55i5;ffi}^ of supply and demand, means greater wages for emxployers as well as employees, and greater pros- perity for workers of every kind. The thought thus suggested for the purpose of showing to v/hat extent labor is necessarily depend- ent upon capital, will be more fully developed in subsequent pages. Before leaving it, however, one question will be briefly answered. The query is this: While the conditions referred to might exist and produce the results described, in a nev/ and thinly settled country, what application can it have to those countries in which there is little or no unused or but partially used land suitable for agri- cultural purposes? The answer simply is, that in every country in the world there is an overwhelm- ing abundance of such unused land, and it is not likely that there ever will be any scarcity of it, con- sidering the probable results of the application of science to agriculture. When unused land is not Laboy-'s Dependence on Capital 137 literally close at hand, modern transportation^, facili- ties can always make it practically so. Where are the thickly settled countries to which the question mentioned above is supposed to apply? The population of India is but 165 to the square mile ; of China, 150 ; Japan, a little more than 360 ; France, 188; the islands of Great Britain, 371. The population of the State of Massachusetts, which is 418 to the square mile, slightly exceeds in density that of Great Britain. Holland is perhaps the only country in the world, except Belgium, where the population is more dense than in the State of Massa- chusetts, and it has only about 500 to the square mile.* The census of 1910, regarding land in Massa- chusetts, illustrates to a great extent the situation in all countries where population is supposed to crowd means of subsistence. There are 5,144,960 acres of land in Massachusetts, of which only 1,164,501 acres are classed as improved farm lands. Thus only about one-fifth of the land in one of the most densely populated countries in the world is in actual cultivation. A study of the figures presented by the census shows that about 1,400,000 acres in *The enormous amount of unused land which careful investi- gation brings to light in the most densely settled countries is shown from the following extract taken from Thomas F. Mil- lard's article on "The Financial Prospects of Japan" in the September number, 1905, of Scribner's Magazine: "It will probably surprise many people to learn that there is now only about one-half the arable land of Japan in cultivation. Some time before the war the Japanese Government appointed a commission to inquire into the state of agriculture in the realm, which in due time reported certain facts bearing thereon. Commenting upon the findings of this commission, one of the leading and more conservative native journals had this to say: 'According to the latest statistics compiled by the Geological Investigation Bureau of the Department of 138 The Problem of the Unemployed and near cities and towns are unused for any agri- cultural purpose whatsoever, on which about nine- tenths of the population of the State, or 3,125,365 people, live. This is enough to give the family unit of five people 2.22 acres of land for a home site, after allov\^ing one-third of the total area for public parks and streets. Yet the lots in actual use for residence and business purposes in the cities and towns of Massachusetts do not probably average the one-tenth part of two and twenty-two hundredths acres of land to the family unit of five. But say that the allowance per family for home purposes ought not to be less than an area of 100 by 100 feet, includ- ing business as well as residence lots, and it follows that at least six-sevenths of the 1,400,000 acres of land referred to is wholly unused. In other words, in Massachusetts there are considerably over a mil- lion acres of land in and adjoining cities and towns, spoiled for any present productive use because its owners believe that in the succeeding five, twenty, or perhaps fifty years, some of it may be used as sites for buildings. The laborer and the capitalist are unable to use this land for agricultural purposes because of the high price demanded for it, and so Agriculture and Commerce, the present total area of culti- vatd fields in Japan forms only 13 2-3 per cent of her total area. Comparing this with the ratios of cultivated land in foreign countries it will be seen that the land cultivated by countries in Europe covers from one-third to one-half of the total land area. * * * From the above (figures) it will be seen that Japan still has 48 per cent, of the total land area which can be turned into cultivated land. There is at present about five million cho (a cho is equal to 2.45 acres) of culti- vated land in the country, leaving some four and a half million cho to be still cultivated. Should efforts be made to turn this arable land to advantage, the increase of popu- lation is little to be feared.' " Labor's Dependence on Capital 139 most of it is practically abandoned to the speculator and to the mere land holder. Yet of ail land in the State, this, with few exceptions, is the most valuable for farming purposes. As in Massachusetts, so everywhere in connection with thriving cities and towns, an area from five to ten or twenty times greater than that on which the population would be concentrated under natural con- ditions is excluded from use. In Massachusetts the amount thus excluded exceeds all the land in crop cultivation in the State. Had the natural order been observed in Massa- chusetts, in the use as well as in the appropriation of land — had the land most suitable for use always been first used, doubtless most of the farmers of that State would now be located on the most valuable and con- veniently situated 1,000,000 unused acres in the suburbs of cities and towns, instead of upon lands remote from centers of population, the remainder of the unimproved land in the State would still be unimproved, the only difference being that nearly all the cultivated lands would then lie adjacent to compactly built cities and towns. Of course, this is but an approximation of what would really have happened, but in the main, the lands of Massachu- setts would have been settled in the manner stated. The best and most valuable land, considering the fertility of the soil and its proximity to centers of population, would always have been first used, and unused land would always have been the least valu- able for use. Under the effects of the taxing power applied in the manner which has been suggested, the unim.proved land in Massachusetts, amounting to millions of acres, would have been practically 140 The Problem of the Unemployed free land, or lands used as pasturage, the tax on v/hich would be nominal. And this free land would generally have commenced where the cultivated fields ended, and where labor could produce as much wealth as when it is now applied to land held at hundreds of dollars per acre. A macadamized road at the -farmer's door vv^ill often alone add ten per cent, and more to his gross income, and quadruple the fund from which his pos- sible savings must come. He can haul his crops over it when wet weather suspends work upon the farm, and at such times, especially, it facilitates the exchange of visits between neighbors, and adds im- mensely to the enjoyment of life. It also enables him constantly to increase the richness of his soil by easily placing upon it the fertilizing m.aterial often obtained without price from neighboring cities and towns. Compare the lot of a man located on land of this character with that of the average husbandman on his oft mud-bound and storm-bound farm. The former has almost all the advantages of a city, including perhaps a telephone, a trolley line, and electric light and power, and the best of educational facilities close at hand ; while the latter lives remote from neighbors, schools and churches, deprived not only of many economic advantages, but also of social pleasures which would add so much to the happiness and contentment of himself and family. What won- der that so many of the sons and daughters of farm- ers crowd the trades and professions in cities and towns ! What else could be expected when the social instincts of mankind are taken into account? Labor's Dependence on Capital 141 There is no economic necessity for the hard and dreary lives v/hich so many farmers and their wives and children are forced to live on lonely farms. Less than half the money, for instance, now expended in the construction and maintenance of dirt roads would put macadamized roads and a telephone line to every farmer's home, together with electric light and power service, if all farmers were located on the lands best situated for farming purposes, and the remainder devoted to pasture and fruit. Not only so, but the same amount of labor wholly applied to such lands, under such advantages, would produce double and quadruple the wealth at present obtained from much of the farming lands in use. The enormous areas of unused lands near the centers of population is not exaggerated. Careful observation will convince the most skeptical on this point. Start from the business center of any aver- age city in America and note the proportion of improved to unimproved, or but partially improved, land between two parallel lines a quarter of a mile or so apart, running into the country. Extend these lines until a region is finally reached where the price of land is based upon the wealth which