or private, to support life. So much is admitted and taught by all Catholic authorities, and probably by all other authorities. Furthermore, the abstract right in question seems very clearly to include the concrete right to obtain on reasonable conditions at least the requisites of a decent livelihood; for example, by direct access to a piece of land, or in return for a reasonable amount of useful labour. All of these particular rights are equally valid in all persons.

Does the equal right to use the bounty of nature include the right to equal shares of land, or land values, or land advantages? Since the resources of nature have been given to all men in general, and since human nature is specifically and juridically equal in all, have not all persons the right to share equally in these resources? Suppose that some philanthropist hands over to one hundred persons an uninhabited island, on condition that they shall divide it among themselves with absolute justice. Are they not obliged to divide it equally? On what ground can any person claim or be awarded a larger share than his fellows? None is of greater intrinsic worth than another, nor has any one made efforts, or sacrifices, or products which will entitle him to exceptional treatment. The correct principle of distribution would seem to be absolute equality, except in so far as it may be modified on account of varying needs, and varying capacities for social service. In any just distribution account must be taken of differences in needs and capacities; for it is not just to treat men as equal in those respects in which they are unequal, nor is it fair to deprive the community of those social benefits which can be obtained only by giving exceptional rewards for exceptional services. The same amount of food allotted to two persons might leave one hungry and the other sated; the same amount of land assigned to two persons might tempt the one to wastefulness and discourage the other. To be sure, the factor of exceptional capacity should not figure in the distribution until all persons had received that measure of natural goods which was in each case sufficient for a decent livelihood. For the fundamental justification of any distribution is to be sought in human needs; and among human needs the most deserving and the most urgent are those which must be satisfied as a prerequisite to right and reasonable life.

Now it is true that private ownership of land has nowhere realised this principle of proportional equality and proportional justice. No such result is possible in a system that, in addition to other difficulties, would be required to make a new distribution at every birth and at every death. Private ownership of land can never bring about ideal justice in distribution. Nevertheless it is not necessarily out of harmony with the demands of practical justice. A community that lacks either the knowledge or the power to establish the ideal system is not guilty of actual injustice because of this failure. In such a situation the proportionally equal rights of all men to the bounty of nature are not actual rights. They are conditional, or hypothetical, or suspended. At best they have no more moral validity than the right of a creditor to a loan that, owing to the untimely death of the debtor, he can never recover. In both cases it is misleading to talk of injustice; for this term always implies that some person or community is guilty of some action which could have been avoided. The system of private landownership is not, indeed, perfect; but this is not exceptional in a world where the ideal is never attained, and all things are imperfect. Henry George declares that "there is on earth no power which can rightfully make a grant of exclusive ownership in land"; but what would he have a community do which has never heard of his system? Introduce some crude form of communism, or refrain from using the land at all, and permit the people to starve to death in the interests of ideal justice? Evidently such a community must make grants of exclusive ownership, and these will be as valid in reason and in morals as any other act that is subject to human limitations which are at the time irremovable.

Perhaps the Single Taxer would admit the force of the foregoing argument. He might insist that the titles given by the State in such conditions were not exclusive grants in the strict sense, but were valid only until a better system could be set up, and the people put in possession of their natural heritage. Let us suppose, then, that a nation were shown "a more excellent way." Suppose that the people of the United States set about to establish Henry George's system in the way that he himself advocated. They would forthwith impose upon all land an annual tax equivalent to the annual rent. What would be the effect upon private land-incomes, and private land-wealth? Since the first would be handed over to the State in the form of a tax, the second would utterly disappear. For the value of land, like the value of any other economic good, depends upon the utilities that it embodies or produces. Whoever controls these will control the market value of the land itself. No man will pay anything for a revenue-producing property if some one else, for example, the State, is forever to take the revenue. The owner of a piece of land which brings him an annual revenue or rent of one hundred dollars, will not find a purchaser for it if the State appropriates the one hundred dollars in the form of a tax that is to be levied year after year for all time. On the assumption that the revenue represents a selling value of two thousand dollars, the private owner will be worth that much less after the introduction of the new system.

Henry George defends this proceeding as emphatically just, and denies the justice of compensating the private owners. In the chapter of "Progress and Poverty" headed, "Claim of Land Owners to Compensation," he declares that "private property in land is a bold, bare, enormous wrong, like that of chattel slavery"; and against Mill's statement that land owners have a right to rent and to the selling value of their holdings, he exclaims: "If the land of any country belong to the people of that country, what right, in morality and justice, have the individuals called land owners to the rent? If the land belong to the people, why in the name of morality and justice should the people pay its salable value for their own?"[23]

Here, then, we have the full implication of the Georgean principle that private property in land is essentially unjust. It is not merely imperfect,—tolerable while unavoidable. When it can be supplanted by the right system, its inequalities must not continue under another form. If inequalities are continued through the compensation of private owners, individuals are still hindered from enjoying their equal rights to land, and the State becomes guilty of formal and culpable injustice. The titles which the State formerly guaranteed to the private owners did not have in morals the perpetual validity which they professed to have. Since the State is not the owner of the land, it was morally powerless to create or sanction titles of this character. Even if all the citizens at any given time had deliberately transferred the necessary authorisation to the State, "they could not," in the words of Henry George, "grant away the right of those who follow them." The individual's right to land is innate and natural, not civil or social. The author of "Progress and Poverty" attributes to the individual's common right to land precisely the same absolute character that Father Liberatore predicates of the right to become a private land owner.[24] In the view of Henry George, the State is merely the trustee of the land, having the duty of distributing its benefits and values so as to make effective the equal rights of all individuals. Consequently, the legal titles of private ownership which it creates or sanctions are valid only so long as nothing better is available. At best such titles have no greater moral force than the title by which an innocent purchaser holds a stolen watch; and the persons who are thereby deprived of their proper shares of land benefits, have the same right to recover them from the existing private owners that the watch-owner has to recover his property from the innocent purchaser. Hence the demand for compensation has no more merit in the one case than in the other.

To the objection that the civil laws of many civilised countries would permit the innocent purchaser of the watch to retain it, provided that sufficient time had elapsed to create a title of prescription, the Single Taxer would reply that the two kinds of goods are not on the same moral basis in all respects. He would contend that the natural heritage of the race is too valuable, and too important for human welfare to fall under the title of prescription.

To put the matter briefly, then, Henry George contends that the individual's equal right to land is so much superior to the claim of the private owner that the latter must give way, even when it represents an expenditure of money or other valuable goods. The average opponent does not seem to realise the full force of the impression which this theory makes upon the man who overemphasises the innate rights of men to a share in the gifts of nature. Let us see whether this right has the absolute and overpowering value which is attributed to it by Henry George.

In considering this question, the supremely important fact to be kept in mind is that the natural right to land is not an end in itself. It is not a prerogative that inheres in men, regardless of its purposes or effects. It has validity only in so far as it promotes individual and social welfare. As regards individual welfare, we must bear in mind that this phrase includes the well being of all persons, of those who do as well as of those who do not at present enjoy the benefits of private landownership. Consequently the proposal to restore to the "disinherited" the use of their land rights must be judged by its effects upon the welfare of all persons. If existing landowners are not compensated they are deprived, in varying amounts, of the conditions of material well being to which they have become accustomed, and are thereby subjected to varying degrees of positive inconvenience and hardship. The assertion that this loss would be offset by the moral gain in altruistic feelings and consciousness, may be passed over as applying to a different race of beings from those who would be despoiled. The hardship is aggravated considerably by the fact that very many of the dispossessed private owners have paid the full value of their land out of the earnings of labour or capital, and that all of them have been encouraged by society and the State to regard landed property in precisely the same way as any other kind of property. In the latter respect they are not in the same position as the innocent purchaser of the stolen watch; for they have never been warned by society that the land might have been virtually stolen, or that the supposedly rightful claimants might some day be empowered by the law to recover possession. On the other hand, the persons who own no land under the present system, the persons who are deprived of their "birthright," suffer no such degree of hardship when they are continued in that condition. They are kept out of something which they have never possessed, which they have never hoped to get by any such easy method, and from which they have not been accustomed to derive any benefit. To prolong this condition is not to inflict upon them any new or positive inconvenience. Evidently their welfare and claims in the circumstances are not of the same moral importance as the welfare and claims of persons who would be called upon to suffer the loss of goods already possessed and enjoyed, and acquired with the full sanction of society.

Henry George is fond of comparing the private owner of land with the slave owner, and the landless man with the man enslaved; but there is a world of difference between their respective positions and moral claims. Liberty is immeasurably more important than land, and the hardship suffered by the master when he is compelled to free the slave is immeasurably less than that endured by the slave who is forcibly detained in bondage. Moreover, the moral sense of mankind recognises that it is in accordance with equity to compensate slave owners when the slaves are legally emancipated. Infinitely stronger is the claim of the landowner to compensation.

If the Georgeite replies that the landless man is at present kept out of something to which he has a right, while confiscation would take from the private owner something which does not really belong to him, the rejoinder must be that this assertion begs the question. The question is likewise begged when the unreasonable defender of private property declares that the right of the landless is vague and undetermined, and therefore morally inferior to the determinate and specific right of the individual landowner. This is precisely the question to be solved. Does the abstract right of the landless man become a concrete right which is so strong as to justify confiscation? Is his natural right valid against the acquired right of the private proprietor? These questions can be answered intelligently only by applying the test of human welfare, individual and social. To say that land of its very nature is not morally susceptible of private ownership, is to make an easy assertion that may be as easily denied. To interpret man's natural right to land by any other standard than human welfare, is to make of it a fetish, not a thing of reason. Henry George himself seemed to recognise this when he wrote that wonderfully eloquent but overdrawn and one-sided description of the effects of private ownership which occurs in the chapter entitled, "Claim of Landowners to Compensation."[25]

When we say that human welfare is the final determinant of the right to land, we understand this phrase in the widest possible sense. To divide the goods of the idle rich among the deserving poor, might be temporarily beneficial to both these classes, but the more remote and enduring consequences would be individually and socially disastrous. To restore a legacy to persons who had been defrauded of it when very young, would probably cause more hardship to the swindler than the heirs would have suffered had there been no restitution; nevertheless the larger view of human welfare requires that the legacy should be restored. When, however, two or three generations have been kept out of their inheritance, the civil law permits the children of the swindler to retain the property by the title of prescription; and for precisely the same reason, human welfare.

The social consequences of the confiscation of rent and land values, would be even more injurious than those falling upon the individuals despoiled. Social peace and order would be gravely disturbed by the protests and opposition of the landowners, while the popular conception of property rights, and of the inviolability of property, would be greatly weakened, if not entirely destroyed. The average man would not grasp or seriously consider the Georgean distinction between land and other kinds of property in this connection. He would infer that purchase, or inheritance, or bequest, or any other title having the immemorial sanction of the State, does not create a moral right to movable goods any more than to land. This would be especially likely in the matter of capital. Why should the capitalist, who is no more a worker than the landowner, be permitted to extract revenue from his possessions? In both cases the most significant and practical feature is that one class of men contributes to another class an annual payment for the use of socially necessary productive goods. If rent-confiscation would benefit a large number of people, why not increase the number by confiscating interest? Indeed, the proposal to confiscate rent is so abhorrent to the moral sense of the average man that it could never take place except in conditions of revolution and anarchy. If that day should ever arrive the policy of confiscation would not stop with land.

The Alleged Right of the Community to Land Values

In the foregoing pages we have confined our attention to the Georgean principle which bases men's common right to land and rent upon their common nature, and their common claims to the material gifts of the Creator. Another argument against private ownership takes this form: "Consider what rent is. It does not arise spontaneously from the soil; it is due to nothing that the landowners have done. It represents a value created by the whole community.... But rent, the creation of the whole community, necessarily belongs to the whole community."[26]

Before taking up the main contention in this passage, let us notice two incidental points. If all rent be due to the community by the title of social production, why does Henry George defend at such length the title of birthright? If the latter title does not extend to rent it is restricted to land which is so plentiful as to yield no rent. Since the owners or holders of such land rarely take the trouble to exclude any one from it, the right in question, the inborn right, has not much practical value. Probably, however, the words quoted above ought not to be interpreted as excluding the title of birthright. In that case, the meaning would be that rent belongs to the community by the title of production, as well as by the congenital title.

The second preliminary consideration is that the community does not create all land values nor all rent. These things are as certainly due to nature as to social action. In no case can they be attributed exclusively to one factor. Land that has no natural qualities or capacities suitable for the satisfaction of human wants will never have value or yield rent, no matter what society does in connection with it: the richest land in the world will likewise remain valueless, until it is brought into relation with society, with at least two human beings. If Henry George merely means to say that, without the presence of the community, land will not produce rent, he is stating something that is perfectly obvious, but it is not peculiar to land. Manufactured products would have no value outside of society, yet no one maintains that their value is all created by social action. Although the value of land is always due to both nature and society, for practical purposes we may correctly attribute the value of a particular piece of land predominantly to nature, or predominantly to society. When three tracts, equally distant from a city, and equally affected by society and its activities, have different values because one is fit only for grazing, while the second produces large crops of wheat, and the third contains a rich coal mine, their relative values are evidently due to nature rather than to society. On the other hand, the varying values of two equally fertile pieces of land unequally distant from a city, must be ascribed primarily to social action. In general, it is probably safe to say that almost all the value of land in cities, and the greater part of the value of land in thickly settled districts, is specifically due to social action rather than to differences in fertility. Nevertheless, it remains true that the value of every piece of land arises partly from nature, and partly from society; but it is impossible to say in what proportion.

Our present concern is with those values and rents which are to be attributed to social action. These cannot be claimed by any person, nor by any community, in virtue of the individual's natural right to the bounty of nature. Since they are not included among the ready made gifts of God, they are no part of man's birthright. If they belong to all the people the title to them must be sought in some historical fact, some fact of experience, some social fact. According to Henry George, the required title is found in the fact of production. Socially created land values and rents belong to the community because the community, not the private proprietor, has produced them. Let us see in what sense the community produces the social value of land.

In the first place, this value is produced by the community in two different senses of the word community, namely, as a civil, corporate entity, and as a group of individuals who do not form a moral unit. Under the first head must be placed a great deal of the value of land in cities; for example, that which arises from municipal institutions and improvements, such as, fire and police protection, water works, sewers, paved streets, and parks. On the other hand, a considerable part of land values both within and without cities is due, not to the community as a civil body, but to the community as a collection of individuals and groups of individuals. Thus, the erection and maintenance of buildings, the various economic exchanges of goods and labour, the superior opportunities for social intercourse and amusement which characterise a city, make the land of the city and its environs more valuable than land at a distance. While the activities involved in these economic and "social" facts and relations are, indeed, a social not an individual product, they are the product of small, temporary, and shifting groups within the community. They are not the activities of the community as a moral whole. For example, the maintenance of a grocery business implies a series of social relations and agreements between the grocer and his customers; but none of these transactions is participated in by the community acting as a community. Consequently such actions and relations, and the land values to which they give rise are not due to, are not the products of the community as a unit, as a moral body, as an organic entity. What is true of the land values created by the grocery business applies to the values which are due to other economic institutions and relations, as well as to those values which arise out of the purely "social" activities and advantages. If these values are to go to their producers they must be taken, in various proportions, by the different small groups and the various individuals whose actions and transactions have been directly responsible.

