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.
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.
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.
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.
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.
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.
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]
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.
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 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.
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 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.
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.
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.
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.
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]