it is capable of producing when devoted to agricultural uses. Or, in other words, extend them until land is reached, the value of which is not inflated by the hope of its some time being used for other than agricultural purposes. In every instance, it will be found that not one acre in fLve, often not one in ten or twenty, between these lines, is used for any pro- ductive purpose whatever. If the natural order of settling upon and using land were observed, unused lands would be found 142 The Problem of the Unemployed everywhere in abundance immediately adjacent to thickly settled communities. Given conditions under w^hich land could not be profitably appropriated in advance of any economic demand for it for actual use, — let the forces of government be so applied that all unused or but partially used land would be prac- tically free land, free land then could always be found where the laborer upon it would be able to enjoy from the very start the social and economic advantages of a densely settled community. On such land most laborers, as heretofore shown, could pro- duce wealth without the aid of any so-called capi- talist, and the wages earned by them upon it would many times exceed what can now be earned on the free land which can only be found at present in the heart of a wilderness. The necessary dependence of labor upon capital, and of the laborer upon the capitalist, can only be ascertained when both are supposed to have access to free land under the natural conditions which have been described. Under such conditions, the agricultural laborer would always be practically independent of the capitalist as well as the landlord, and his independence would bring about the inde- pendence of all laborers. Under the natural condi- tions thus described, employers would compete for the privilege of employing labor, even as laborers now compete for the privilege of being employed, and wages would rise accordingly. CHAPTER XL THE WAGE FUND OR PERMANENT WEALTH. CAPITAL is not only wealth used to produce more wealth, but it is also wealth consumed in the production of wealth. The machine, no mat- ter how strongly built, finally wears out, and is replaced by a new one. Wealth in the form of stat- uary may last for centuries, but wear and tear, moth and rust and decay finally prevail, and the process of consumption as to everything produced by human hands is at last completed. If wealth is not being consumed as capital, it is because it has reached the final stage had in mind during the process of its cre- ation, and is being consumed in the gratification of human desires with no ulterior aim in view. Thus, the reaping machine, which is instrumental in pro- ducing the wheat which makes the flour which makes the bread, is capital; but the bread on the table of the consumer is not capital — it is simply wealth. Things of the same class may often be consumed, either as capital or as wealth only, according to cir- cumstances. The horse dragging the plow is being consumed in the production of wealth, and is capital ; the horse which merely ministers to the pleasure of its owner is being consumed like food, and is not capital. The race horse, by its efforts on the race track, adds nothing to the stock of wealth in the v^orld, although it may enable some men to obtain wealth produced by other men. Wealth which is 144 The Problem of the Unemployed not used to produce more wealth may be conven- iently referred to as wealth consumed in living ex- penses; wealth thus consumed is not capital. Gen- erally speaking, wealth is always being consumed, either in living expenses, or as capital in the produc- tion of more wealth. It is unnecessary to make other distinction with respect to it, since all v/ealth is either wealth in itself alone, or it is wealth used to produce more wealth. Wealth saved by individuals takes the form of cap- ital, unless invested in land, and most of the wealth which is not consumed as fast as produced is used as capital. The aggregate amount of capital in any community can be appropriately called the wage fund of such community or the permanent wealth of the community. It constitutes the fund from which are drawn the tools and supplies used by labor in producing wealth. It is evident, other things being equal, that the greater this fund, the more tools there are, the greater will be the amount of wealth produced, and that whatever tends to lessen this fund also tends to lessen the production of wealth. One of the most important things to be considered in connection with the production and distribution of wealth, is the simple fact that wealth used as cap- ital, and consumed in the production of wealth, increases the wage fund of the world or the amount of capital in the world, and makes it easier to pro- duce wealth, while wealth consumed in living ex- penses has the opposite effect ; hence it follows that the less consumed in living expenses, the larger will be the wage fund, and the more wealth will be pro- duced by the same amount of labor. A rich man The Wage Fund or Permanent Wealth 145 may live extravagantly, indulge himself without limit in expensive cigars, wines, race horses and servants, and spend his entire income on living expenses, thus taking from instead of adding to the wage fund; while, on the other hand, a so-called miserly man with the same income may spend three- fourths of it on tenement houses and labor-saving appliances of various kinds, and thus add to this fund. The expenditures of the miserly man thus create as great a demand for labor as the expendi- tures of the former; but in the former case wealth is simply destroyed, while in the latter case it is saved and made useful in the production of more wealth. The so-called miserly men who economize and save are public benefactors, as compared with the less provident whose incomes are entirely absorbed in living expenses. The miser may not be so popular with tailors and retail store-keepers as the spend- thrift, but if it were not for the prudence and self- denial exercised by the thrifty the wage fund would be smaller, rates of interest would be higher, and the comforts and luxuries of life would not be so com- monly enjoyed. While the senseless extravagances of the very rich create a demand for labor, labor would not be in less demand if the effort needed for the production of things consumed in ostentatious display were devoted to things useful in the produc- tion of v/ealth. The rich man who spends a million dollars, for instance, in the erection of comfortable and sanitary tenement houses in the slums of a city, creates as great a demand for labor as if he spent it all on caterers, jewelers, servants and dressmakers. So also, as to the hundreds of millions of dollars 146 The Problem of the Unemployed thrown away annually by the working men of America for tobacco, beer and whiskey — ^the demand for labor would not be lessened, if this money were saved and invested in other things needed by them — say, in better houses and additional furniture for wives and children ; while fewer men would be em- ployed in such event in the liquor business, more would be employed as carpenters and furniture makers. An approach to equality in the matter of incomes tends to increase the wage fund or permanent wealth of the world, while inequality in this respect tends to decrease it. Thus, suppose that 50 out of 1,000 families in a given community have an average income of $15,000 each, while the average income of the remaining 950 is but $200 each. It is evident that great numbers of the poorer class would then be employed as servants in ministering to the pleasures of the rich, and would thus merely consume wealth without producing it; hence, the wealth produced, and the portion of it saved in such a community, would be much less than if fewer of the population were employed as servants. It is also apparent that in such a community energy would be devoted to the production of luxuries, which, under different condi- tions, would be devoted to the production of labor- saving appliances, and nobles would vie with one another in splendor of equipages, while peasants, for want of horses, would harness women to plows. Russia presents an example of conditions which must necessarily result from excessive inequalities in the distribution of wealth. If every family had an income of not less than $1,000, there would be comparatively few who, as The Wage Fund or Permanent Wealth 147 personal servants of the rich, would be mere con- sumers instead of producers of wealth. More labor would also be applied to the production of comfort- able houses, barns, domestic animals and agricultural implements, and less to the production of palaces, jewelry and fine gowns ; hence, the aggregate amount of wealth consumed in living expenses would prob- ably be smaller; in any event, the amount added to the wage fund or permanent wealth of the world would be larger. And so, in fact, in countries where wages are highest and differences in incomes are least marked, the amount of wealth per capita is greatest. Although, as before stated, the New Political Economy offers no substitute for it, private owner- ship of land under existing conditions does more to check the growth of the wage fund than all other causes combined. It not only enables individuals to reap the unearned increment which attaches to land from increase of population, and also to obtain from capital and labor tribute money for its use, but the exchange of wealth for land and for the use of land often results in the consumption