To distribute these values among the producers thereof in proportion to the productive contribution of each person is obviously impossible. How can it be known, for example, what portion of the increase in the value of a city's real estate during a given year is due to the merchants, the manufacturers, the railroads, the labourers, the professional classes, or the city as a corporation? The only practical method is for the city or other political unit to act as the representative of all its members, appropriate the increase in value, and distribute it among the citizens in the form of public services, institutions, and improvements. Assuming that the socially produced value of land ought to go to its social producer rather than to the individual proprietor, this method of public appropriation and disbursement would seem to be the nearest approximation to practical justice that is available.

Is the assumption correct? Do the socially produced land values necessarily belong to the producer, society? Does not the assumption rest upon a misconception of the moral validity of production as a canon of distribution? Let us examine some of the ways in which values are produced.

The man who converts leather and other suitable raw materials into a pair of shoes, increases the utility of these materials, and in normal market conditions increases their value. In a certain sense he has created value, and he is universally acknowledged to have a right to this product. Similarly the man who increases the utility and value of land by fertilising, irrigating, or draining it, is conceded the benefit of these improvements by the title of production.

But value may be increased by mere restriction of supply, and by mere increase in demand. If a group of men get control of the existing supply of wheat or cotton, they can artificially raise the price, thereby producing value as effectively as the shoemaker or the farmer. If a syndicate of speculators gets possession of all the land of a certain quality in a community, they can likewise increase its value, produce new value. If a few powerful leaders of fashion decide to adopt a certain style of millinery, their action and example will effect an increase in the demand for and the value of that kind of goods. Yet none of these producers of value are regarded as having a moral right to their product.

When we turn to what is called the social creation of land values, we find that it takes two forms. It always implies increase of social demand; but the latter may be either purely subjective, reflecting merely the desires and power of the demanders themselves, or it may have an objective basis connected with the land. In the first case it may be due solely to an increase of population. Within the last few years, agricultural land which is no more fertile nor any better situated with regard to markets or other social advantages than it was thirty years ago, has risen in value because its products have risen in value. Its products have become dearer because population, and therefore demand, have grown faster than agricultural production. Merely by increasing its wants the population has produced land values; but it has obviously no more right to them than have the leaders of fashion to the enhanced value which they have given to feminine headgear. On the other hand, the increased demand for land, and the consequent increase in its value, are frequently attributable specifically to changes connected with the land itself. They are changes which affect its utility rather than its scarcity. The farmer who irrigates desert land increases its utility, as it were, intrinsically. The community that establishes a city increases the utility of the land therein and thereabout extrinsically. New relations are introduced between that land and certain desirable social institutions. Land that was formerly useful only for agriculture becomes profitable for a factory or a store. Through its new external relations, the land acquires new utility; or better, its latent and potential uses have become actual. Now these new relations, these utility-creating and value-creating relations, have been established by society, in its corporate capacity through civil institutions and activities, and in its non-corporate capacity through the economic and "social" (in the narrower "society" sense) activities of groups and individuals. In this sense, then, the community has created the increased land values. Has it a strict right to them? a right so rigorous and exact that private appropriation of them is unjust?

As we have just seen, men do not admit that mere production of value constitutes a title of ownership. Neither the monopolist who increases value by restricting supply, nor the pace-makers of fashion, who increase value by merely increasing demand, are regarded as possessing a moral right to the value that they have "created." It is increase of utility, and not either actual or virtual increase of scarcity to which men attribute a moral claim. Why do men assign these different ethical qualities to the production of value? Why has the shoemaker a right to the value that he adds to the raw material in making a pair of shoes? What is the precise basis of his right? It cannot be labour merely; for the cotton monopolist has laboured in getting his corner on cotton. It cannot be the fact that the shoemaker's labour is socially useful; for a chemist might spend laborious days and nights producing water from its component elements, and find his product a drug on the market. Yet he would have no reasonable ground of complaint. Why, then, is it reasonable for the shoemaker to require, why has he a right to require payment for the utilities that he produces? Because men want to use his products, and because they have no right to require him to serve them without compensation. He is morally and juridically their equal, and has the same right as they to have access on reasonable terms to the earth and the earth's possibilities of a livelihood. Being thus equal to his fellows, he is under no obligation to subordinate himself to them by becoming a mere instrument for their welfare. To assume that he is obliged to produce socially useful things without remuneration, is to assume that all these propositions are false; it is to assume that his life and personality and personal development are of no intrinsic importance, and that his pursuit of the essential ends of life has no meaning except in so far as may be conducive to his function as an instrument of production. In a word, the ultimate basis of the producer's right to his product, or its value, is the fact that this is the only way in which he can get his just share of the earth's goods, and of the means of life and personal development. His right to compensation does not rest on the mere fact of value-production.

As a producer of land values, the community is not on the same moral ground with the shoemaker. Its productive action is indirect and extrinsic, instead of direct and intrinsic, and is merely incidental to its principal activities and purposes. Land values are a by-product which do not require the community to devote thereto a single moment of time or a single ounce of effort. The activities of which land values are a by-product, have already been remunerated in the price paid to the wage-earner for his labour, the physician for his services, the manufacturer and the merchant for their wares, and the municipal corporation in the form of taxes. On what ground can the community, or any part of it, set up a claim in strict justice to the increased land values? The right of the members of the community to the means of living and self development is not dependent upon the taking of these values by the community. Nor are they treated as instruments to the welfare of the private owners who do get the socially created land values; for they expend neither time nor labour in the interest of the latter directly. Their labour is precisely what it would have been had there been no increase in the value of the land.

Since social production does not constitute a right to land values nor to rent, it affords not a shadow of justification for the confiscation of these things by the community. If social appropriation of socially created land values had been introduced with the first occupation of a piece of land, it might possibly have proved more generally beneficial than the present system. In that case, however, the moral claim of the community to these values would have rested on the fact that they did not belong to anybody by a title of strict justice. They would have been a "res nullius" ("nobody's property") which might fairly have been taken by the community according as they made their appearance. The community could have appropriated them by the title of first occupancy. But there could have been no moral title of social production. When, however, the community or the State failed to take advantage of its opportunity to be the first occupant of these values, when it permitted the individual proprietor to appropriate them, it forfeited its own claim. Ever since it has had no more right to already existing land values than it has to seize the labourer's wages or the capitalist's interest,—no more right than one person has to recover a gift or donation that he has unconditionally bestowed upon another.

To sum up the conclusions of this chapter: The argument against first occupancy is valid only with regard to the abuses of private ownership, not with regard to the institution; the argument based upon the title of labour is the outcome of a faulty analysis, and is inconsistent with other statements of its author; the argument derived from men's equal rights to land merely proves that private ownership does not secure perfect justice, and the proposal to correct this defect by confiscating rent is unjust because it would produce greater evils; and the so called production of the social values of land confers upon the community no property right whatever.

CHAPTER IV
PRIVATE OWNERSHIP THE BEST SYSTEM OF LAND TENURE

The defence of private landownership set forth in the last chapter has been conditional. It has tended to show that the institution is morally lawful so long as no better system is available. As soon as a better system has been discovered, the State and the citizens are undoubtedly under some degree of moral obligation to put it into practice. Hence the important present question is whether this condition or contingency has become a reality. The only proposed and the only possible alternative systems are Socialism and the Single Tax. All other forms of tenure are properly classed as modifications of private ownership, rather than as distinct systems. Consequently the worth, and efficiency, and morality of private ownership can be adequately determined by comparison with the two just mentioned.

The Socialist Proposals Impracticable

As now existing and as commonly understood, private landownership comprises four elements which are not found together in either Socialism or the Single Tax. They are: security of possession combined with the power to transfer and transmit; the use of land combined with the power to let the use to others; the receipt of revenue from improvements in or upon the land; and the receipt of economic rent, the revenue due to the land itself, apart from improvements. In its extreme form, and as formerly understood by the majority of its authoritative exponents, Socialism would take from the individual all of these elements or powers. The State, or the Collectivity, would own and manage all productive land and land-capital, and would receive and distribute the product. Consequently the cultivators of the land would be deprived of even that limited degree of control which is now possessed by the tenant on a rented farm; for the latter, though not a landowner, is the owner of a farming business, and of agricultural instruments of production. Under Socialism the users of the land would not receive the revenue either from improvements or from the land itself. They would be substantially employés of the community, receiving a share of the product according to some plan of distribution established by public authority. Land occupied by dwellings would likewise be owned and managed by the State, although its product, the benefit of its use, would necessarily go in the first instance to the occupier. In return for this benefit he would undoubtedly be required to pay some kind of rent to the State.

Now the majority of persons believe that this system of land tenure would be inferior to private ownership, both as regards individual welfare and social welfare. The reasons for this belief will be given in detail in the chapter on "The Socialist Scheme of Industry." For the present it will be sufficient to point out in a summary way that Socialism would be unable to organise and carry on efficiently all agricultural and extractive industries, either under one central direction or under many provincial authorities; that it could not adjust wages and salaries satisfactorily, nor give the individual worker an incentive as effective as the self interest that goes with private ownership; that it would deprive the worker of a great part of the freedom that he now enjoys in the matters of occupation and residence; that it would leave to the consumer less choice in the demand for the products of land; that it would place all the people in a position of dependence upon a single agency for all these products; and that it would make all land users, whether as workers or as residents, tenants-at-will on the property of the State.

From the nature of the case, none of the foregoing propositions can be demonstrated mathematically. Nevertheless they are as nearly evident as any other practical conclusions which are based upon our general experience of human nature, its tendencies, and its limitations. At any rate, the burden of proof is upon the advocates of the new system. Until they have assumed and satisfactorily disposed of this burden, we are justified in rejecting their prophecies, and in maintaining the superiority of private ownership.[27]

To-day, however, many Socialists, possibly the majority of them in some countries, would reject the extreme form of land socialisation discussed in the preceding paragraphs. "The nearest approach which Socialists have made to a volte face since Marx, has been in relation to Agrarianism.... Marx thought that the advantage of concentrating capital would be felt in agriculture as in other industries; but, in spite of a temporary confirmation of this view by the mammoth farms which sprang up in North America, it now appears very doubtful.... Recognition of this has led reformists to substitute a policy of actively assisting the peasants for the orthodox policy of leaving them to succumb to capitalism. Their formula is: 'Collectivise credit, transport, exchange, and all subsidiary manufacture, but individualise culture.'"[28] The Belgian Socialist leader, Vandervelde, seems to prefer State ownership and management of the great agricultural industries which require large masses of capital for their efficient operation, such as dairying, distilling, and sugar making, together with State ownership of the land thus used. Other lands he would have owned by the State, but cultivated by individuals according to a system of leasing and rent-paying.[29] By a referendum vote the members of the Socialist party in the United States recently amended their platform on land, to read as follows: "The Socialist party strives to prevent land from being used for the purpose of exploitation and speculation. It demands the collective possession, control or management of land to whatever extent may be necessary to attain that end. It is not opposed to the occupation and possession of land by those using it in a useful and bona fide manner without exploitation."[30] As to land occupied by dwellings, perhaps the majority of Socialists would now agree with Spargo in the statement that, "so far as the central principle of Socialism is concerned, there is no more reason for denying the right of a man to own his own home than there is to deny him the right to own his hat."[31]

In so far as the foregoing modifications of Socialist proposals would allow the individual to own the land that he cultivates or occupies, they do not call for further discussion here. In so far as they combine State ownership of land with individual management of cultivation, they are subject to at least all the limitations of the Single Tax. To the latter system we now turn our attention.

Inferiority of the Single Tax System

Of the four leading elements of private ownership enumerated above, the Single Tax scheme would comprise all but one. In the words of Henry George himself: "Let the individuals who now hold it still retain, if they want to, possession of what they are pleased to call their land. Let them continue to call it their land. Let them buy and sell, and bequeath and devise it. We may safely leave them the shell, if we take the kernel. It is not necessary to confiscate land; it is only necessary to confiscate rent.... In this way the State may become the universal landlord without calling herself so, and without assuming a single new function. In form, the ownership of land would remain just as now. No owner of land need be dispossessed, and no restriction need be placed upon the amount of land that any one could hold."[32]

Individuals would, therefore, still enjoy security of possession, the managerial use of land, and the revenue due to improvements. The income arising from the land itself, the economic rent, they would be obliged to hand over as a free gift to the State. As we have seen in a preceding chapter, this confiscation of rent by the State would be pure and simple robbery of the private owner. Suppose, however, that the State were willing to compensate individual proprietors with a sum equal to the present value, or the capitalised rent, of their land. In that case the only difference made to the individual would be that he could no longer invest his money in land nor profit by the increases in land values. While this would deprive some persons of advantages that they now enjoy, it would be beneficial to the majority, and to the community. Since no man would find it profitable to retain control of more land than he could use himself, the number of actual land users would be increased. The land speculator would disappear, together with the opportunity of making and losing fortunes by gambling on the changes in land values. Owing to the removal of taxation from the necessaries of life and from industry, consumers would get goods cheaper, and some stimulus would be given to production and employment. Those monopolies which derive their strength from land would become weaker and tend to disappear. Sooner or later there would probably be a considerable increase in the amount of money available for public improvements and socially beneficial institutions.