of wealth which would otherwise be conserved and added to the wage fund. Since, however, the money which the grantee or the tenant pays for land, or for the use of land, is ordinarily spent or reinvested, the question may be asked as to how the payment of rent or purchase money for land can really lessen the amount of capital in the world. The fact that money paid for land, or for the use of land, is put into circulation by the person receiving it, in the purchase of other things, indicates nothing. Money, as heretofore 148 The Problem of the Unemployed explained, is like a warehouse receipt. It only evi- dences the amount of one's wealth on deposit in the warehouse of the world. It has no more significance in the transfer of wealth than the "chips" used in a game of poker. Chips keep an account of the trans- fer of wealth between gamblers, and money in the same way keeps an account of the transfer of wealth between those who buy and sell. We care nothing for the chips — for the money used for convenience in the transaction. We wish to know in this connection what ordinarily becomes of the wealth actually given in exchange for land, or for the use of land. While a portion of it may be used as capital by the grantor or the landlord, much of it is alw^ays consumed in extravagant living expenses, and wealth in enormous quantities is thus destroyed which would otherwise be added to the wage fund. It makes mere con- sumers of people who would otherwise be producers as well as consumers. This will appear from the following illustration : Some years ago, the lands containing coal beds and mineral deposits in Northern Alabama, 99% of which v/ere wholly unused, advanced in value within a few years from a million to fifty million dollars. Now, suppose this land, when it was worth but a million dollars, to have been owned by a thousand people, who, ten years later, sold it to a thousand capitalists for fifty million dollars. If this did not in effect occur, it is nevertheless illustrative of and differs only in degree from what is constantly occur- ring in every civilized community. Here a thousand capitalists paid a thousand land owners on an aver- age fifty thousand dollars apiece, or fifty million dollars in all, for the bare privilege of producing coal The Wage Fund or Permanent Wealth 149 and iron and wealth generally from unused lands. Recurring again to the functions of money, and it appears that the payment of fifty million dollars for this privilege signified that the thousand capitalists in effect had teams, furniture, steam engines, tools, food, clothing, merchandise and other things innum- erable, in the markets of the world, of the value of fifty million dollars, which they gave in exchange for the land. The money simply evidenced the fact of the ownership of this wealth, and when it passed to the grantors, it gave the latter power to draw from the wage fund of the world, in lots to suit, things of the aggregate value of $50,000,000. Had they drawn ten million dollars' worth of gunpowder and burned it in a grand celebration, the permanent wealth of the world would have been lessened to that extent as one of the consequences of this exchange of wealth for land. The wage fund could also have been dimin- ished in the same way by any other extravagance in which the former land owners might have indulged. Many of them, who would otherwise have continued to work and produce wealth, would doubtless then have begun lives of ease and luxury with retinues of servants to minister to their pleasures. They and their servants would thus become simple consumers of wealth and mere pensioners on the people at large, and the wealth thus squandered would diminish the wage fund of the world as effectually as the wanton burning of gunpowder. The wealth which men acquire from the rent of land, or from buying and selling land, is not earned by them, but is wealth produced by others, which they are permitted to appropriate and withdraw from the wage fund and consume, if they choose to 150 The Problem of the Unemployed do so, in living exposes. A man pays $10,000 for a tract of land which in course of time he sells for $40,000, netting $25,000 on the transaction after payment of taxes and all expenses. This gain to him of $25,000 — this unearned increment which he indi- vidually appropriates — results from increase of pop- ulation and the enterprise of the community in which the land is situated. He may never have been within a thousand miles of it, or done anything to add to its value. Nevertheless, the $25,000 profit in the trans- action enables him to draw from the storehouse of the world, commodities of the value of $25,000, and consume them in increased living expenses for him- self and family, or otherwise, and reduce the wage fund accordingly. Or he may live in idleness on the things thus withdrawn, and thereby become a mere pensioner, his claim to a pensioner's support resting on the fact of his having, years before, succeeded in forestalling capital and labor in the purchase of a bounty of nature which other people have made valuable. It may be urged, however, that employers engaged in wealth-producing enterprises often live in need- less luxury also, and consume wealth which could be saved and added to the wage fund. This is true; but it does not disprove the fact that the fund would be larger if individuals were not permitted to appro- priate the rent of land and the increase in the value of land. As v/ell might it be said that since there are some leaks in a ship which cannot be helped, it is useless to consider those which can be stopped. The right to collect tribute money, and diminish the wage fund by consuming in living expenses wealth pro- duced by others, would not accrue to the land own- The Wage Fund or Permanent Wealth 151 ers, but for the burden of taxation being so adjusted as to make it often more profitable to invest wealth in the purchase of land than in the employment of labor. There are in the main but two ways in which accumulated wealth can be permanently invested for income-producing purposes. One way is to invest it in effect in machinery, or in other words in capital, to be used in the employment of labor — or to loan it to those who will use it for this purpose. The other way is to invest it in land on which to use machinery, i. e., capital. For its advantageous employment labor needs cap- ital in the form of houses, teams, tools, implements, paving upon highways, rails and ties and cuts and embankments on railroad rights of way, rolling stock, ships and unnumbered other mechanical appli- ances produced by human labor ; together with stocks of food, clothing and merchandise with which to tide labor over from one harvest to another, and from one cycle of exchange to the next. The more there are of these things which constitute the wage fund, the greater will be the prosperity of workers of every kind, employers as well as employees. It is evident that the more paid for land on which to use these appliances, the less will there be left with which to purchase the appliances themselves. There is no limit to the extent to which capital can add to the effectiveness of labor. With more and better paved highways, for instance, time and effort otherwise frittered away would be available for the production of additional wealth. If the wage fund were larger, more labor-saving devices would be used on the farms and in the factories, shops and homes, 152 The Problem of the Unemployed and more wealth would be produced; yet, strange as it may seem, labor is everywhere diverted from the making of things which add to the productive powers of nations, and in all countries the forces of government are so applied as to encourage the pro- duction of luxuries and the maintenance of hordes of personal servitors. Imagine the increase in the wage fund of the world, and the increased amount of wealth produced, if employing capitalists were not compelled to pay land owners such enormous sums for places on which to rest the tools of production. In Northern Ala- bama, for instance, as much if not more wealth in the aggregate was demanded for the privilege of using the tools referred to than the tools themselves were worth. And so it is everywhere. The aggre- gate price demanded for land in every community equals or exceeds the value of all the wealth, inclu- sive of the capital which rests upon it. On Manhat- tan Island the tax assessment rolls show that it exceeds it by over two billion dollars. It is the size of the wage fund which determines, also, the relative strength as well as the relative wealth of nations. If employing capitalists were not required to buy from individuals the privilege of pro- ducing wealth on the soil of Japan, for instance ; if the obstacles to the employment of labor which have been pointed out were removed, and the wage fund of that country permitted to increase as it naturally would under such circumstances, the expense of its war with Russia would have been a mere bagatelle compared with the increased amount of wealth which would then be produced. The Wage Fund or Permanent Wealth 153 There may be no help for it, but the burden of private ownership of land has a more depressing effect upon industry and enterprise than war, pesti- lence and famine. The pressure from this burden is never relaxed, nor is it lightened by material progress ; on the contrary, it is, if anything, intensi- fied by it and rendered less endurable. CHAPTER XII. THE DISTRIBUTION OF WEALTH. CAUSES AFFECTING THE DIVISION OF WEALTH BE- TWEEN LAND OWNERS ON THE ONE HAND AND CAPITALISTS AND LABORERS ON THE OTHER HAND. ALSO THE LAW OF RENT AND ITS COROLLARY, THE LAW OF WAGES. A SIMPLE illustration of the way in which wealth is naturally distributed is seen in the case of a tenant farmer, who borrows, say, $5,000, and opens up a farm on unimproved land, not owned by him, but which he leases from another. He uses this money to provide himself with buildings, teams, implements, supplies, etc., these things being in effect borrowed by him from the capitalist who loans him the $5,000. He might arrange to pay the capitalist interest, the land owner rent, and the laborers wages, in wheat raised on the place; but whether he does this or sells the wheat and pays them in money, the wealth produced on the land is just as clearly divided among the factors of land, capital and labor, as if these payments were made in kind. Say that he raises 2,000 bushels of wheat, which are sold for $2,000, of which the land owner gets $300 as rent, the capitalist $300 as interest, and the employees ?r600 as wages, leaving a net gain of $800 to the tenant farmer. This gain of $800 is the result of iiibor of the tenant farmer. It is the reward received The Distribution of Wealth 155 by the tenant farmer for his industry and enterprise. To call any part of it profit, or to give to it any other name than wages, is needlessly to introduce a con- fusing distinction. It constitutes, however, the wages of the employer as distinguished from the wages of the employee. Before discussing the causes which affect the divi- sion of the product between employer and employee, it is first in order to consider those which affect the amount to be divided; for the portion to be thus divided depends on what is left after land has received rent and after capital has received interest. In the discussion which follows, therefore, rent will be separated from the total product, interest will be deducted from what is left, and the remainder as v/ages will be divided betv/een employer and em- ployee. In this way, we can ascertain the causes which affect the ratio of the division among land owners, capitalists, employers and employees, respectively. In the illustration given, wheat, the product of the factors of land, capital and labor, is sold for $2,000 ; in the division of this product, land gets $300, capital $300, and labor gets the remain- der. Thus labor receives $1,400, of which the em- ployer gets $800 and the employees $600. The product of every wealth-producing enterprise can be thus divided into as many parts as there are factors entering into its production ; and since wealth is brought forth by a combination of land, capital and labor, the product is naturally divided in the first instance into three parts only, one representing rent, another interest, and the other wages. Had the tenant, in the case cited, owned the capital which he used, and thus combined in himself the functions 156 The Problem of the Unemployed of a capitalist as well as a laborer; or owning the land also, had he combined in himself the functions of landlord, capitalist and laborer, the portions of his income attributable respectively to rent, interest and wages would have been the same, and could have been just as easily ascertained. This has been ex- plained in a previous chapter. While the division of the product among the fac- tors of land, capital and labor is most easily seen in the case of labor applied directly to the soil, it can nevertheless be observed in all wealth-producing enterprises. Whenever the raw material of one stage is changed into the finished product of the next, the additional wealth thus produced is in effect divided among land owners, capitalists and laborers. The fact that in many instances there is a remaining por- tion appropriated under exceptions to the general rule, for which no consideration in the performance of service, or in the furnishing of land or capital, is given, such as exceptions arising from special priv- ileges and combinations in restraint of trade and otherwise, has already been alluded to. While it lessens the amount to be divided among the factors of production, it does not affect the ratio of the division. Take the stage embracing the period from the time when the tenant farmer places the 2,000 bushels of wheat in the warehouse of the nearest railway sta- tion until it is delivered from an elevator in a distant city to the flouring mill. During this period, valuable land has been furnished for the storage and trans- portation of the wheat ; land has also been furnished as sites for the buildings in which merchants and brokers have expended mental effort in directing its The Distribution of Wealth 157 transportation and in effecting its exchange for other commodities; land has also been furnished for the houses in which the laborers lived who had handled it, and without which the wheat could not have been moved; capital has also been used in the form of buildings and railway improvements and other appli- ances, including the houses, and labor, both physical and mental, has been employed in bringing the wheat to the flouring mill, where it is worth, independently of any fluctuation in price, say, fifteen cents a bushel more than when it left the hands of the farmer. In other words, wealth, to the extent of fifteen cents per bushel, has been as effectually produced by labor, and by the use of land and capital, as in the produc- tion of the original wheat itself, and added to its original value. This additional wealth of fifteen cents per bushel is as surely divided among the fac- tors of land, capital and labor, each of which has contributed in a measure to its production, as v/as the original wheat in effect divided among the same factors when it was sold by the tenant farmer for $2,000. The fact that money, instead of wheat, is paid for the labor and for the use of the land and the use of the capital, and that hundreds of thou- sands of bushels of wheat are handled in connection with the 2,000 bushels, is of course immaterial ; and so, also, is the fact that we cannot tell just how many cents of this additional wealth per bushel goes respectively to land owners, capitalists and laborers. It is the fact alone that the division is made which is material; for it is evident, for instance, that a cause which would decrease rent might, under cer- tain conditions, increase the portions going to cap- ital and labor ; and a cause which would increase the 158 The Problem of the Unemployed independence of employees might, under certain conditions, decrease the employers' portion of the share received by labor. In the study of the causes which thus affect the portions received, respectively, by the various fac- tors of production, is found, as stated in Chapter V, the key to the solution of the economic problem. Land is used by capital and labor, as shown above, in producing the finished product as well as the raw material. When the farmer sold the wheat, it was raw material, and wealth was constantly produced thereafter and annexed to it on its journey upon and in connection with land occupied by office buildings, railroads, elevators, flouring mills, warehouses and bakeries, until the wheat was placed on the table of the consumer in the form of bread, in which form it was worth, say, $3.00 a bushel. The owners of this land received pay for its use, and this pay increased the cost of the bread just as did the $300 rent paid to the owner of the land on which the wheat was grown. This history of a loaf of bread does not differ in any material respect from the history of any other article of wealth. Take the coat, the making of which begins with wool produced by farmers ; or the gown, beginning with cotton which farmers raise; take the watch spring, beginning with the ore which the miner brings to the surface of the earth ; or take the chair, beginning with the timber which the lum- berman fells. In these, and in every other like case, wealth is produced and added to the raw material by means of appliances which come within the defi- nition of capital, and which rest on land, and which are operated by laborers using lands, just as from The Distribution of Wealth 159 wheat bread is made and finally placed on the table of consumers, and in every instance this additional wealth is produced by the factors of land, capital and labor. The amount of wealth of the character referred to above, prr-duced on non-agricultural land and im- parted to the raw material in its conversion into things useful to man, and in delivering them to consumers, greatly exceeds the amount of wealth embodied in the raw material itself as it comes from the hands of farmers and miners. Thus, a bushel of wheat, for which the farmer receives, say, a dollar, is made into sixty loaves of bread, costing three dollars — ^threefold increase. Meat, for which the farmer gets five cents a pound, is v/orth perhaps three times that sum on the table of the consumer. A few pounds of wool, for which the IVrmer is paid but a dollar or less, may be worth from five to twenty dollars, or more, in th^ coat worn by the mechanic, and the cotton whkh the farmer raises Is often increased tenfold and more in value when it is ready to be consumed as clothing. This is also true of iron ore when it has been worked into things ready for consumption. And so as to numberless other articles, the vs^hvj of the finished product vastly exceeds that of the original raw material. If we reflect for a moment on the thousand and one things consumed and in the