On the other hand, there would be certain and serious disadvantages. A considerable number of land users might permit their holdings to deteriorate through careless cultivation. To be sure, they would not find this a profitable course if they intended to remain on the land permanently; but they might prefer to exhaust the best qualities of a farm in a few years, and then retire, or go into some other business, or repeat the wearing-out process on other lands. Thus the community would suffer through the lowered productiveness of its land, and because of the lower rent that it would receive from all subsequent users of the deteriorated tracts. In the second place, the administrative machinery required to levy and collect the rent, and to apportion the different holdings among competitive bidders, would inevitably involve a vast amount of error, inequality, favouritism, and corruption. For the land tax to be levied and collected would not be, as now, a fraction of the rental value, but the full amount of the annual rent. In the third place, cultivators would not have the inducement to make improvements which arises from the hope of selling both the improvements and the land at a profit, owing to the increased demand for the land. Perhaps the greatest disadvantage of the system would be the instability of tenure, with regard to both productive and residential lands. Owing to misfortunes of various kinds, for example, one or two bad crops, many cultivators would be temporarily unable to pay the full amount of the land tax or rent. It is scarcely conceivable that the State would remit the deficiency, or refuse to turn the land over to other persons on terms more advantageous to itself. Inasmuch as the value and rent of land would be continuously adjusted by competition, the more efficient and more wealthy would frequently supplant the less efficient and the less wealthy, even though the latter had occupied their holdings or their dwellings for a great number of years. Legal security of tenure, though theoretically the same as that enjoyed by the private owner to-day, would be much less effective practically. In this respect land users would be in almost as bad a case as renters are at present.[33]

Our conclusion, then, is that private landownership is certainly better than extreme Socialism, or any form of Socialism which does not concede to the land user all the control that he would have under the Single Tax system, and that it is very probably superior to the latter. In making this comparison and drawing this conclusion, we have in mind private ownership, not at its worst nor as it exists or has existed in any particular country, but private ownership in its essential elements, and with its capacity for modification and improvement. If we were to examine carefully the results of private ownership as it obtained in Ireland for several centuries before the enactment of the recent Land Purchase Act, we should probably be tempted to declare that the most extreme form of agrarian Socialism could scarcely have been productive of more individual and social injury. Certain other countries present almost equally unfavourable conditions of comparison. Failure to note this distinction between the historical and the potential aspects of private landownership has vitiated many otherwise excellent defences of the institution. It has provoked the retort that almost any plausible change would be an improvement upon private ownership as it has existed in this or that country. But these are not the real alternatives. The practical choice is between private ownership as shown by experience and reason to be capable of improvement, and some untried system which is subject to grave defects, and which at its best would be probably inferior to modified private ownership. An attempt to describe some of these modifications and improvements will be made in a subsequent chapter. In the meantime we content ourselves with the statement that private land ownership is capable of becoming better than Socialism certainly, and probably better than the Single Tax system. Consequently it is justified not merely so long as neither of these schemes is introduced, but as an institution which the State would do well to maintain, protect, and improve.

CHAPTER V
PRIVATE LANDOWNERSHIP A NATURAL RIGHT

The conclusions of the preceding chapter include the statement that individuals are morally justified in becoming and remaining landowners. May we take a further step, and assert that private landownership is a natural right of the individual? If it is, the abolition of it by the State, even with compensation to the owners, would be an act of injustice. The doctrine of natural rights is so prominent in the arguments of both the advocates and the opponents of private landownership that it deserves specific treatment. Moreover, the claim that private landownership is a natural right rests upon precisely the same basis as the similar claim with regard to the individual ownership of capital; and the conclusions pertinent to the former will be equally applicable to the latter.

A natural right is a right derived from the nature of the individual, and existing for his welfare. Hence it differs from a civil right, which is derived from society or the State, and is intended for a social or civil purpose. Such, for example, is the right to vote, or the right to hold a public office. Since a natural right neither proceeds from nor is primarily designed for a civil end, it cannot be annulled, and it may not be ignored, by the State. For example: the right to life and the right to liberty are so sacred to the individual, so necessary to his welfare, that the State cannot rightfully kill an innocent man, nor punish him by a term in prison.

Three Principal Kinds of Natural Rights

Although natural rights are all equally valid, they differ in regard to their basis, and their urgency or importance. From this point of view, we may profitably distinguish three principal types.

The first is exemplified in the right to live. The object of this right, life itself, is intrinsically good, good for its own sake, an end in itself. It is the end to which even civil society is a means. Since life is good intrinsically, the right to life is also valid intrinsically, and not because of consequences. Since there is no conceivable equivalent for life in the case of any individual in any contingency, the right to life is immediate and direct in all possible circumstances.

Among the natural rights of the second class, the most prominent are the right to marry, to enjoy personal freedom, and to own consumption-goods, such as food and clothing. The objects of these rights are not ends in themselves, but means to human welfare. Confining our attention to marriage, we see that membership in the conjugal union is an indispensable means to reasonable life and self development in the majority of persons. The only conceivable substitutes are free love and celibacy. Of these the first is inadequate for any person, and the second is adequate only for a minority. Marriage is, therefore, directly and per se necessary for the majority of individuals; for the majority it is an individual necessity. If the State were to abolish marriage it would deprive the majority of an indispensable means of right and reasonable life. Consequently the majority have a direct natural right to the legal power of marrying.

In the case of the minority who do not need to marry, who can live as well or better as celibates, the legal opportunity of marriage is evidently not directly necessary. But it is necessary indirectly, inasmuch as the power of choice between marriage and celibacy is an individual necessity. No argument is required to show that the State could not decide this matter consistently with individual welfare or social peace. Whence it follows that even the minority who do not wish or do not need to marry, have a natural right to embrace or reject the conjugal condition. In their case the right to marry is indirect, but none the less inviolable.[34]

Private ownership of land belongs in a third class of natural rights. Inasmuch as it is not an intrinsic good, but merely a means to human welfare, it differs from life and resembles marriage. On the other hand, it is unlike marriage in that it is not directly necessary for any individual whatever.[35] The alternative to marriage, namely, celibacy, would not even under the best social administration enable the majority to lead right and reasonable lives. The alternative to private landownership (and to private ownership of capital as well), namely, some form of employment as wage receiver, salary receiver, or fee receiver enables the individual to attain all the vital ends of private ownership: food, clothing, shelter, security of livelihood and residence, and the means of mental, moral, and spiritual development. None of these vital ends or needs is essentially dependent upon private ownership of land; for millions of persons satisfy them every day without becoming landowners. Nor are they exceptions, as those who can get along without marriage are exceptions. The persons who live reasonable lives without owning land are average persons. What they do any other person could do if placed in the same circumstances. Therefore, private landownership is not directly necessary for the welfare of any individual.

Private Landownership Indirectly Necessary for Individual Welfare

In our present industrial civilisation, however, private landownership is indirectly necessary for the welfare of the individual. It is said to be indirectly necessary because it is necessary as a social institution, rather than as something immediately connected with individual needs as such. It is not, indeed, so necessary that society would promptly go to pieces under any other form of land tenure. As we have seen in the last chapter, it is necessary in the sense that it is capable of promoting the welfare of the average person, of the majority of persons, to a much greater degree than State ownership. It is necessary for the same reason and in the same way as a civil police force. As the State is obliged to maintain a police force, so it is obliged to maintain a system of private landownership. As the citizen has a right to police protection, so he has a right to the social and economic advantages which are connected with the system of private ownership of land. These rights are natural, derived from the needs of the individual in society, not dependent upon the good pleasure of the city or the State. They are individual rights to the presence and benefits of these social institutions.

But man's rights in the matter of land tenure are more extensive than his rights with regard to a police force. They are not restricted to the presence and functioning of a social institution. Every citizen has a natural right to police protection, but no citizen has a natural right to become a policeman. The welfare of the citizen is sufficiently looked after when the members of the police are selected by the authorities of the city. On the contrary, his welfare would not be adequately safeguarded if the State were to decide who might and who might not become landowners. In the first place, the ideal condition is that in which all persons can easily become actual owners. In the second place, the mere legal opportunity of becoming owners is a considerable stimulus to the energy and ambition of all persons, even of those who are never able to convert it into an economic opportunity. Therefore, only a very powerful reason of social utility would justify the State in excluding any person or any class from the legal power to own land. No such reason exists; and there are many reasons why the State should not attempt anything of the sort. As a consequence of these facts, every person, whether an actual owner or not, has a natural right to acquire property in land. This right is evidently a necessary condition of a fair and efficient system of private ownership, which is in turn a necessary condition of individual welfare. The right of private landownership is, therefore, an indirect right; but it is quite as valid and quite as certain as any other natural right.

Now this right is certainly valid as against complete Socialism, which includes State management and use, as well as State ownership. Is it valid against the Single Tax system, or against such modified forms of Socialism as would allow the individual to rent and use the land as an independent cultivator with security of tenure? Would the introduction of some such scheme in a country in which only a small minority of the population were actual owners, constitute a violation of individual rights? While we cannot with any feeling of certainty return an affirmative answer to these questions, we can confidently affirm that reform within the lines of private ownership would in the long run be more effective, and, therefore, that the right of private ownership is probably valid even against these modified forms of common ownership.[36]

Excessive Interpretations of the Right of Private Landownership

The indirect character of the right of private landownership, its relativity to and dependence upon social conditions, is not always sufficiently grasped by either its advocates or its opponents. In the writings of the former we sometimes find language which suggests that this right is as independent of social conditions as the right to marriage or the right to life. "The State has no right to abolish private property [in land] because private property is not a social right, but an individual right derived from nature, not derived from the State." It exists for human welfare, not merely for civil welfare.[37] The only defect in this reasoning is that the premises do not justify the conclusion. Undoubtedly the State may not abolish private ownership, so long as it is necessary for human or individual welfare; but, when this necessity ceases, the moral justification of the institution likewise disappears. The institution may then be abolished, somehow, by some agency, without any violation of individual rights. Why may not the task of abolition be performed by the State? No other agency is available. The assertion that the State is incompetent to decide whether the institution of private ownership has outlived its usefulness, is entirely gratuitous; besides, it implies that a small minority of selfishly interested persons may justly require the continuation of a system of land tenure which has become harmful to the overwhelming majority of the community. Extreme defences of the right of private landownership are largely responsible for the misconceptions of many of its opponents. Occasionally the latter represent this right as an a priori monstrosity which is serenely independent of the facts of life and industry. While such persons are at liberty to reject the interpretations of facts contained in the preceding paragraphs, they cannot reasonably deny the logic of the process which has led to the conclusion that the individual has a natural right to own land.

So much for the natural right of landownership as seen in the light of reason. Let us now consider it briefly from the side of doctrinal authority, namely, the writings of the Fathers and Theologians of the Church, and the formal pronouncements of the Popes.

The Doctrine of the Fathers and Theologians

Some of the Church Fathers, particularly Augustine, Ambrose, Basil, Chrysostom, and Jerome, denounced riches and the rich so severely that they have been accused of denying the right of private ownership. The facts, however, are that none of the passages upon which this accusation is based proves it to be true, and that in numerous other passages all of these writers explicitly affirm that private ownership is lawful.[38] Speaking generally, we may say that they taught the moral goodness of private ownership without insisting upon its necessity. Hence they cannot be cited as authorities for the doctrine that the individual has a natural right to own land.

Some of the great theologians of mediæval and post-mediæval times denied this right, inasmuch as they denied that the institution of private ownership was imposed or commanded by the natural law. Among them are Scotus,[39] Molina,[40] Lessius,[41] Suarez,[42] Vasquez,[43] and Billuart.[44] Since private ownership is not absolutely necessary to human welfare in all forms of society, it cannot, in their view, be regarded as strictly prescribed by the natural law, nor be instituted without the positive action of civil authority, or the consent of the community. Nevertheless they all admit that it is much better than common ownership in contemporary societies. The difference between their position and that of de Lugo, for example, seems to be two-fold: First, they put stronger emphasis upon the doctrines that the earth belongs to all men in common, that in the absence of original sin ownership would likewise have been common, and that this arrangement is therefore in a fundamental sense normal, agreeing with nature and the natural law; and, second, they put a lower estimate upon the superiority of private ownership even in contemporary conditions. In a word, they denied that private ownership was so much better than any alternative system as to confer upon the individual a natural right in the strict sense; that is, a right which laid upon the State the correlative obligation of maintaining the institution of private landownership.

On the other hand, many of the ablest theologians of the same period declared that private ownership was enjoined by the natural law and right reason, and consequently that it was among the individual's natural rights. According to St. Thomas Aquinas, private property is "necessary for human life," and is one of those social institutions which are prescribed by the jus gentium; and the content of the jus gentium is not determined by positive law, but by the dictates of "natural reason," by "natural reason itself."[45] These statements seem to convey the doctrine of natural right as clearly as could be expected in the absence of an explicit declaration. Cardinal de Lugo sets forth the same teaching somewhat more compactly, but in substantially the same terms: "Speaking generally, a division of goods and of ownership-titles proceeds from the law of nature, for natural reason dictates such division as necessary in the present circumstances of fallen nature and dense populations."[46] This view is to-day universally accepted among Catholic writers.

The Teaching of Pope Leo XIII

The official teaching of the Church on the subject is found in the Encyclical, "On the Condition of Labour," by Pope Leo XIII. In this document we are told that the proposals of the Socialists are "manifestly against justice"; that the right of private property in land is "granted to man by nature"; that it is derived "from nature not from man, and the State has the right to control its use in the interest of the public good alone, but by no means to abolish it altogether." These statements the Pope deduces from a consideration of man's needs. Private property in land is necessary to satisfy the wants, present and future, of the individual and his family. Were the State to attempt the task of making this provision, it would exceed its proper sphere, and produce manifold domestic and social confusion.

While Pope Leo defines the natural right of private ownership as incompatible with complete Socialism, that is, collective use as well as collective ownership, his statements cannot fairly or certainly be interpreted as condemning the Single Tax system, or any other arrangement which would leave to the individual managerial use and secure possession of his holding, together with the power to transmit and transfer it, and full ownership of improvements. These are the only elements of ownership which the Holy Father defends, and which he insists upon as necessary. The one element of private ownership which the Single Tax system would exclude; namely, the power to take rent from and profit by the changes in land values, finds no place among the advantages of private ownership enumerated in the Encyclical.

There is, indeed, one passage of the Encyclical in which Pope Leo seems to allude to the Single Tax, or to some similar proposal. He expresses his amazement at those persons who "assert that it is right for private persons to have the use of the soil and its various fruits, but that it is unjust for any one to possess outright either the land on which he has built, or the estate which he has brought under cultivation. But those who deny these rights do not perceive that they are defrauding man of what his own labour has produced. For the soil which is tilled and cultivated with toil and skill utterly changes its conditions: it was wild before, now it is fruitful; was barren, but now brings forth in abundance. That which has thus altered and improved the land becomes so truly a part of itself as to be in great measure indistinguishable and inseparable from it. Is it just that the fruit of a man's own labour should be possessed and enjoyed by any one else? As effects follow their cause, so is it just and right that the results of labour should belong to those who have bestowed their labour."

In this passage we find two principal statements: first, that those persons are in error who declare full private ownership of land to be unjust; and, second, that it is wrong to deprive a man of the improvements which he makes in the soil. Now the first of these propositions does not touch the Single Tax system as such; it only condemns the assertion of Henry George that private ownership is essentially unjust. It is directed against one of the arguments for the system, not against the system itself. More specifically, it is a refutation of an argument against private land ownership, rather than a positive attack upon any other system. It could be accepted by any Single Taxer who does not agree with Henry George that the present system is essentially unjust. The second proposition does not apply to the Single Tax system at all; for the latter would concede to the individual holder the full ownership and benefit of improvements; and it could easily be so administered as to protect him against injury in any case in which improvement values were not exactly and clearly distinguishable from land values.

While Henry George opposed the doctrines of the Encyclical in his "Open Letter to Pope Leo XIII," all his arguments are directed against the proposition that private ownership is right and just. The "Letter" is an attack upon private ownership rather than a defence of the Single Tax. Apparently its author did not find that Pope Leo condemned any positive or essential element of the Single Tax as a proposed system of land tenure.