process of consump- tion by us in our daily lives, and compare the value of them with the value of the original material from which they have been made, we can hardly fail to reach the conclusion that the aggregate amount of wealth brought into being by artisans, merchants and others of like class, and annexed to the raw 160 The Problem of the Unemployed material furnished by farmers, miners, lumbermen, hunters and fishermen, whose labor is applied direct- ly to land, is often in the aggregate many times greater than that of the original articles when first produced. In this connection, it must ever be borne in mind, as already shown, that the labor of mer- chants and brokers produces and annexes wealth to commodities as certainly as that of mechanics and manufacturers. From all this wealth the toll taken in the form of rent by those on whose land it is produced, and annexed to the original product, very largely ex- ceeds the rent of agricultural lands. This being true, then the aggregate value of non-agricultural lands ought to exceed the aggregate value of lands in cul- tivation in approximately the same ratio. Such is, in fact, the case, and if the forces of government were so applied as to insure the natural order in the use as well as in the appropriation of land, prob- ably two-thirds of the lands now in cultivation would have no economic rental value whatever. As it is at present, probably four-fifths of the rent received by individuals is for the use of lands other than those in cultivation. The aggregate burden thus borne by capital and labor in this country now exceeds thousands of millions of dollars annually.* That is to say, in Free America, capital and labor are now, in effect, paying several thousand million dollars every year, not to the government in lieu of every species of taxation, but to individuals, as tribute money for the bare privilege of employment ! One reason for the comparatively slight import- ance attached by anarchists, socialists and many pro- *See "Natural Taxation," by Thomas G. Shearman. The Distribution of Wealth 161 fessors of political economy to the influence of the factor of rent in the distribution of wealth is the disposition to associate rent almost exclusively with lands devoted to agriculture. In point of fact, under natural conditions agricultural lands would hardly yield ten per cent of the real economic rent of a country like the United States, while under actual conditions they yield less than twenty per cent. An- other reason for ignoring the subject is the fear of encouraging unjustifiable legislation affecting the rights of those who are now permitted to appro- priate rent for private use. Progress is often re- tarded by the notion that truth is sometimes more dangerous than error. But be this as it may, the faithful student will find in the law of rent the law of wages. And he will also find in it the explanation of the social paradox of increasing poverty in the midst of increasing wealth. For it can be seen almost at a glance that if the effect in the long run of inventions and material progress is to add to the value of land only, and thus increase rent without increasing wages, then in this fact is the explana- tion of the failure of wages to rise in proportion to the increased effectiveness of labor ; while the obsta- cles to employment pointed out in Chapter VIII afford sufficient reason for men who are willing to work being so often unable to find work. The economic rent of land is the net income which can be derived from its use in a wealth-producing enterprise adapted to its location, after capital has been paid current interest, and after labor has been paid current wages. Rent when capitalized, or the economic value of land, is the equivalent of a sum of money which, if invested at current rates of 162 The Problem of the Unemployed interest, would produce an income equal to the economic rent of the land. Thus, if the economic rent is six hundred dollars and interest is six per cent, the economic value of the land will be ten thou- sand dollars. As already pointed out, however, the price at which land is sold generally exceeds its economic value, since the prospect of an advance in value is usually discounted and added to the economic value. The rent of land without regard to improvements approximates the excess of wealth which it will yield above the amount which can be produced with the same expenditure of effort on the least product- ive land in use, and this excess alone increases nat- urally as the efficiency of the laborer is increased by the aid of labor-saving appliances. In accordance with the law of rent, as stated above, rent, and rent alone, or the value of land, is directly increased in the long run by improvements in labor-saving ma- chinery, growth of population and material progress generally. Further illustrations of this, the most important truth in political economy, will not be amiss. Suppose there are three tracts of land situated, respectively, one mile, ten miles and thirty miles from market, and that the same amount of capital and labor is applied to each tract, viz : five hundred dollars of capital and the equivalent of one hundred days of common labor. Other things being equal, most wealth will be produced on the first tract near- est the market, less on the second, and least on the third, because of the labor involved in hauling the crops to market. Suppose the amount of wealth produced on the first tract is three hundred dollars, The Distribution of Wealth 163 on the second tract two hundred dollars, and on the third one hundred dollars. Of course, the difference in the value or desirability of the tracts of land, respectively, might as well arise from difference in anything else affecting the value. It is evident that in America, land on which less than one hundred dollars worth of wealth can be produced with the use of five hundred dollars of capital and the appli- cation of one hundred days of labor, will remain, or at least ought to remain, uncultivated. It will be assumed in any event, however, that the third tract belongs to the class of land which is the least pro- ductive of any in use. Applying the law of rent, as above quoted, to this land, and it follows that the third tract will yield no economic rent, while the second tract will yield economic rent to the amount of one hundred dollars, and the first to the amount of two hundred dollars. Given the prevailing rate of interest, and from this data the economic value of each of the respective tracts can be ascertained. Assuming the rate of interest to be six per cent, and it follows that the third tract has no economic value, while the capitalized economic value of the second tract is $1666, and that of the first is $3333. It will be found from observation that the price ordinarily paid for land, irrespective of improvements on it, is its economic value plus a speculative value often added in anticipation of a future increase in real value. The economic rent of land which is not de- voted to agricultural uses can be ascertained in the same way. Under the law of rent, which is as unvarying in its application as the law of gravitation, the entire advantage from location or quality of land naturally 164 The Problem of the Unemployed goes to the land owner, and none in the final adjust- ment of the rent to either the laborer or the capi- talist. A day's labor on the first of the three tracts of land, with the aid of five hundred dollars of capital, produces three dollars' worth of wealth, while on the second tract it produces only two dol- lars' worth, yet the wages paid employees for work on the first tract are no higher than those paid for work on the second tract. The economic value of the first tract, however, is, say, one hundred dollars per acre, while that of the second tract is perhaps but twenty dollars per acre. When tracts of land thus situated, respectively, are rented, the difference in the rent collected from each is usually such that the tenant on one tract can make no more than the tenant on the other; in the long run, this is always the case. Suppose that one day's labor applied to land on which a certain coal bed is located will produce on an average fifteen dollars' worth of wealth in the form of coal; yet, in estimating the value of this land, wages at current rates only will be considered ; the same is the case as to the rate of interest on the capital necessary for sinking the shafts and operat- ing the mine. In fixing the price of the land without reference to improvements, at, say, a thousand dol- lars per acre, the estimate as to the share of the product which labor must have will be no greater than would be the case if labor could only produce three instead of fifteen dollars' worth of coal in a day; nor will interest on the capital employed be estimated at any higher rate on this account. Sup- pose the coal bed, when the employer bought it at the rate of a thousand dollars an acre, was in a The Distribution of V/ealth 165 lawless community, abounding in liquor shops, with few schools and no refining social influences, and where life was unsafe, and riots and labor troubles were common ; and that, within a few years, a change for the better ensued, and the people became intelli- gent and law-abiding. It would then be safer and more desirable to invest capital in the employment of labor in this community; there would therefore be a greater demand for coal beds there than other- wise would be the case, and this would increase the price demanded for the