If the rejoinder be made that Pope Leo could have had no other group of persons in mind than the Single Taxers, when he wrote the paragraph quoted above, our answer must be that he did not definitely identify them, either by naming them, as he named the Socialists, or by any other sufficiently explicit designation. Applying to this paragraph the customary and recognised rules of interpretation, we are obliged to conclude that it does not contain an explicit condemnation of the Single Tax system.

To put the substance of this chapter in two sentences: Private landownership is a natural right because in present conditions the institution is necessary for individual and social welfare. The right is certainly valid as against complete Socialism, and probably valid as against any such radical modification of the present system as that contemplated by the thoroughgoing Single Taxers.

CHAPTER VI
LIMITATIONS ON THE LANDOWNER'S RIGHT TO RENT

The chapters immediately preceding have led to the conclusion that private ownership is the best system of land tenure, and that the individual has a natural right to participate in its advantages. Although this system confers upon the individual owner the power to take the rent of the land, we are not logically debarred from raising the question whether this power is a necessary part of the moral rights of landownership. Does the right to own a piece of land necessarily include the right to take its rent? By what ethical principle of distribution is the landowner justified in appropriating a revenue in return for which he has performed no labour, nor made any sacrifice? This is unquestionably what happens when a man hires out his land to another. And in conditions of perfect competition, those owners who operate their own land are fully remunerated for their labour in the form of profits. Over and above this sum they receive rent, the payment that they could get from the land if they were to let its use to tenants. In the normal situation, therefore, rent is a workless income. On what moral ground may it be taken by the landowner?[47]

The fact that we have rejected the Single Tax and the confiscation of rent by the community, does not of itself commit us to the conclusion that the private owner has a moral right to receive rent. We have condemned the State appropriation of rent on the assumption that it would take place without a similar confiscation of interest. Such discrimination would be grossly unfair; for it would cause land values to sink to zero, while leaving the value of capital substantially undisturbed. To carry out such a programme would be to treat property owners unequally, to penalise one set of beneficiaries of "workless" incomes, while leaving another set untouched. Consequently, the State is not justified in confiscating rent unless it is justified in confiscating or prohibiting interest; and the landowner is as fully justified in taking rent as the capital owner is in taking interest. The contention of the Single Taxer that ownership of the former kind is morally wrong, while ownership of capital is morally legitimate, has already received sufficient discussion. The specific question remains, therefore,—whether the landowner and the capitalist are justified in receiving and retaining their "workless" incomes.

Inasmuch as the principles and pertinent facts involved in this question can be more effectively and more conveniently discussed in relation to interest than in relation to rent, the solution will be deferred to the chapters on interest. Assuming provisionally that the outcome of the discussion will be favourable to the claims of the landowner, let us inquire whether he always has a moral right to all the rent. The parallel question regarding the capitalist will be considered in connection with the right of the labourer to a living wage.

The Tenant's Right to a Decent Livelihood

The actual payments made by tenants to landowners sometimes leave the former without the means of decent living. Such had been the condition of a large part of the Irish tenant farmers before 1881, when the Land Courts were established. In the course of twenty-five years these courts reduced the rents by twenty per cent. on the average in upwards of half a million cases. While a part of the reductions was intended to free the tenants from the unjust burden of paying rent on their own improvements, another part was undoubtedly ordered on the theory that the tenants were entitled to retain a larger share of the product for their own support. Yet the latter portion of the reduction apparently represented true economic rent; for it was included in the difference between the product and the current cost of production; it was included in the amount that men in Ireland were willing to pay for the use of land. It was a part of the surplus that they had left after defraying their expenditures for capital and labour. To be sure, the tenants in some other countries, say, the United States, would not have been satisfied with such a small remuneration, and would not have handed over so much to the landlord; but if the concept of economic rent is to have any serviceable meaning it must be determined by the actual returns to capital and labour in each locality, and not by the standards of some other place which are assumed to be normal. In any case, the Irish Land Courts did reduce the rents below the level fixed by competition, by the unregulated forces of supply and demand.

Was this treating the landlords justly? May a tenant ever retain a part of the rent which the free course of competition would yield to the landowner? Here we must distinguish between the tenant who is and the tenant who is not in possession of a holding sufficiently large to require all the time and labour of a cultivator possessing average efficiency. The tenant who controls and cultivates less than this amount of land ought not to expect to get all his livelihood therefrom. Failure to do so would not necessarily mean that he was paying exorbitant rent. Holdings of this sort are rightly called "uneconomic"; that is, they are too small to permit a profitable and reasonable application of labour and capital. On such holdings the fair rent would be that amount per acre which would be regarded as fair for the use of the same land held in farms of "economic" size. The proper recourse for the occupiers of uneconomic holdings is to get control of more land, which is exactly what has been happening in Ireland through the action of the Congested Districts Board.

This brings us to the case of the man who cannot pay the competitive rent on a holding of normal size, and have sufficient left to provide himself and family with a decent livelihood. The fundamental reason why the rent is so high is to be found in the economic weakness of the great mass of the tenants, who can neither emigrate to another country nor get a better living as wage earners in their own. Their predicament is exactly the same as that of the helpless and unskilled labourers who are compelled by the force of competition to accept less than living wages. In these circumstances it seems clear that a government commission would be justified in reducing the rents to such a level as would leave the tenants of average efficiency on normal holdings the means of maintaining a decent standard of living. In such cases, then, the landowner has not a right to the full economic or competitive rent. His right thereto is morally inferior to the tenant's right to a decent livelihood, just as the capitalist-employer's right to the prevailing rate of interest is morally inferior to the labourer's right to a living wage. Neither in the one case nor in the other is mere competition the final determinant and measure of justice. It has no moral validity when it comes into conflict with man's natural right to get a reasonable livelihood on reasonable conditions from the bounty of the earth. These fundamental questions will be discussed at length in the chapters on wages.

To the possible objection that the concept of a "normal" holding is vague, the sufficient reply is that in practice it can be estimated with as much definiteness as the concept of the "average" labourer. As we see from the history of the Irish Land Courts and their "Judicial Rents," it can be defined with sufficient accuracy to serve the ends of practical justice. More than this is not attained in any department of human relations, particularly, economic relations.

The Labourer's Claim Upon the Rent

Should any part of the rent go to the labourer? Let us take first the case of the labourer who is employed by a tenant, and who is not occupied in personal service but in some productive task connected with the land. Like all other wage earners he has a right to a sufficient share of the product to afford him a decent livelihood. Since the tenant is the employer, the director of the business, and the owner of the product, he rather than the landowner is the person who is primarily charged with the obligation of providing the labourer with a living wage. As noted above, his own claim to a decent livelihood is morally superior to the landlord's claim to rent; but if, having taken this amount from the product, he finds himself unable to pay living wages to all his employees unless he deducts something either from the normal interest-return on his own capital or from the rent that would ordinarily go to the landowner, he is morally bound to choose the former course. He, not the landowner, is the wage payer. That he is obliged to provide living wages to his labour force even at the cost of interest on his own investment in the business, is a proposition that will receive ample discussion and defence in a later chapter.[48]

Suppose, however, that the tenant has not the means of paying full living wages after turning into the wage fund all the money that he had hoped to retain as interest on his capital. May he withhold from the landowner a sufficient portion of the rent to cover the deficit in wages? Were this action practicable it would be undoubtedly justifiable; for the landowner's claim to rent is no stronger than the tenant-capitalist's claim to interest. As claims upon the product, both are morally weaker than the labourer's right to a living wage. Nevertheless, the tenant who should attempt to carry out this course would probably be prosecuted for non-fulfilment of his contract with the landowner, or would be evicted from the holding. Nor is the landowner obliged in such cases to give up the rent in order that a living wage may be paid to the tenant's labour force. He cannot be certain that the failure of the latter to receive full living wages has not been due to inefficiency or fraudulent conduct on the part of the tenant. Moreover, the landowner would be justified in seeking to protect himself against the recurrence of such situations by putting his land in charge of a more capable tenant, or by selling it and investing or lending the money elsewhere. However clear may be the abstract proposition that the claim to a living wage possessed by the employee of the tenant is superior to the claim to rent possessed by the landowner, the difficulty of realising this right in practice is sufficient to relieve even conscientious proprietors from the obligation of giving up the rent for this purpose.

When the landowner is operating or cultivating his land himself, he is evidently obliged to pay a living wage to all his employees at the expense of rent, just as he is obliged to do so at the cost of interest on his artificial capital. To be sure, the first charge upon the product should be a decent livelihood for himself; but, when he has obtained this, the right of his employees to a living wage is morally superior to his right to either rent or interest.

At present the State takes a part of the rent through taxation. May it take a larger share without violating justice? This question will be considered in the second chapter following. In the meantime, we shall examine the principal defects of the existing system of land tenure with a view to the suggestion of appropriate remedies, whether through taxation or otherwise.

CHAPTER VII
DEFECTS OF THE EXISTING LAND SYSTEM

Starting from the principle that the rightness or wrongness of any system of land tenure is determined not by metaphysical and intrinsic considerations, but by the effects of the institution upon human welfare, we arrived at the conclusion that private landownership is not unjust, so long as no better system is available. By the same test of human welfare we found that it would be wrong to substitute a better system through the process of confiscating rent, while leaving interest undisturbed. A further step brought us to the conclusion that complete Socialism would certainly, and the complete Single Tax probably, be inferior to the present system. As a sort of corollary, the social and moral superiority of private landownership was stated in terms of natural rights. Finally, the question was raised whether the landowner has a right to take rent, and to take all the rent.

In stating the superiority of the present system, we explicitly noted that we had in mind the system as capable of improvement. This implied that there are defects in the present form of land tenure, and that these can be eliminated in such a way as to make the system more beneficial and more in harmony with the principles of justice. In the present chapter we shall give a summary review of the principal defects, and in the following chapter we shall suggest some methods of reform. All the defects and abuses may conveniently be grouped under three heads: Monopoly; Excessive Gains; and Exclusion from the Land.

Landownership and Monopoly

In the literature of the Single Tax movement the phrase, "land monopoly," is constantly recurring. The expression is inaccurate; for the system of individual landownership does not conform to the requirements of a monopoly. There is, indeed, a certain resemblance between the control exercised by the owner of land and that possessed by the monopolist. As the proprietor of every superior soil or site has an economic advantage over the owner of the poorest soil or site, so the proprietor of a monopolistic business obtains larger gains than the man who must operate in conditions of competition. In both cases the advantage is based upon the scarcity of the thing controlled, and the extent of the advantage is measured by the degree of scarcity.

Nevertheless, there is an important difference between landownership and monopoly. The latter is usually defined as that degree of unified control which enables the persons in control arbitrarily to limit supply and raise price. As a rule, no such power is exercised by individuals, or by combinations of individuals with regard to land. The pecuniary advantage possessed by the landowner, that is, the power to take rent, is conferred and determined by influences outside of himself, by the natural superiority of his land, or by its proximity to a city. He can neither diminish the amount of land in existence nor raise the price of his own. The former result is inhibited by nature; the latter by the competition of other persons who own the same kind of land. To be sure, there are certain kinds of land which are so scarce and so concentrated that they do fall under true monopolistic control. Such are the anthracite coal mines of Pennsylvania, and some peculiarly situated plots in a few great cities, for example, land that is desired for a railway terminal. But these instances are exceptional. The general fact is that the owners of any kind of land are in competition with similar owners. While the element of scarcity is common to landownership and to monopoly, it differs in its operation. In the case of monopoly it is subject, within limits, to the human will. This difference is sufficiently important, both theoretically and practically, to forbid the identification or confusion of landownership with monopoly.

A notable illustration of such confusion is the volume by Dr. F. C. Howe, entitled, "Privilege and Democracy in America." He maintains that bituminous coal, copper ore, and natural gas are true monopolies, but gives no adequate proof to support this assertion. Moreover, he exaggerates considerably the part played by landownership in the formation of industrial monopolies. Thus, his contention that the petroleum monopoly is due to ownership of oil-producing lands is certainly incorrect; for the Standard Oil Company (or companies) has never controlled as much as half the supply of raw material. "The power of the Standard does not rest upon a direct monopoly of the production of crude oil through ownership of the wells."[49] Perhaps the most remarkable misstatement in the volume is this: "The railway is a monopoly because of its identity with land."[50] Now there are a few important railway lines traversing routes or possessing terminal sites which are so much better than any alternative routes or sites as to give all the advantages of a true monopoly. But they are in a small minority. In the great majority of cases, a second parallel strip or parallel site could be found which would be equally or almost equally suitable. Neither the amount nor the kind of land owned by a railroad, nor its legal privilege of holding land in a long, continuous strip, is the efficient cause of a railway monopoly. To attribute the monopoly to land is to confound a condition with a cause. One might as well say that the land underlying the "wheat king's" office is the cause of his corner in wheat. It is true that in a few of the great cities the existing railroads may, through their ownership of all the suitable terminal sites, prevent the entrance of a competing line. In the first place, such instances are rare; in the second place, the fact that there are several roads already in existence shows that competition was possible without the entrance of another one. The influence impelling them to form a monopoly for the regulation of charges is not their ownership of terminal sites. No sort of uniform action with regard to terminals would produce any such effect. The true source of the monopoly element in railways is inherent in the industry itself. It is the fact of "increasing returns," which means that each additional increment of business is more profitable than the preceding one, and that in most cases this process can be kept up indefinitely. As a consequence, each of two or more railroads between two points strives to get all the traffic; then follows unprofitable rate cutting, and finally combination.[51] The same forces would produce identical results if railroad tracks and terminals were suspended in the air.

Dr. Howe asserts that the monopolistic character of such public utility corporations as street railways and telephone companies is due to their occupation of "favoured sites."[52] How can this be true, when it is possible to build a competing line on an adjoining and parallel street? If the city forbids this, and gives an exclusive franchise to one company, this legal ordinance, and not any exceptional advantage in the nature of the land occupied, is the specific cause of the monopoly. If the city permits a competing line, and if the two lines sooner or later enter into a combination, the true source and explanation are to be found in the fact of increasing returns. Combination is immeasurably more profitable than cut-throat competition. Moreover, the evils of public service monopolies can be remedied through public control of charges and through taxation. Neither in railroads nor in public utilities is land an impelling cause of monopoly, or a serious hindrance to proper regulation.

Most of Dr. Howe's exaggerations of the influence of land upon monopoly take the form of suggestion rather than of specific and direct statement. When he attempts in precise language to enumerate the leading sources of monopoly, he mentions four; namely, land, railways, the tariff, and public service franchises.[53] Nor is he able to prove his assertion that of these the most important is land.

Nevertheless, land is one of the foremost causes. The most prominent examples of land monopoly in this country are the anthracite coal mines and the iron ore beds. Fully ninety per cent. of our anthracite coal supply (exclusive of Alaska) is under the control of eight railway systems which in this matter act as a unit.[54] According to Dr. Howe, the excessive profits reaped from this monopolistic control amount to between one hundred and two hundred million dollars annually.[55] In other words, the consumers of anthracite coal must pay every year that much more than they would have expended if the supply had not been monopolised. On the other hand, the formation of monopoly would have been much more difficult if the railroads had been legally forbidden to own coal mines. As things stand, railway monopoly is an important cause of the anthracite coal monopoly. Some authorities are of the opinion that a similar condition of monopoly will ultimately prevail in the bituminous coal mines. Iron ore has been brought under the control of the United States Steel Corporation to such an extent that the Commissioner of Corporations writes: "Indeed, so far as the Steel Corporation's position in the entire iron and steel industry is of a monopolistic character, it is chiefly through its control of ore holdings and the transportation of ore."[56] From this statement, however, it is evident that the monopoly depends upon control of transportation as well as upon ownership of the ore beds. If the former were properly regulated by law, the latter would not be so effective in promoting monopoly.

Speaking generally, we may say that when a great corporation controls a large proportion of the raw material entering into its manufactured products, such control will supplement and reinforce very materially those other special advantages which make for monopoly.[57] Prominent examples are to be found in steel, natural gas, petroleum, and water powers. In his "Report on Water Power Development in the United States," the Commissioner of Corporations (March 14, 1912) declared that the rapidly increasing concentration of control might easily become the nucleus of a monopoly of both steam and water power. Ten great groups of interests, he said, already dominated about sixty per cent. of the developed water power, and were pursuing a policy characterised by a large measure of agreement.[58] As a rough generalisation, it would be fair to say that in one or two instances, at least, landownership is the chief basis, and in several other cases an important contributory cause of monopoly.

Even an approximately accurate estimate of the amount of money which consumers are compelled to pay annually for the products of such concerns over and above what they would pay if the raw material were not wholly or partially monopolised, is obviously impossible. It may possibly run into hundreds of millions of dollars.

Excessive Gains from Private Landownership

The second evil of private landownership to be considered here, is the general fact that it enables some men to take a larger share of the national product than is consistent with the welfare of their neighbours and of society as a whole. As in the matter of monopoly, however, so here, Single Tax advocates are chargeable with a certain amount of overstatement. They contend that the landowner's share of the national product is constantly increasing, that rent advances faster than interest or wages, nay, that all of the annual increase in the national product tends to be gathered in by the landowner, while wages and interest remain stationary, if they do not actually decline.[59]

The share of the product received by any of the four agents of production depends upon the relative scarcity of the corresponding factor. When undertaking ability becomes scarce in proportion to the supply of land, labour, and capital, there is a rise in the remuneration of the business man; when labour decreases relatively to undertaking ability, land, and capital, there is an increase in wages. Similar statements are true of the other two agents and factors. All these propositions are merely particular illustrations of the general rule that the price of any commodity is immediately governed by the movement of supply and demand. In view of this fact, it is not impossible that rent might increase to the extent described in the preceding paragraph. All that is necessary is that land should become sufficiently scarce, and the other factors sufficiently plentiful.

As a fact, the supply of land is strictly limited by nature, while the other factors can and do increase. There are, however, several forces which neutralise or retard the tendency of land to become scarce, and of rent to rise. Modern methods of transportation, of drainage, and of irrigation have greatly increased the supply of available land, and of commercially profitable land. During the nineteenth century, the transcontinental railroads of the United States made so much of our Western territory accessible that the value and rent of New England lands actually declined; and there are still many millions of acres throughout the country which can be made productive through drainage and irrigation. In the second place, every increase of what is called the "intensive use" of land gives employment to labour and capital which otherwise would have to go upon new land. In America this practice is only in its infancy. With its inevitable growth, both in agriculture and mining, the demand for additional land will be checked, and the rise in land values and rents be correspondingly diminished. Finally, the proportion of capital and labour that is absorbed in the manufacturing, finishing, and distributive operations of modern industry is constantly increasing. These processes call for very little land in comparison with that required for the extractive operations of agriculture and mining. An increase of one-fifth in the amount of capital and labour occupied in growing wheat or in taking out coal, implies a much greater demand for land than the same quantity employed in factories, stores, and railroads.[60]

As a consequence of these counteracting influences, it appears that the share of the landowners has not increased disproportionately. The most comprehensive endeavour yet made to determine the growth and relative size of the different shares of the national product is embodied in Professor W. I. King's volume, "The Wealth and Income of the People of the United States," published in 1915. It estimates that the total annual income of the nation increased from a little less than two and one-fourth billions of dollars in 1850 to a little more than thirty and one-half billions in 1910, or slightly more than fifteen times. During the same period rent, the share of the landowners, advanced from $170,600,000 to $2,673,900,000, or about fifteen and three quarter times. In the year 1910, therefore, the landowners were receiving but a very small fraction more of the national product than their predecessors obtained sixty years earlier.[61] As to the relative size of the shares going to the different factors in 1910, the figures are even more remarkable. Wages and salaries absorbed 46.9 per cent.; profits, 27.5 per cent.; interest, 16.8 per cent.; and rent, only 8.8 per cent.[62] This was exactly the same per cent. that the landowners received in 1860. To be sure, these figures are only approximations, but they are probably the most reliable that can be obtained from our notoriously incomplete statistics, and they will deserve respectful consideration until they have been refuted by specific criticism and argument. In the opinion of their compiler: "The figures for wages and salaries are believed to be fairly accurate; those for rent are thought to have an error of not more than twenty per cent. The separation of the share of capital from that of the entrepreneur is very crudely done and no stress should be laid on the results. The total for all shares is thought to be more accurate than the mode of distribution, and for the last three census years should come within ten per cent. of the correct statement of the national income. For earlier years the error should not be over twenty per cent. at the outside."[63] If we make the maximum allowance for error in reference to the share of the landowner, and assume that the rent estimate is twenty per cent. too low, we find that it was still only ten and one-half per cent. of the total product in 1910, which represents an increase of less than three per cent. since 1850. It is significant that Dr. Howe, who has no bias toward belittling the share of the landowner, suggested as his minimum and maximum estimates of the land values of the country in 1910 figures which are respectively fifty per cent. below and only five per cent. above the amount taken by Professor King as the basis for his estimate of rent.[64] There is, consequently, a strong presumption that Professor King is right when he stigmatises as "absurd" the contention of the Single Taxer, "that all the improvements of industry result only in the enrichment of the landlord.... The value of our products has increased since 1850 to the extent of some twenty-eight billions of dollars, while rent has gained less than three billions. Evidently it has captured but a meagre part of the new production."[65]

There are strong indications, however, that the per cent. of the product going to the owners of land has increased considerably in the last twenty years, and that this movement will continue indefinitely. According to Professor King's calculations, the per cent. of the total product assignable as rent advanced from 7.8 in 1900 to 8.8 in 1910, which meant that during that period the national income increased only 70 per cent., while the share of the landowner increased 91 per cent.[66] It is true that a disproportionate advance in rent has occurred between other census years, only to be neutralised by subsequent decreases; but the present instance seems to include certain features which did not characterise any of the former gains in the relative share of the landowner. Since 1896 the prices of food products "rose most rapidly in the case of meat, dairy products, and cereals, which were derived directly from the land. The prices of raw materials show a like relation. Timber, grain, and other raw materials obtained directly from the land have risen rapidly in price, while semi-manufactured articles have increased less rapidly, or have decreased in price.... There is no parallel in any other field to the advance in those land values upon which civilisation most directly depends—timber lands, fertile agricultural land, and land in large commercial and industrial centres. The recent rise in land values has been little short of revolutionary."[67]

Between 1900 and 1910 the value of farm lands per acre in the United States advanced 108.1 per cent.[68] During the eight years beginning with July 1, 1906, the value of land in Greater New York increased something more than one-third; in the principal cities of New Jersey, and in Worcester, Washington, Boston, and Buffalo, somewhat less; in Springfield and Holyoke, considerably more. In the most recent ten years for which figures are available (since 1900 in every case) the land values of Milwaukee, St. Louis and San Francisco averaged only a slight degree of expansion, while those of Kansas City doubled, and those of Houston, Dallas, Los Angeles, and Seattle trebled. To quote Professor Nearing, from whose compilations these estimates have been summarised: "The total extent of the increase in American city land values may be hinted at rather than stated with any certainty. The scattering instances in which land and improvements are separately assessed led to the conclusion that in a large, well-established city, growing at approximately the same rate as the other portions of the United States, the land value is doubling in from ten to twenty-five years. In the new, rapidly growing city of the middle and far West and in some of the smaller cities of the East, the ratio of increase in land values is far greater, amounting to two-fold or even three-fold in a decade. In a few instances the rate of increase is much smaller, and in one case, Jersey City, land values over a period of seven years have actually decreased.... Nevertheless, the few available long range figures indicate a widespread and considerable increase in American city land values."[69]

The rise in the value of timber lands during the last thirty years has been, in the words of the federal investigators, "enormous." For the ten-year period ending in 1908, "the value of a given piece of southern pine taken at random is likely to have increased in any ratio from three-fold to ten-fold." About the same ratio of increase obtained in the Pacific Northwest, and a somewhat smaller increase in the region of the Great Lakes.[70] While a considerable decline has taken place since 1908, it is only temporary; for the demand for timber is notoriously increasing several times as fast as the supply.

That this upward movement in the value of all three kinds of land will continue without serious interruption, seems to be as nearly certain as any economic proposition that is dependent upon the future. Although millions of acres of arable lands are still unoccupied in the United States and Canada, the far greater part of them require a comparatively large initial outlay for draining, clearing, irrigation, etc., in order to become productive. Hence there is no likelihood that they can be brought under cultivation fast enough to halt or greatly retard the advancing values which follow upon the growth of population and the increased demand for agricultural products. In all probability the greater part of them will not come into use until the prices of farm products have risen above the present level. Obviously this supposes an increase in the value of all farm land, old and new. Nor is the adoption of better methods of farming likely to check seriously the upward movement. Between 1900 and 1910 the urban population of America increased 34.8 per cent., as against a gain of only 21 per cent. in the total population. This disproportionate growth in the number of the city dwellers will if continued make certain what is in any case extremely probable, a steady and considerable advance in urban land values and rents.

The circumstance that these remarkable increases in land values are a comparatively recent phenomenon has prevented them from receiving the attention that they deserve, either from the general public or from the students of economic and social problems. The total value of the land of the country has increased steadily from decade to decade, but so has the total value of capital, and even between 1900 and 1910 the increase in the share of the capitalist was exactly equal to the increase in the share of the landowner, that is, 91 per cent.[71] Those persons who complacently make such comparisons overlook the new and significant feature of the more recent advances in land value; namely, that they are due in only a slight degree to an expansion of the area of land under consideration. The increases of value quoted in the foregoing paragraphs are increases per acre and per urban lot, not increases derived from bringing new land under cultivation or new tracts within municipal limits. On the other hand, the increases in the value of capital, now as always, represent for the most part concrete additions to the existing stock of productive instruments. Except where monopoly holds sway, particular capital instruments, unlike particular pieces of land, do not increase in value. Hence the owner of a given amount of capital does not profit by the advance in the total value of capital as the owner of the average parcel of land profits by the general increase in the value of land. This means that all those consumers of products who are not landowners must pay an increasing tribute to those who are landed proprietors.

So much for the proportion of the national product which goes to the landowning class. Let us next inquire how the landowner's share, or rent, is distributed throughout the population. If it were equally divided among all persons, its increase relatively to the shares of the other factors would, from the social viewpoint, be a matter of considerable indifference. On the other hand, if it is secured by a minority of the population, and if that minority tends to become smaller as the share itself becomes larger, we have a socially undesirable condition.

In the twenty years between 1890 and 1910, the proportion of farm families in the United States owning farm land, mortgaged or unmortgaged, declined from 65.9 per cent. to 62.8 per cent.; the proportion of urban families owning their homes, encumbered or unencumbered, increased from 36.9 to 38.4 per cent., and the proportion of all families owning homes, encumbered or unencumbered, fell from 47.8 to 45.8 per cent. Of the homes owned by their occupiers, 28 per cent. were mortgaged in 1890, and 32.8 per cent. in 1910.[72] While a decline of two per cent. in the home owning and landowning families in twenty years, and an increase of almost five per cent. in the number of those families who hold their property subject to encumbrance, may not seem very serious in themselves, they indicate a definitely unhealthy trend. Not only are the landowning families in a minority, but the minority is becoming smaller.

Nevertheless, when we consider the amount of gains accruing to the average member of the landowning class, we do not find that it is unreasonably large. The great majority of landed proprietors have not received, nor are they likely to receive, from their holdings incomes sufficiently large to be called excessive shares of the national product. Their gross returns from land have not exceeded the equivalent of fair interest on their actual investment, and fair wages for their labour. The landowners who have been enabled through their holdings to rise above the level of moderate living constitute a comparatively small minority. And these statements are true of both agricultural and urban proprietors.

It is true that a considerable number of persons, absolutely speaking, have amassed great wealth out of land. It is a well known fact that land was the principal source of the great mediæval and post-mediæval fortunes, down to the end of the eighteenth century. "The historical foundation of capitalism is rent."[73] Capitalism had its beginning in the revenue from agricultural lands, city sites, and mines. A conspicuous example is that of the great Fugger family of the sixteenth century, whose wealth was mostly derived from the ownership and exploitation of rich mineral lands.[74] In the United States very few large fortunes have been obtained from agricultural land, but the same is not true of mineral lands, timber lands, or urban sites. "The growth of cities has, through real estate speculation and incremental income, made many of our millionaires."[75] "As with the unearned income of city land, our mineral resources have been conspicuously prolific producers of millionaires."[76] The most striking instance of great wealth derived from urban land is the fortune of the Astor family. While gains from trading ventures formed the beginning of the riches of the original Astor, John Jacob, these were "a comparatively insignificant portion of the great fortune which he transmitted to his descendants."[77] At his death, in 1848, John Jacob Astor's real estate holdings in New York City were valued at eighteen or twenty million dollars. To-day the Astor estate in that city is estimated at between 450 and 500 millions, and within a quarter of a century will not improbably be worth one billion dollars.[78] According to an investigation made in 1892 by the New York Tribune, 26.4 per cent. of the millionaire fortunes of the United States at that time were traceable to landownership, while 41.5 per cent. were derived from competitive industries which were largely assisted by land possessions.[79] The proportion of such fortunes that is due, directly or indirectly, in whole or in part, to landownership has undoubtedly increased considerably since 1892.