land containing them ; hence, while neither interest nor wages would rise on this account, land values would. Labor as well as capital would be attracted to such a community, but land owners only in the end would profit by the material advantage directly resulting from the improvements in the intelligence and morality of the laborers. Again, suppose that, owing to inventions after- wards discovered, twice as much coal with the same labor could be mined as when the unused coal beds were bought at the rate of a thousand dollars an acre. In estimating what would be paid for the land then, however, no more than current interest and current wages would be considered. The difference resulting from improvements in methods of pro- ducing coal, which would increase the output without increase of labor, would add to the value of the land, and an employer would then have to pay, say, two thousand dollars an acre instead of a thousand, if the demand for coal remained the same. If the employer were fortunate enough to have bought this land before the improvement in social conditions or in the machinery occurred, he v/ould not on this account pay more as wages or receive more as inter- 166 The Problem of the Unemployed est. As an employer, he would continue to pay current wages, and as a capitalist he would continue to receive current interest; but as a landlord, he would demand and receive all the benefit of the in- creased amount of wealth produced from the causes mentioned, unless prompted to do otherwise by pure benevolence or the fear of a strike. Such increase of rent would be shown in the increased net receipts of the enterprise. Thus, if before the improved machinery was introduced the gross receipts were $10,000, and after its introduction $15,000, with no increase of expenses, $5,000 would represent the additional rent collected by virtue of the labor- saving appliance and improvements in social con- ditions. The meaning of the law of rent and the correct- ness of the definition given is readily seen when the application is made to farming and mining lands; reflection, however, will show that it applies with equal force and constancy to urban and all lands generally. The advantage of location in the city as well as in the country always in the long run goes to the owner of the site on which the business is located, rather than to the man who builds the busi- ness up; and while, on an average, misfortune and failure more often perhaps than otherwise overtake the latter in the end, nothing interferes in thriving communities with the steady increase of rent year by year, or at least decade by decade. What has been said in regard to rent would be proved by experience in every instance if natural conditions alone controlled. If special privileges and the combinations in restraint of trade which usually originate in them were abolished, and if free compe- The Distribution of Wealth 167 tition and the law of supply and demand were allowed full play, all aberrations and apparent excep- tions to the law of rent would quickly disappear. It is not claimed, however, that the immediate effect of every labor-saving appliance, even under natural conditions, would be to enhance the value of land to such an extent as to absorb the entire benefit ; ultimate results only are referred to. The first effect of such appliances in many, if not all, instances, is to increase the wages of employers who use them as well as the value of the land on which they are used. The employer, sometimes called an entrepeneur, or enterpriser, by orthodox political economists, often reaps a handsome reward for his enterprise in intro- ducing new inventions ; but the law of averages, and the effect of supply and demand, sooner or later reduce his wages to the common level, and in the end the land owner gets it all. Thus, in Southern Texas and Louisiana, when the improved methods in the cultivation and harvesting of rice, to which attention has been called, were first introduced, small fortunes were rapidly acquired by employers while land was only three or four dollars an acre. But in a few years these lands advanced to thirty dollars an acre ; and then the cultivation of rice was no more profitable than the cultivation of cotton; the wages of rice raising employers fell accordingly, so that land owners in the end reaped the entire benefit. A novel illustration of the fact that while the employer or the laborer may at first profit from an advantage suddenly conferred upon some special spot of land, the owners themselves quickly reap the fruits of it, was seen in recent years in connection 168 The Problem of the Unemployed with one of the slums of London. This particular slum was so vile and so conveniently located as to attract sight-seers in great numbers during the year of the Queen's Jubilee. In consequence of this, alms in extraordinary amounts were distributed among its wretched inhabitants. Dwellers in other slums were thus attracted to this particular one, and fierce competition arose for the chance of sharing in this golden harvest. Since the tenements v/ere rented by the week only, rents at once advanced, and by the end of the season the sums paid for the privilege of living in these miserable dens were fourfold greater than before, and thus nearly all the gifts to tenants were appropriated by landlords. In the same way, the millions of dollars sent by Irish immigrants in this country to relatives in Ireland have simply enabled the landlords of Ireland to demand and receive higher rents than would otherwise have been the case. If, for instance, $10,000,000 were to be systematically distributed, year after year, in char- ity among the deserving poor of the slums of New York, the only effect of it, after a short time, would be to increase to that extent the rents of the land- lords owning the slums. It would have the effect of increasing the demand for tenements in these slums, and this increased demand would increase rent. And so it is under all circumstances, the price of any tract of land, or the rent paid for the use of it, exclusive of the use of the improvements, always covers every advantage which it may have over any other tract, and from such advantage neither cap- italists nor laborers, as such, can derive any perma- nent benefit — in the end it all goes to the owner in The Distribution of Wealth 169 the additional price charged for it, or for the use of it. Rent also paralyzes the hand of charity, and ren- ders futile all attempts to alleviate the condition of the very poor by means of benevolence only. Thus the students of a theological seminary in New York, having had their attention called to the cold dinners eaten from proverbial dinner pails by the laborers on a nearby building, concluded to play the part of practical Christians. So they appeared on the works with hot coffee every noon, until the building was completed, and served it to the men gratuitously. This act of kindness was duly appreciated. Suppose, however, it had been universally emulated, and that all laborers working for building contractors in the same grade of employment in New York had been gratuitously served with hot coffee, or better still, v/ith a hot dinner, every day by the charitable rich. This would have been equivalent to, say, a ten per cent increase in wages. Such an unnatural advance of wages would have attracted laborers from other places and from other lines of employment, and competition among them would have quickly reduced wages to the former level. The laborer would then have been no better off than before. In fact, he would be worse off, for his personal dignity and pride of character would have been impaired by the acceptance of the gratuity. The employing contract- ors would have profited by it at first, however, since it would have enabled them to obtain the laborer's services ten per cent cheaper, just as, from the same cause, the Pullman Car Company is able to hire its tip-accepting porters at starvation wages. The char- itable dimes and quarters bestowed upon the porters 170 The Problem of the Unemployed are pocketed by the Pullman Company, because it is a monopoly; in the case of the building contractors in New York the value of charity dinners would, in the long run, be pocketed by land owners, since com- peting contractors would be compelled to erect build- ings somewhat cheaper on account of the reduction in wages resulting from this benevolence. When the law of rent is clearly understood, the reason for the failure of improvements in labor- saving processes to increase wages is easily seen. Thus, to recapitulate: Under natural conditions, v/ealth is divided wholly among the factors entering into its production, a portion of it going to labor as wages, another portion to capital as interest, and the remainder to land as rent. Labor-saving processes, and material progress generally, naturally enhance the value of land and increase rent only; hence the portion going to land owners is increased without increase of the portion going to laborers and capi- talists. It necessarily follows that labor-saving in- ventions do not increase wages, simply because the natural effect of them, in the end, is to increase land values alone. Since all increase naturally goes to land as increase in rent, none of it can naturally go to labor as increase in wages, or to capital as increase in interest. If land owners get all of it, capitalists and laborers can get none of it. What is more simple than this ? Yet it is the fundamental truth on which the science of political