With regard to great individual or corporate land holdings, there exist no adequate statistics. A few conspicuous instances may be cited. The United States Steel Corporation owns lands yielding iron ore, coal, coke, and timber which are valued by the Commissioner of Corporations at nearly 250 million dollars, and by the Steel Corporation itself at more than 800 million dollars.[80] Three companies own nearly eleven per cent., and 195 individuals or corporations own 48 per cent. of all the privately owned timber in the United States.[81] The United States Census of 1910 shows that the number of farms containing 500 acres or over was about 175,000, and comprised ten per cent. of the total farm acreage. One hundred and fifty persons and corporations are said to own 220,000,000 acres of various kinds of land. None of these holders has less than ten thousand acres, and two of the syndicates possess fifty million acres each.[82]

Exclusion from the Land

One of the most frequent charges brought against the present system of land tenure is that it keeps a large proportion of our natural resources out of use. It is contended that this evil appears in three principal forms: owners of large estates refuse to break up their holdings by sale; many proprietors are unwilling to let the use of their land on reasonable terms; and a great deal of land is held at speculative prices, instead of at economic prices. So far as the United States are concerned, the first of these charges does not seem to represent a condition that is at all general. Although many holders of large mineral and timber tracts seem to be in no hurry to sell portions of their holdings, they are probably moved by a desire to obtain higher prices rather than to continue as large landowners. As a rule, the great landholders of America are without those sentiments of tradition, local attachment, and social ascendency which are so powerful in maintaining intact the immense estates of Great Britain. On the contrary, one of the common facts of to-day is the persistent effort carried on by railroads and other holders of large tracts to dispose of their land to settlers. While the price asked by these proprietors is frequently higher than that which corresponds to the present productiveness of the land, it is generally as low as that which is demanded by the owners of smaller parcels. To be sure, this is one way of unreasonably hindering access to the land, but it falls properly under the head of the third charge enumerated above. There is no sufficient evidence that the large landholders are exceptional offenders in refusing to sell their holdings to actual settlers.

The assertion that unused land cannot be rented on reasonable terms is in the main unfounded, so far as it refers to land which is desired for agriculture. As a rule, any man who wishes to cultivate a portion of such land can fulfil his desire if he is willing to pay a rent that corresponds to its productiveness. After all, landowners are neither fools nor fanatics: while awaiting a higher price than is now obtainable for their land, they would prefer to get from it some revenue rather than none at all. As a matter of fact, almost all the agricultural land that is immediately available for renting, is constantly under cultivation. This refers to land that is already under the plough, and is provided with buildings and other necessary improvements. Practically none of this is out of use. New land which is without buildings is not wanted by tenants, unless it is convenient to their residences, because they do not desire to expend money for permanent improvements upon land that they do not own. True, the present owners of such land might erect buildings, and then let it to tenants. In so far as new land might profitably be improved and cultivated, and in so far as the owners are unwilling or unable to provide the improvements, the present system does keep out of use agricultural land that could be cultivated by tenants. Mineral and timber lands are sometimes withheld from tenants because the owners wish to limit the supply of the product, or because they fear that a long-term lease would prevent them from selling the land to the best advantage. As to urban sites, the contention that we are now examining is generally true. The practice of leasing land to persons who wish to build thereon does not, with the exception of a very few cities, obtain in the United States for other than very large business structures. As a rule, it does not apply to sites for residences. The man who wants a piece of urban land for a dwelling or for a moderately sized business building cannot obtain it except by purchase.

Cannot the land be bought at a reasonable price? This brings us to the third and most serious of the charges concerning exclusion from the land. Since the value of land in most cities is rising, and apparently will continue to rise more or less steadily, the price at which it is held and purchasable is not the economic price but a speculative price. It is higher than the capitalised value of the present revenue or rent. For example: if five per cent. be the prevailing rate of interest, a piece of land which returns that rate on a capital of one thousand dollars cannot be bought for one thousand dollars. The purchaser is willing to pay more because he hopes to sell it for a still higher price within a reasonable time. He knows that he cannot immediately obtain five per cent. on the amount (say, 1,200 dollars) that he is ready to pay for the land, but his valuation of it is not determined merely by its present income-producing power, but by its anticipated revenue value and selling value.[83] The buyer will pay more for such land than for a house which yields the same return; for he knows that the latter will not, and hopes that the former will, bring a higher return and a higher price in the future. Wherever this discounting of the future obtains, the price of land is unreasonably high, and access to vacant land is unreasonably difficult.

This condition undoubtedly exists most of the time in the great majority of our larger cities. Men will not sell vacant land at a price which will enable the buyer to obtain immediately a reasonable return on his investment. They demand in addition a part of the anticipated increase in value. In the rural regions this evil appears to be smaller and less general. The owners of unused or uneconomically used arable land are more eager to sell their holdings than the average proprietor of a vacant lot. So far as this sort of land is concerned, it is probable that most of the denunciation of "land speculators" and "land monopolists" overshoots the mark. Not the high price at which unused arable lands are held, but the great initial cost of draining, clearing, or irrigating them, is the main reason why they are not purchased by cultivators.

While no general and precise estimate can be given of the extent to which the speculative exceeds the actual rent-producing value of land in growing cities, twenty-five per cent. would not improbably be a fair conjecture. Even when a reaction occurs after a period of excessive "land-booming," the lower prices do not bring the manless land any nearer to the landless men. Only the few who possess ready money or excellent credit can take advantage of such a situation. On the whole the evil that we are now considering is probably greater than any other connected with the private ownership of land.

All the tendencies and forces that have been described in the present chapter under the heads of Monopoly, Excessive Gains, and Exclusion from the Land, are in some degree real defects and abuses of the existing system of land tenure. Most of them do not seem to be sufficiently understood or appreciated by the more ardent defenders of private ownership. To recognise them, and to seek adequate correctives of them would seem to be the task of both righteousness and expediency. In the next and final chapter of this Section, we shall consider certain remedies that seem to be at once effective and just.

CHAPTER VIII
METHODS OF REFORMING OUR LAND SYSTEM

In economic and social discussion the word reform is commonly opposed to the word revolution. It implies modification rather than abolition, gradual rather than violent change. Hence reforms of the system of land tenure do not include such radical proposals as those of land nationalisation or the Single Tax. On the other hand, some extension of State ownership of land, and some increase in the proportion of taxes imposed upon land, may quite properly be placed under the head of reform, inasmuch as they are changes in rather than a destruction of the existing system.

In general, the reform measures needed are such as will meet the defects described in the last chapter; namely, monopoly, excessive gains, and exclusion from the land. Obviously they can be provided only by legislation; and they may all be included under two heads, ownership and taxation.

By far the greater part of the more valuable lands of the country are no longer under the ownership of the State. Urban land is practically all in the hands of private proprietors. While many millions of acres of land suitable for agriculture are still under public ownership, almost all of this area requires a considerable outlay for irrigation, clearing, and draining before it can become productive. Forty years ago, three-fourths of the timber now standing was public property; at present about four-fifths of it is owned by private persons or corporations.[84] The bulk of our mineral deposits, coal, copper, gold, silver, etc., have likewise fallen under private ownership, with the exception of those of Alaska. The undeveloped water power remaining under government ownership has been roughly estimated at fourteen million horse power in the national forests, and considerably less than that amount in other parts of the public domain.[85] This is a gratifying proportion of the whole supply, developed and undeveloped, of this national resource, which is said to be somewhere between 27 and 60 millions horse power.[86] Only about seven million horse power has yet been developed, almost all of which is privately owned.

The Leasing System

In many countries of Europe it has long been the policy of governments to retain ownership of all lands containing timber, minerals, oil, natural gas, phosphate, and water power. The products of these lands are extracted and put upon the market through a leasing system. That is; the user of the land pays to the State a rental according to the amount and quality of raw material which he takes from the storehouse of nature. Theoretically, the State could sell such lands at prices that would bring in as much revenue as does the leasing system; practically, this result has never been attained. The principal advantages of the leasing arrangement are: to prevent the premature destruction of forests, the private monopolisation of limited natural resources (which has happened in the case of the anthracite coal fields of Pennsylvania) and the private acquisition of exceptionally valuable land at ridiculously low prices; and to enable the State to secure just treatment for the consumer and the labourer by stipulating that the former shall obtain the product at fair prices, and that the latter shall receive fair wages.

This example should be followed by the United States. All timber, mineral, gas, oil, and water power lands which have not been alienated to private persons should remain under government ownership, and be brought into use through a leasing arrangement which would enable the private operators to obtain the rates of profit and interest which are ordinarily yielded by enterprises subject to the same degree of risk. Happily this policy now seems likely to be adopted. In 1913 a law was passed by the United States providing for the operation of the coal mines of Alaska on leases. The amount that can be leased by any person or corporation is limited to 2560 acres, and the penalty for attempting to monopolise the product is forfeiture of tenure. The Secretary of the Interior has urged a similar arrangement for the development and extraction of water power, coal, oil, gas, phosphate, sodium, and potassium on the public domain of Continental United States, and his recommendation will probably be adopted by Congress. Thus the rent of these lands will go to the whole people instead of to a comparatively small number of individuals, monopoly of the products will be made impossible, and our remaining public resources will be protected from rapid and ruinous exploitation.

To the objection that capitalists will not invest their money in nor carry on extractive enterprises on a leasing basis, the sufficient answer is that they are doing it now. In 1909, 24.5 per cent. of all the lands producing minerals, precious metals, and stone; 94.6 per cent. of the lands producing petroleum and gas; and 61.2 per cent. of the two groups of lands combined, were operated under leases from private owners or from the government.[87] If the rental or royalty demanded is not unreasonably high capitalists will be quite as willing to produce raw materials of these kinds from leased land as they are to manufacture or sell goods in a rented building. Not the leasing system, but the terms of the particular lease are the important consideration.

Public grazing lands should remain government property until such time as they become available for agriculture. Cattle owners could lease the land from the State on equitable terms, and receive ample protection for money invested in improvements.

Public Agricultural Lands

The leasing system cannot well be applied to agricultural lands. In order that they may be continuously improved and protected against deterioration, they must be owned by the cultivators. The temptation to wear out a piece of land quickly, and then move to another piece, and all the other obstacles that stand in the way of the Single Tax as applied to agricultural land, show that the government cannot with advantage assume the function of landlord in this domain. In the great majority of cases the State would do better to sell the land in small parcels to genuine settlers. There are, indeed, many situations, especially in connection with government projects of irrigation, clearing, and drainage, in which the leasing arrangement could be adopted temporarily. It should not be continued longer than is necessary to enable the tenants to become owners. With this end in view the State should make loans to cultivators at moderate rates of interest, as is done in New Zealand and Australia.

Whether the State ought to purchase undeveloped land from private owners in order to sell it to settlers, may well be doubted. The only lands to which such a scheme would be at all applicable are large estates which are held out of use by their proprietors. Even here the transfer of the land to cultivators could be accomplished indirectly, through an extra heavy tax. This method has been adopted with success by Australia and New Zealand. The only other action by the State that seems necessary or wise in order to place settlers upon privately owned agricultural land, is the establishment of a comprehensive system of rural credits. The need of cheaper food products, and the desirability of checking the abnormal growth of our urban populations, are powerful additional reasons for the adoption of this policy. The Hollis Rural Credits Bill recently enacted into law by Congress goes a considerable way toward meeting these needs.

Public Ownership of Urban Land

No city should part with the ownership of any land that it now possesses. Since capitalists are willing to erect costly buildings on sites leased from private owners, there is no good reason why any one should refuse to put up or purchase any sort of structure on land owned by the municipality. The situation differs from that presented by agricultural land; for the value of the land can easily be distinguished from that of improvements, the owner of the latter can sell them even if he is not the owner of the land, and he cannot be deprived of them without full compensation. While the lessee paid his annual rent, his control of the land would be as complete and certain as that of the landowner who continues to pay his taxes. On the other hand, the leaseholder could not permit or cause the land to deteriorate if he would; for the nature of the land renders this impossible. Finally, the official activities involved in the collection of the rent and the periodical revaluation of the land, would not differ essentially from those now required to make assessments and gather taxes.

The benefits of this system would be great and manifest. Persons who were unable to own a home because of their inability to purchase land, could get secure possession of the necessary land through a lease from the city. Instead of spending all their lives in rented houses, thousands upon thousands of families could become the owners and occupiers of homes. The greater the amount of land thus owned and leased by the city, the less would be the power of private owners to hold land for exorbitant prices. Competition with the city would compel them to sell the land at its revenue-producing value instead of at its speculative value. Finally, the city would obtain the benefit of every increase in the value of its land by means of periodical revaluation, and periodical readjustment of rent.

Unfortunately the amount of municipal land available for such an arrangement in our American cities is negligible. If they are to establish the system they must first purchase the land from private owners. Undoubtedly this ought to be done by all large cities in which the housing problem has become acute, and the value of land is constantly rising. This policy has been adopted with happy results by many of the municipalities of France and Germany.[88] At the state election of 1915 the voters of Massachusetts adopted by an overwhelming majority a constitutional amendment authorising the cities of the commonwealth to acquire land for prospective home builders. In Savannah, Georgia, no extension of the municipal limits is made until the land to be embraced has passed into the ownership of the city. Another method is to refrain from opening a new street in a suburban district until the city has become the proprietor of the abutting land. Whatever be the particular means adopted, the objects of municipal purchase and ownership of land are definite and obvious: to check the congestion of population in the great urban centres, to provide homes for the homeless, and to secure for the whole community the socially occasioned increases in land values. Indeed, it is probable that no comprehensive scheme of housing reform can be realised without a considerable amount of land purchase by the municipalities. Cities must be in a position to provide sites for those home builders who cannot obtain land on fair conditions from private proprietors.[89]

Turning now from the direct method of public ownership to the indirect method of reform through taxation, we reject the thoroughgoing proposals of the Single Taxers. To appropriate all economic rent for the public treasury would be to transfer all the value of land without compensation from the private owner to the State. For example: a piece of land that brought to the owner an annual revenue of one hundred dollars would be taxed exactly that amount; if the prevailing rate of interest were five per cent. the proprietor would be deprived of wealth to the amount of two thousand dollars; for the value of all productive goods is determined by the revenue that they yield, and benefits the person who receives the revenue. Thus the State would become the beneficiary and the virtual owner of the land. Inasmuch as we do not admit that the so-called social creation of land values gives the State a moral right to these values, we must regard the complete appropriation of economic rent through taxation as an act of pure and simple confiscation.[90]

Appropriating Future Increases of Land Value

Let us examine, then, the milder suggestion of John Stuart Mill, that the State should impose a tax upon land sufficient to absorb all future increases in its value.[91] This scheme is commonly known as the appropriation of future unearned increment. Either in whole or in part it is at least plausible, and is to-day within the range of practical discussion. It is expected to obtain for the whole community all future increases in land values, and to wipe out the speculative, as distinguished from the revenue-producing value of land. Consequently it would make land cheaper and more accessible than would be the case if the present system of land taxation were continued. Before discussing its moral character, let us see briefly whether the ends that it seeks may properly be sought by the method of taxation. For these ends are mainly social rather than fiscal.

To use the taxing power for a social purpose is neither unusual nor unreasonable. "All governments," says Professor Seligman, "have allowed social considerations in the wider sense to influence their revenue policy. The whole system of productive duties has been framed not merely with reference to revenue considerations, but in order to produce results which should directly affect social and national prosperity. Taxes on luxuries have often been mere sumptuary laws designed as much to check consumption as to yield revenue. Excise taxes have as frequently been levied from a wide social, as from a narrow fiscal, standpoint. From the very beginning of all tax systems these social reasons have often been present."[92] Our Federal taxes on imports, on intoxicating liquors, on oleo-margarine, and on white phosphorus matches, and many of the license taxes in our municipalities, as on pedlars, saloon keepers, and dog owners, are in large part intended to meet social as well as fiscal ends. They are in the interest of domestic production, public health, and public safety. The reasonableness of effecting social reforms through taxation cannot be seriously questioned. While the maintenance of government is the primary object of taxation, its ultimate end, the ultimate end of government itself, is the welfare of the people. Now if the public welfare can be promoted by certain social changes, and if these in turn can be effected through taxation, this use of the taxing power will be quite as normal and legitimate as though it were employed for the upkeep of government. Hence the morality of taxing land for purposes of social reform will depend entirely upon the nature of the particular tax that is imposed.

Some Objections to the Increment Tax

The tax that we are now considering can be condemned as unjust on only two possible grounds: first, that it would be injurious to society; and, second, that it would wrong the private landowner. If it were fairly adjusted and efficiently administered it could not prove harmful to the community. In the first place, landowners could not shift the tax to the consumer. All the authorities on the subject admit that taxes on land stay where they are put, and are paid by those upon whom they are levied in the first instance.[93] The only way in which the owners of a commodity can shift a tax to the users or consumers of it, is by limiting the supply until the price rises sufficiently to cover the tax. By the simple device of refusing to erect more buildings until those in existence have become scarce enough to command an increase in rent equivalent to the new tax, the actual and prospective owners of buildings can pass the tax on to the tenants thereof. By refusing to put their money into, say, shoe factories, investors can limit the supply of shoes until any new tax on this commodity is shifted upon the wearers of shoes in the form of higher prices. Until these rises take place in the rent of buildings and the price of shoes, investors will put their money into enterprises which are not burdened with equivalent taxes. But nothing of this sort can follow the imposition of a new tax upon land. The supply of land is fixed, and cannot be affected by any action of landowners or would-be landowners. The users of land and the consumers of its products are at present paying all that competition can compel them to pay. They would not pay more merely because they were requested to do so by landowners who were labouring under the burden of a new tax. If all landowners were to carry out an agreement to refrain from producing, and to withhold their land from others until rents and prices had gone up sufficiently to offset the tax, they could, indeed, shift the latter to the renters of land and the consumers of its products. Such a monopoly, however, is not within the range of practical achievement. In its absence, individual landowners are not likely to withhold land nor to discontinue production in sufficient numbers to raise rents or prices. Indeed, the tendency will be all the other way; for all landowners, including the proprietors of land now vacant, will be anxious to put their land to the best use in order to have the means of paying the tax. Owing to this increased production, and the increased willingness to sell and let land, rents and prices must fall. It is axiomatic that new taxes upon land always make it cheaper than it would have been otherwise, and are beneficial to the community as against the present owners.

In the second place, the tax in question could not injure the community on account of discouraging investment in land. Once men could no longer hope to sell land at an advance in price, they would not seek it to the extent that they now do as a field of investment. For the same reason many of the present owners would sell their holdings sooner than they would have sold them if the tax had not been levied. From the viewpoint of the public the outcome of this situation would be wholly good. Land would be cheaper and more easy of access to all who desired to buy or use it for the sake of production, rather than for the sake of speculation. Investments in land which have as their main object a rise in value are an injury rather than a benefit to the community; for they do not increase the products of land, while they do advance its price, thereby keeping it out of use. Hence the State should discourage instead of encouraging mere speculators in land. Whether it is or is not bought and sold, the supply of land remains the same. The supreme interest of the community is that it should be put to use, and made to supply the wants of the people. Consequently the only land investments that help the community are those that tend to make the land productive. Under a tax on future increases in value, such investments would increase for the simple reason that land would be cheaper than it would have been without the tax. Men who desired land for the sake of its rent or its product would continue as now to pay such prices for it as would enable them to obtain the prevailing rate of interest on their investment after all charges, including taxes, had been paid. Men who wanted to rent land would continue as now to get it at a rental that would give them the usual return for their capital and labour.

So much for the effect of the tax upon the community. Would it not, however, be unjust to the landowners? Does not private ownership of its very nature demand that increases in the value of the property should go to the owners thereof? "Res fructificat domino:" a thing fructifies to its owner; and value-increases may be classed as a kind of fruit.

In the first place, this formula was originally a dictum of the civil law merely, the law of the Roman Empire. It was a legal rather than an ethical maxim. Whatever validity it has in morals must be established on moral grounds, by moral arguments. It cannot forthwith be assumed to be morally sound on the mere authority of legal usage. In the second place, it was for a long time applied only to natural products, to the grain grown in a field, to the offspring of domestic animals. It simply enunciated the policy of the law to defend the owner of the land in his claim to such fruits, as against any outsider who should attempt to set up an adverse title through mere appropriation or possession. Thus far, the formula was evidently in conformity with reason and justice. Later on it was extended, both by lawyers and moralists, to cover commercial "fruits," such as, rent from lands and houses, and interest from loans and investments. Its validity in this field will be examined in connection with the justification of interest. More recently the maxim has received the still wider application which we are now considering. Obviously increases in value are quite a different thing from the concrete fruit of the land, its natural product. A right to the latter does not necessarily and forthwith imply a right to the former. In the third place, the formula in question is not a self evident, fundamental principle. It is merely a summary conclusion drawn from the consideration of the facts and principles of social and industrial life. Consequently its validity as applied to any particular situation will depend on the correctness of these premises, and on the soundness of the process by which it has been deduced.

The increment tax is sometimes opposed on the ground that it is new, in fact, revolutionary. In some degree the charge is true, but the conditions which the proposal is intended to meet are likewise of recent origin. The case for this legislation rests mainly on the fact that, for the first time in the world's history, land values everywhere show an unmistakable tendency to advance indefinitely. This means that the landowning minority will be in a position to reap unbought and continuous benefits at the expense of the landless majority. This new fact, with its very important significance for human welfare, may well require a new limitation on the right of property in land.

It is also objected that to deprive men of the opportunity of profiting by changes in the value of their land would be an unfair discrimination against one class of proprietors. But there are good reasons for making the distinction. Except in the case of monopoly, increases in the value of goods other than land are almost always due to expenditures of labour or money upon the goods themselves. The value increases that can be specifically traced to external and social influences are intermittent, uncertain, and temporary. Houses, furniture, machinery, and every other important category of artificial goods are perishable, and decline steadily in value. Land, however, is substantially imperishable, becomes steadily scarcer relatively to the demand, and its value-increases are on the whole constant, certain, and permanent. Moreover, it is the settled policy of most enlightened governments to appropriate or to prevent all notable increases in the value of monopolistic goods, either through special taxation or through regulation of prices and charges. Taking the increment values of land is, therefore, not so discriminative as it appears at first glance.[94]

Another objection is that the proposal would violate the canons of just taxation, since it would impose a specially heavy burden upon one form of property. The general doctrine of justice in taxation which is held by substantially all economists to-day, and which has been taught by Catholic moralists for centuries, is that known as the "faculty" theory.[95] Men should be taxed in proportion to their ability to pay, not in accordance with the benefits that they may be assumed to receive from the State. And it is universally recognised that the proper measure of "ability" is not a man's total possessions, productive and unproductive, but his income, his annual revenue. Now, the increment tax does seem to violate the rule of taxation according to ability, inasmuch as it would take all of one species of revenue, while all other incomes and properties pay only a certain percentage.

All the adherents of the faculty theory maintain, however, that it is subject to certain modifications. Incomes from interest, rent, and socially occasioned increases in the value of property should be taxed at a higher rate than incomes that represent expenditures of labour; for to give up a certain per cent. of the former involves less sacrifice than to give up the same per cent. of the latter. Therefore, increments of land-value may be fairly taxed at a higher rate than salaries, personal property, or even rent and interest. When, however, the law absorbs the whole of the value increments, it seems to be something more than a tax. The essential nature of a tax is to take only a portion of the particular class of income or property upon which it is imposed. The nearest approach to the plan of taking all future increases in land value is to be found in the special assessments that are levied in many American cities. Thus, the owners of urban lots are frequently compelled to defray the entire cost of street improvements on the theory that their land is thereby and to that extent increased in value. In such cases the contribution is levied not on the basis of the faculty theory, but on that of the benefit theory; that is, the owners are required to pay in proportion to benefits received. All adherents of the faculty theory admit that the benefit theory is justifiably applied in situations of this kind. It might be argued that the latter theory can also be fairly applied to increments of land value that are to arise in the future. In both cases the owner returns to the State the equivalent of benefits which have cost him nothing. There is, however, a difference. In the former case the value increases are specifically due to expenditures made by the State, while in the latter they are indirectly brought about by the general activities of the community. We do not admit with the Single Taxers that this "social production" of value increments creates a right thereto on the part of either the community or the civil body; but even if we did we should be compelled to admit that the two situations are not exactly parallel; for the social production of increases in the value of land involves no special expenditure of labour or money. Hence it is very questionable whether the appropriation of the whole of the future value increments can be harmonised with the received conceptions and applications of the canons of taxation.

The Morality of the Proposal

However, it is neither necessary nor desirable to justify the proposal on the mere ground of taxation. Only in form and administration is it a tax; primarily and in essence it is a method of distribution. It resembles the action by which the State takes possession of a newly discovered territory by the title of first occupancy. The future increases of land value may be regarded as a sort of no man's property which the State appropriates for the benefit of the community. And the morality of this proceeding must be determined by the same criterion that is applied to every other method or rule of distribution; namely, social and individual consequences. No principle, title, or practice of ownership, nor any canon of taxation, has intrinsic or metaphysical value. All are to be evaluated with reference to human welfare. Since the right of property is not an end in itself, but only a means of human welfare, its just prerogatives and limitations are determined by their conduciveness to the welfare of human beings. By human welfare is meant not merely the good of society as a whole, but the good of all individuals and classes of individuals. For society is made up of individuals, all of whom are of equal worth and importance, and have equal claims to consideration in the matter of livelihood, material goods, and property. In general, then, any method of distribution, any modification of property rights, any form of taxation, is morally lawful which promotes the interests of the whole community, without causing undue inconvenience to any individual. Whether a given rule of ownership or method of distribution which is evidently conducive to the public good is, nevertheless, unduly severe on a certain class of individuals, is a question that is not always easily answered. Some of the methods and practices appearing in history were clearly fair and just, others clearly unfair and unjust, and still others of doubtful morality. Frequently the State has compelled private persons to give up their land at a lower price than they paid for it; in more than one country freebooters and kingly favourites robbed the people of the land, yet their heirs and successors are recognised by both moralists and statesmen as the legitimate owners of that land; in Ireland stubborn landlords are to-day compelled by the British government to sell their holdings to the tenants at an appraised valuation; in many countries men may become owners of their neighbours' lands by the title of prescription, without the payment of a cent of compensation. All these practices and titles inflict considerable hardship upon individuals, but most of them are held to be justified on grounds of social welfare.

Now the public appropriation of all future increments of land value would evidently be beneficial to the community as a whole. It would enable all the people to profit by gains that now go to a minority, and it would enable the landless majority to acquire land more easily and more cheaply. We have in mind, of course, only those value increases that are not due to improvements in or on the land, and we assume that these could be distinguished in practice from the increments of value that represent improvements. Would the measure in question inflict undue hardship upon individuals? Here we must make a distinction between those persons who own land at the time that, and those who buy land after, the law is enacted.

The only inconvenience falling upon the latter class would be deprivation of the power to obtain future increases in value. The law would not cause the value of the land to decline below their purchase price. Other forces might, indeed, bring about such a result; but, as a rule, such depreciation would be relatively insignificant, for the simple reason that it would already have been "discounted" in the reduction of value which followed the law at the outset. The very knowledge that they could not hope to profit by future increases in the value of the land would impel purchasers to lower their price accordingly. While taking away the possibility of gaining, the law enables the buyers to take the ordinary precautions against losing. Therefore, it does not, as sometimes objected, lessen the so called "gambler's chances." On the other hand, the tax does not deprive the owners of any value that they may add to the land through the expenditure of labour or money, nor in any way discourage productive effort. Now it is, as a rule, better for individuals as well as for society that men's incomes should represent labour, expenditure, and saving instead of being the result of "windfalls," or other fortuitous and conjunctural circumstances. And the power to take future value increments is not an intrinsically essential element of private property in land. Like every other condition of ownership, its morality is determined by its effects upon human welfare. But we have seen in the last paragraph that human welfare in the sense of the social good is better promoted by a system of landownership which does not include this element; and we have just shown that such a system causes no undue hardship to the individual who buys land after its establishment. Such is the answer to the contention, noticed a few pages back, that the landowner has a right to future increments of value because they are a kind of fruit of his property. It is more reasonable that he should not enjoy this particular and peculiar "fruit." Were the increment tax introduced into a new community before any one had purchased land, it would clearly be a fair and valid limitation on the right of ownership. Those who should become owners after the regulation went into effect in an old community would be in exactly the same moral and economic position. Finally, there exists some kind of legal precedent for the proposal in the present policy of efficient governments with regard to the only important increases that occur in the value of goods other than land; namely, increases due to the possession of monopoly power. By various devices these are either prevented or appropriated by the State.

Those persons who are landowners when the increment tax goes into effect are in a very different situation from those that we have just been considering. Many of them would undoubtedly suffer injury through the operation of the measure, inasmuch as their land would reach and maintain a level of value below the price that they had paid for it. The immediate effect of the increment tax would be a decline in the value of all land, caused by men's increased desire to sell and decreased desire to buy. In all growing communities a part of the present value of land is speculative; that is, it is due to demand for the land by persons who want it mainly to sell at an expected rise, and also to the disinclination of present owners to sell until this expectation is realised. The practical result of the attitude of these two classes of persons is that the demand for, and therefore the value of land is considerably enhanced. Let a law be enacted depriving them of all hope of securing the anticipated increases in value, and the one group will cease to buy, while the other will hasten to sell, thus causing a decline in demand relatively to supply, and therefore a decline in value and price.

All persons who had paid more for their land than the value which it came to have as a result of the increment tax law, would lose the difference. For, no matter how much the land might rise in value subsequently, the increase would all be taken by the State. And all owners of vacant land the value of which after the law was passed did not remain sufficiently high to provide accumulated interest on the purchase price, would also lose accordingly. To be sure, both these kinds of losses would exist even if the law should cause no decline in the value of land, but they would not be so great either in number or in volume.

Landowners who should suffer either of these sorts of losses would have a valid moral claim against the State for compensation. Through its silence on the subject of increment-tax legislation, the State virtually promised them at the time of their purchases that it would not thus interfere with the ordinary course of values. Had it given any intimation that it would enact such a law at a future time, these persons would not have paid as much for their land as they actually did pay. When the State passes the law, it violates its implicit promise, and consequently is under obligation to make good the resulting losses.