economy is based. It is fool- ish to ignore it, or deny it, or shrink from the conse- quences which necessarily follow. When all, or nearly all, the profit of anything goes to one man, or one class of men, none, or but little of it, can go to another man, or another class of men. If, under The Distribution of Wealth 171 natural conditions, all the increase of the product resulting from improvements in machinery ulti- mately goes to owners of ground on which machinery rests, then, under such conditions, none of it can go to laborers for operating improved machines, or to capitalists for furnishing the use of them. As already stated, the law of rent is also the law of wages, the latter being the corollary of the former. Since, under the law of rent, the owner of any tract of land finally gets all produced upon it in excess of what can be produced with the same expenditure of effort on the least productive land in use, it fol- lows that labor on any land can only get as wages the equivalent of what it could produce on such least productive land. In the sense used, however, labor includes capital, and wages includes interest. This is the case because capital is stored up labor, and interest is wages paid for the use of such labor. See supra, pages 39-40. In the last analysis, therefore, wealth is really the product of but two factors, namely, land and labor; and it is divided between them as rent and wages. Thus, the $5,000 worth of capital represented by the tools, teams, buildings, etc., used by the tenant farmer was the product of labor, and its use was the application to land of stored-up labor. The interest of $300 a year, paid for the use of this capital, was wages paid for labor or effort, as much so as the money received by the hired hands; hence "effort," when applied to land, has reference to the labor stored up in the capital used upon it, as well as to the labor of those by means of whose brains and hands the capital is applied. It follows, therefore, that although a cer- tain amount of capital and toil may be applied to 172 The Problem of the Unemployed one tract of land, and less capital and more toil to another, or more capital and less toil to still another, the amount of effort applied to each, respectively, is not necessarily different on this account. Bearing in mind the meaning of "effort" as used here, it is easy to apply the law of wages to the three tracts of land situated, respectively, one mile, ten miles and thirty miles from market. Let it be assumed that this land was subject to conditions largely prevailing in the West thirty or forty years ago, and that the tract thirty miles from market was free land. On the last mentioned tract, the equivalent of one hundred days of common toil and the use of five hundred dollars of capital produced wealth of the value of $100. On this free land, then, a certain amount of "effort" produced one hundred dollars' worth of wealth, and the entire product went to labor as wages, and none went to land as rent. But, as shown in the illustration, while the same amount of effort produced two or three times as much wealth on lands nearer the market, no more of the product went to capital as interest or to labor as wages, because all the excess went to land as rent. Hence the law of wages to the effect that labor (meaning effort) on any land receives as wages only the equivalent of what it can obtain on free land, or the least productive land in use. The law of wages, as thus announced and ex- plained, states the principle which regulates wages, rather than a rule governing in all cases with math- ematical accuracy. For practical purposes, it simply means that the greater the reward of effort, i. e., toil combined with capital, on available free land, or on the least productive land in use, the greater will be The Distribution of Wealth 173 its reward on all land and in all kinds of wealth- producing employment. Or, to put it differently, wages on free land, or the least productive land in use, largely if not wholly regulates wages of all kinds on all lands. That this is true is abundantly proven by experi- ence and observation. It is not a mere theory, but an indisputable fact. Many of the illustrations already given bear it out, and others of the same kind could be presented without limit. A striking example of it was seen in California in the prosper- ous days of placer mining. A man, then, with per- haps no more than one or two hundred dollars of stored-up labor (capital), represented by his burro and the provisions and rude tools which it carried, went into the wilderness, staked off his claim, applied his own toil and capital to free land, and produced on an average $16 worth of gold per day. Here, ''effort," represented by $200 worth of capital and one day's toil, produced on free land $16 a day, all of which the laborer retained, none of it going to a landlord. So long as the reward for this amount of effort averaged $16 per day on free land, it is evident that the same amount of effort would not be applied for a less reward approximately on any nearby land. Some men with an equal amount of capital would perhaps prefer to work in town for a reward of $10 per day, rather than put forth the additional effort necessary to overcome the hardships of the wilder- ness; but the fact that the wages of Effort were enormous when applied to free lands would make them enormous when applied to other lands. With unlimited free land at hand, landlords could not, by 174 The Problem of the Unemployed advancing rents, compel Effort to accept less on their land than could be made on free land. While the placer miner averaged $16 a day, the wages of common laborers in California were $5 a day and upwards, and ordinary mechanics earned from $10 to $20 a day. Suppose the returns from placer mining had risen from $16 to $32 per day ; it is evident that the scale of wages on all nearby lands would have quickly doubled. Or suppose the returns had fallen to $8 per day ; it is equally apparent that wages generally would have dropped accordingly. Such rise or fall in wages would have been in accord- ance with the law of wages, to the effect that the greater the reward of effort on available free land, the greater will be its reward on all land. In fact, this actually occurred in California. As the placer mines became exhausted and the average earnings of Effort on free land fell, the reward of effort or wages generally on all lands also fell. In the United States, for many years, available free lands were abundant. A man with, say, a thou- sand dollars or even less, could settle on a quarter section of such land and make a bountiful living for himself and family, none of the wealth produced by him being given up to any landlord. It would be absurd to suppose that with such openings for the employment of capital and labor, a farmer would be content to rent land or buy it from another, unless he could make as much upon his entire investment as upon free land. Hence, the owners of private land were forced to sell or rent in competition with free land, and the price demanded for privately owned land, or for i\^h use of it, was always neces- sarily low enough to -iiable Effort to make approxi- The Distribution of Wealth 175 mately as much upon such land as upon nearby free land. Wages generally, of both employer and em- ployee, including the rewards of effort of every kind, were, therefore, higher for this reason in the United States than in the older countries of Europe where there were no free lands. The application of the law of wages in communi- ties where there are no available free lands is as easily made. Thus, suppose our three tracts of land were in England, and that the equivalent of the one whose location is thirty miles from the market, instead of being free land, had a rental value of $25. The net reward of effort on this, the least productive land in use, would thus be $75 instead of $100. But Effort could get no greater reward on the other two tracts, since all produced on either of them, in excess of $75, would go to land as rent. If for any reason the net reward of Effort on the least productive tract were doubled, it would be doubled on the other tracts also, and wages on all lands would rise accordingly, just as from the same cause wages rose in California in the early days of placer mining. But why is it that rent free land is not to be found in England? It is not because of any real scarcity of land, since, as has been shown, there is an abund- ance of unused or but partially used land in that country. It is because the forces of government there, as everywhere, are so applied as to press the margin of free land into remote wildernesses so far from centers of population that the rewards of Effort upon it are seldom more than sufficient for a bare subsistence. Labor in England and on the Conti- nent is farther from free land than labor in America, and for this reason the workers of Europe are com- 176 The Problem of the Unemployed pelled to submit to a lower standard of living, espe- cially as regards unorganized labor. Effort, there- fore, accepts $75 in Europe when it would insist on having not less than $100 in America. The fact, however, that there are other countries in which the rewards of labor on the least productive land in use are greater than in Europe, prevents the standard of living in Europe sinking to still lower levels, since emigrants seek such countries. Thus it is that free lands and cheap lands elsev/here to some extent compete with the dear land of Europe, to