Is it not obliged to go further, and pay for the positive gains that many of the owners would have reaped in the absence of the law? For example: a piece of land is worth one thousand dollars the day after the tax goes into effect, and that was exactly the price paid for it by the present owner; another piece has the same value, but was bought by the present owner for eight hundred dollars. While neither of these men suffer any loss on their investments, they are deprived of possible gains; for had the law not been enacted their holdings would be worth, say, eleven hundred dollars. Nevertheless, they are no worse off in this respect than those persons who buy land after the increment tax goes into effect, and have no greater claim to compensation for abolished opportunities of positive gain. As we have seen above, the certain advantages of the measure to the community, the doubtful advantages to individuals of profiting by changes in price which do not represent labour, expense, or saving, show that the owners have no strict right to compensation. And it is still clearer that no landowner has a valid claim on account of value increases that would have taken place subsequent to the time that the measure was enacted. There is no way by which owners who would have held their land long enough to profit by these increments can be distinguished from owners who would not have availed themselves of this conjectural opportunity, nor any method by which the amount of such gains can be determined.

On the other hand, it might be objected that, in reimbursing all owners who suffer the positive losses above described, the State is unduly generous; for if the law had not been enacted many of the reimbursed persons would have sold their holdings at a price insufficient to cover their losses. But these cannot be distinguished from those who would have sold at a remunerative price. Hence the State must compensate all or none. The former alternative is not only the more just all round, but in the long run the more expedient.

In view of the social benefits of the increment tax, especially the removal of many of the inequities of the present taxing system, the State might sometimes be justified in making good only a part of the losses that we have been discussing. But this could probably occur only for administrative reasons, such as the difficulty of determining the persons entitled to and the amounts of compensation. It would not be justified merely to enable the State to profit at the expense of individuals. And, in any case, there seems to be no good reason why the unpaid losses should amount to more than a small fraction of the whole.

In the foregoing pages we have been considering a law which would from the beginning of its operation take all the future increments of land value. There is, however, no likelihood that any such measure will soon be enacted in any country, least of all, in the United States. What we shall probably see is the spread of legislation designed to take a part, and a gradual growing part, of value increases, after the example of Germany and Great Britain. Let us glance at the laws in force in these two countries.

The German and British Increment Taxes

The first increment tax (Werthzuwachssteuer) was established in the year 1898 in the German colony of Kiautschou, China. In 1904 the principle of the tax was adopted by Frankfort-am-Main, and in 1905 by Cologne. By April, 1910, it had already been enacted in 457 cities and towns of Germany, some twenty of which had a population of more than 100,000 each, in 652 communes, several districts, one principality, and one grand duchy. In 1911 it was inserted in the imperial fiscal system, and thus extended over the whole German Empire. While these laws are all alike in certain essentials, they vary greatly in details. They agree in taking only a per cent. of the value increases, and in imposing a higher rate on the more rapid increases. The rates of the imperial law vary from ten per cent. on increases of ten per cent. or less to thirty per cent. on increases of 290 per cent. or over. In Dortmund the scale progresses from one to 12½ per cent. Inasmuch as the highest rate in the imperial law is 30 per cent., and in any municipal law (Cologne and Frankfort) 25 per cent.; inasmuch as all the laws allow deductions from the tax to cover the interest that was not obtained while the land was unproductive; and inasmuch as only those increases are taxed which are measured from the value that the land had when it came into the possession of the present owner,—it is clear that landowners are not obliged to undergo any positive loss, and that they are permitted to retain the lion's share of the "unearned increment."[96]

It is to be noted that most of the German laws are retroactive, since they apply not merely to future value increases, but to some of those that occurred before the law was enacted. Thus, the Hamburg ordinance measures the increases from the last sale, no matter how long ago that transaction took place. The imperial law uses the same starting point, except in cases where the last sale occurred before 1885. Accordingly, a man who had in 1880 paid 2500 marks for a piece of land which in 1885 was worth only 2000 marks, and who sold it for 3000 marks after the law went into effect, would pay the increment tax on 1000 marks,—unless he could prove that his purchase price was 2500 marks. In all such cases the burden of proof is on the owner to show that the value of the land in 1885 was lower than when he had bought it at the earlier date. Obviously this retroactive feature of the German legislation inflicts no wrong on the owner, since it does not touch value increases that he has paid for. Indeed, the value of the land when it came into the present owner's possession seems to be a fairer and more easily ascertained basis from which to reckon increases than any date subsequent to the enactment of the law. On the one hand, persons whose lands had fallen in value during their ownership would be automatically excluded from the operation of the law until such time as the acquisition value was again reached; on the other hand, those owners whose lands had increased in value before the law went into effect would be taxed as well as those whose gains began after that event; thus the law would reach a greater proportion of the existing beneficiaries of "unearned increment." Moreover, it would bring in a larger amount of revenue.

The British law formed a part of the famous Lloyd-George budget of 1909. It taxes only those increments that occur after its enactment. These are subject to a tax of twenty per cent. on the occasion of the next transfer of the land, by sale, bequest, or otherwise.[97] In some cases this arrangement will undoubtedly cause hardship. For example: if land which was bought for 1,000 pounds in 1900 had fallen to 800 pounds in 1909, and were sold for 1,000 pounds in 1915, the owner would have to pay a tax of twenty per cent. on 200 pounds. This would mean a net loss of forty pounds, to say nothing of the loss of interest in case the land was unproductive. It would seem that some compensation ought to be given here; yet the rarity of such instances, the administrative difficulties, and the general advantages of this sort of legislation quite conceivably might forbid the conclusion that the owner was made to suffer certain injustice. The compensating social advantages of the increment tax as well as of other special taxes on land, will receive adequate discussion presently.

Transferring Other Taxes to Land

Another taxation plan for reducing the evils of our land system consists in the imposition of special taxes on the present value of land. As a rule, these imply, not an addition to the total tax levy, but a transfer of taxes from other forms of property. The usual practice is to begin by exempting either partly or wholly buildings and other kinds of improvements from taxation, and then to apply the same measure to certain kinds of personal property. In most cases the transfer of such taxes to land is gradual, extending over a period of five, ten, or fifteen years. The plan is in operation in Canada and Australasia, and to a slight extent in the United States.

It has received its greatest development in the western provinces of Canada; namely, British Columbia, Alberta, Saskatchewan, and Manitoba. The cities of Edmonton, Medicine Hat, and Red Deer; Vancouver, Victoria, and thirteen others of the thirty-three cities of British Columbia; all the towns of Alberta except two; all but one of the villages of Alberta, and one-fourth of those in Saskatchewan; all the rural municipalities and local improvements districts in Alberta, Manitoba, and Saskatchewan, and 24 of the 28 in British Columbia,—exempt improvements entirely from taxation. The three cities in Alberta which retain some taxes on improvements; all the cities and towns and three-fourths of the villages in Saskatchewan; the four largest cities in Manitoba; and a considerable number of the municipalities in Ontario (by the device of illegal under-assessment in this instance),—tax improvements at less than full value, in some cases as low as fifteen per cent. Land is invariably assessed at its full value. It is to be observed that these special land taxes provide only local revenues; they do not contribute anything to the maintenance of either the provincial or the dominion governments. The reason why the local jurisdictions have adopted these taxes so much more extensively in Alberta than in the other provinces is to be found in a provincial law enacted in 1912, which requires all towns, villages, and rural areas to establish within seven years the practice of exempting from taxation personal property and buildings. Saskatchewan permits cities and towns to tax improvements up to sixty per cent. of their value, while British Columbia and Manitoba leave the matter entirely in the hands of the local authorities. The provincial revenues are derived from many sources, chiefly real estate, personal property, and incomes; but British Columbia, Saskatchewan, and Alberta levy a special tax on unimproved and only slightly improved rural land. The rate of this "wild lands tax" is in British Columbia four per cent., and in the other two provinces one per cent. Some of the municipalities of British Columbia and Saskatchewan also impose a "wild lands tax." By a law passed in 1913 Alberta levies a provincial tax of five per cent. on the value increases of non-agricultural lands. A movement for the reduction of the tax on buildings has developed considerable strength in the eastern provinces of Ontario, Nova Scotia, and New Brunswick.[98]

New Zealand and most of the states of Australia have for several years levied special taxes on land, consisting mainly of general rates on estates of moderate size, and a progressive super tax on large estates. The Commonwealth of Australia also imposes a tax of one penny in the pound on the value of land. A considerable proportion of the cities and towns in both New Zealand and Australia derive practically all their revenues from land, exempting improvements entirely. In both countries, however, the bulk of the total revenue is obtained from other sources than land taxes. In New Zealand they yield less than thirteen per cent. of the national receipts.[99]

Pittsburgh and Scranton were required by a law enacted in 1913 to reduce the local tax rate on buildings at such a pace that in 1925 and thereafter it would be only one-half the highest rate on other forms of property. Everett, Wash., and Pueblo, Col., within recent years adopted by popular vote more sweeping measures of the same character, but the Everett law has never gone into effect, and the Pueblo statute was repealed two years after it had been passed. In many cities of the United States, buildings are undervalued relatively to land by the informal and illegal action of assessors. The most pronounced and best known instance of this kind is Houston, Texas, where in 1914 land was assessed at seventy per cent. of its value and buildings at only twenty-five per cent. In 1915, however, the practice was forbidden by the courts as contrary to the Texas constitution. At more than one recent session of the New York legislature, bills have been introduced providing for the gradual reduction of the tax on buildings in New York City to a basis of fifty per cent. of their value. While none of them has been passed, the sentiment in favour of some such measure is probably increasing. A similar movement of opinion is apparent in many other sections of the country.

On the whole, the special land taxes of Canada and Australasia are not remarkably high. They seem to be as low or lower than the average rates imposed on land, as well as on other forms of general property, in the United States. In the provinces, the special land taxes provide only a small portion of the total revenues; in the cities and towns, there are, as a rule, other sources of revenue as well as land, and the expenses of municipal government are probably not as high as in this country. Hence the land taxes of Canada have not reached an abnormally high level, and are probably lower than most persons who have heard of them would be inclined to expect. The chief exceptions to the foregoing statements are to be found in the "wild lands tax" of British Columbia, and in the land taxes of some of the towns (not the cities) of Alberta. A rate of four per cent. on unimproved and slightly improved rural land is extraordinary in fiscal annals, and is scarcely warranted by any received principle of taxation, although it may possibly be justified by peculiar social and administrative conditions in the province of British Columbia. Some of the smaller towns of Alberta which adopted the land tax during the recent period of depression have been compelled to impose even higher rates, the maximum being reached by Castor in 1912, with a rate of 8½ per cent. As a natural consequence, a large proportion of the land in this town was surrendered by its owners to the municipality. While this amazing tax rate is probably temporary, and is likely to be lowered after the return of the average conditions of prosperity, it inflicts unfair hardship upon those owners whose circumstances are such that they must give up their land, instead of awaiting the hoped for decline in the rate of taxation.

The Morality of the Plan

The losses of various kinds that would result from the transfer of other taxes to land may be thus summarised. Land would depreciate in value by an amount equal to the capitalised tax. For example; if the rate of interest were five per cent., an additional tax of one per cent. would reduce land worth one hundred dollars an acre to eighty dollars. This decline might, indeed, be partly, wholly, or more than offset by a simultaneous rise due to economic forces. In any case, however, the land would be worth twenty dollars less than it would have been worth had the tax not been imposed. For some owners this would mean a positive loss; for others it would signify mere failure to gain. The latter would happen in the case of all those owners who at any time after the imposition of the tax sold their land at as high a price as they had paid for it. Not all of the owners whose land was forced by the tax to a figure below their purchase price would suffer positive loss; for the land might subsequently rise in value sufficiently to wipe out the unfavourable difference. In this respect a special tax on the present value of land has a different effect from a tax that appropriates all the future value increases. Only those owners who actually sold their land below their purchase price could charge the former tax with inflicting upon them positive losses. In the case of the land exemplified above, the owner who sold at ninety dollars per acre could properly attribute to the tax a loss of ten dollars; the owner who sold at eighty dollars would have a grievance amounting to twenty dollars; and a loss would be suffered by any owner who sold for less than eighty dollars. In the second place, all owners of vacant land who sold at a price insufficient to provide for accumulated interest on the purchase price, could justly hold the tax responsible, so long as the deficiency did not exceed the value-depreciation caused by the tax. Thirdly, all persons whose land had an unusually high value relatively to the value of their exempted property, would suffer losses as taxpayers. They would lose more through the heavier land taxes than they would gain through the lighter taxes, or the absence of taxes, on their other property.

To compensate all owners who underwent these three kinds of losses would be practically impossible. The number of persons would be too large, the difficulty of proving many of the claims would be too expensive, and the compensation process would be too long drawn out, since it would have to continue until the death of all persons who had owned land when the last instalment of the increased land taxes went into effect. Therefore, the losses in question must be counterbalanced by other and indirect methods. These will be found mainly in the following considerations: the amount of the new taxes; the gradual method of imposing them; and their socially beneficial results.

Amount of Taxes Practically Transferable

According to Professor King's computations, the total rent of land in the United States in 1910 was $2,673,900,000, while the total expenditures of national, state, county and city governments were $2,591,800,000.[100] In his opinion (p. 162) "the rent would have been barely sufficient to pay off the various governmental budgets as at present constituted, and with the growing concentration of activities in the hands of the government, it appears that rent will soon be a quantity far too small to meet the required changes. With increasing pressure on our natural resources, however, it is probable that the percentage of the total income paid for rent will gradually increase and, since this is true, the lag behind the growing governmental expenses will be considerably less than would otherwise be the case."

A change in our fiscal system providing for the immediate derivation of all revenues from land taxes would, therefore, involve the confiscation of all rent, and the destruction of all private land values. Land would be worth nothing to the owners when its entire annual return was taken by the State in the guise of taxes. Even if the process of imposing the new taxes on land were extended over a long term of years the same result would be reached in the end; for whatever increase had taken place in the economic value of land during the process would in all probability have been neutralised by the increase in governmental expenditures. It is evident, therefore, that the proposal to put all taxes on land must be rejected on grounds of both morals and expediency.

Let us suppose that all national revenues continued, as now, to be raised from other sources than land, and that all state, county, and city revenues remained as they are, except those derived from the general property tax. This would mean that all the following taxes would be unchanged: all federal taxes, the taxes on licenses of all kinds, all taxes on business, incomes, and inheritances, and all special property taxes. If, then, the whole of the general property tax were concentrated on land; that is, if all the taxes on improvements and on all forms of personal property were legally shifted to land,—the entire revenue to be raised from land would in 1912 have amounted to $1,349,841,038.[101] This is slightly more than one-half of Professor King's estimate of the total rent for 1910, which was $2,673,900,000. But this figure equals four per cent. of the land values of the country; hence the concentration of the general property tax on land would mean a tax rate of two per cent. on the full value of the land.

How much would this change increase the present rate of land taxes, and decrease existing land values? While no accurate and definite answer can be given to either of these questions, certain approximations can be attempted which should be of considerable service.