the benefit of the laborers of Europe who do not emigrate, thereby lessening competition among laborers there. In the United States and in some of the English speaking colonies of Great Britain, land is rented and sold in competition with free land and immense quantities of low priced unused lands; hence land owners in these countries are unable to appropriate so great a percentage of the product as the land owners of Europe ; and here, again, the law of wages is proven by experience as well as theory, for wages are in fact higher in the Unitod States and in the colonies referred to than in the countries of Europe. Suppose an island, as large as Europe, and with a soil equally fertile, were suddenly to appear in the Atlantic Ocean ; also that taxes on this island were so adjusted that no land could be profitably withheld from the use to which it was approximately best adapted, and that hence unused land would continue to remain free land until put into use. Can one doubt that wages all over Europe would at once advance enormously, provided laborers and small capitalists were free to emigrate to this island? Land in Europe would then have to be rented or sold The Distribution of Wealth 111 in competition with easily available free land, and hence the land owner's percentage of the product would be decreased and Effort's percentage of it increased. The opening up of cheap if not free lands in Siberia was having precisely this effect on the wages of laborers in Russia, when the government of that country for this very reason put a stop to it in 1900. In that year it was decreed that peasants should only be permitted to purchase 30 acres of government land to the family in Siberia, while members of the nobility were allowed to purchase 6,000 acres apiece, at 50 cents per acre. The plan recommended by Edward Gibbons Wakefield, nearly a hundred years ago, for producing "a salutary scarcity of employ- ment," was thus frankly and brutally adopted by the autocracy of Russia. Since bringing available free land into competition with privately owned land must result in increasing the rewards of effort on all lands, it follows that if the forces of government in Europe, for instance, were so applied as to accomplish this result with respect to the unused lands of Europe, it would have the sam.e effect on wages as the appearance of a new continent of nearby free lands. This would be so because, as already shown, one-fourth or more of the area of Europe can be classed as unused lands, much of which v/ould speedily become free land if it were m^ade unprofitable to withhold land from use entirely, or from the use to which it was approximately best adapted. So, also, if the forces of government v/ere so applied in America that the second of our three tracts of land referred to in the illustration — the tract ten miles from market, on which Effort pro- 178 The Problem of the Unemployed duced $2 per day — were brought within the class of the least productive lands in use, the net rewards of effort upon such lands would be doubled. If this were done, then most of the agricultural labor of the country would be concentrated upon lands not less productive, and the margin of free land in the com- munity in which these tracts were situated Vv^ould thus be drawn from thirty miles to within ten miles of the market. In other words, the distances between free land and the centers of population would be reduced, and hence the net rewards of effort on free land w^ould be increased and wages on all lands and in every line of industry would be advanced accord- ingly. This increase would not only be the case as to wages in America, but if immigration were not restricted, it would to some extent increase wages in other countries also. Hence the rule already stated, that the greater the rewards of labor on the least productive land in use, the greater will be its reward on all lands. CHAPTER XIII. THE DISTRIBUTION OF WEALTH— Continued. CAUSES AFFECTING THE DIVISION OF WEALTH BETWEEN CAPITALISTS AND LABORERS, AND BETWEEN EMPLOYERS AND EMPLOYEES. AS progress is made in the arts and sciences, the unnecessary is eliminated. The movement is from the complex to the simple. The rotary, applying steam directly to the shaft to be revolved, takes the place of the reciprocating engine with its compli- cated attachments. In the same way, the real science of political economy, eliminating needless terminol- ogy, wastes no energy tracing distinctions between capital, for instance, and "fixed capital," "circulating capital," "productive capital," "consumptive capi- tal," "capital goods," and "economic goods;" or be- tween employer and "entrepeneur" or "enterpriser," between rent and "rent bearers," or between pro- duction and "inherent productivity," "diminishing productivity," "uniform productivity," "absolute productivity," "effective productivity," etc.* Beginning with a few clear and comprehensive definitions, and insisting that wealth can only include things produced by human toil, it assumes that the object of political economy is to determine the nat- *See "The Disfribution of Wealth," by John B. Clarke, Pro- fessor of Political Economy at Columbia University; a typical text book on political economy for schools and colleges. 180 The Problem of the Unemployed ural laws which control the distribution of these things, and the effect on such distribution of man- made laws; that since capital is stored-up labor, wealth is the product only of the factor labor applied to the factor land; that this product is naturally divided between these two factors only — rent to land and wages to labor, interest being but the wages of stored-up labor ; that rent is tribute extorted by priv- ilege, while wages is reward bestowed upon effort; that under present conditions, all advancement in the arts and sciences, in labor-saving processes, in good government, in public and private morality, increases the tribute extorted by privilege without increasing in a corresponding degree, if at all in the long run, the reward bestowed upon effort;* that the portion of the reward of effort which goes to labor as wages is divided between employer and employee, and that this is so, even when the worker is his own employer. Showing the causes in the first place which affect the division of wealth between land owners on one hand and capitalists and laborers on the other hand, it next in natural sequence treats of the causes affecting the division between capital- ists and laborers, of the portion going to capital and labor, and then between employer and employee of the portion going to labor alone. But little now remains to be added to this chapter. Capital is something which in itself is dead and inert. The capitalist is simply the owner of capital, just as the landlord is the owner of land ; the former receives interest for the use of capital, just as the *In other words, it makes land more valuable without in- creasing rates of interest or the wages of employers and employees. The Distribution of Wealth 181 latter receives rent for the use of land. Supply and demand regulate both interest and rent. With in- crease of population and improvement in the arts, the demand for capital increases, but there is no increase in rates of interest, because the supply of capital increases as fast if not faster than the demand for it. Every additional emigrant coming to this country, as well as every child born here, has two hands with which to produce capital, and all inventions and improvements which make it easier to produce wealth tend to increase the amount of capital. Not so, however, as to land ; the demand for it is constantly increasing, but the earth's surface cannot be increased to the extent of a single acre; therefore, although rates of interest may fall, rent must rise. While there is a natural monopoly of land which becomes more intense as population increases, there can be no natural monopoly of capital; since, with free access to unused land, labor speedily cre- ates and accumulates its own capital. In new countries two things combine to make interest rates higher than in old and thickly settled ones ; the scarcity of capital and the attractive oppor- tunities for its investment resulting from the cheap- ness of land. While high rates of interest attract capital from one locality to another, the real or sup- posed insecurity of its investment in new countries, v/here the demand for it is greatest, retards its flow to such countries, and delays the establishment of a common level of interest between countries or com.- munities in which land is cheap and those in which it is dear. But the rapidity with which wealth is produced, when labor has comparatively easy access to the bounties of nature, brings about a rapid in- 182 The Problem of the Unemployed crease in the volume of capital in countries where this is the case, and reduction in rates of interest quickly follows. Thus, in the United States today, while labor is better paid, and the rewards of effort on the least productive lands in use are greater than in England, the government borrows money for 3% and less, and rates of interest generally are little if any higher than in that country, when the security is equally as satisfactory. A comparison of rates of interest and wages in New Zealand with those in England leads to the same conclusion. While it is true that the high price of land, and especially of unused land, tends to reduce rates of interest, because of its paralyzing effect upon industry, never- theless the removal of the obstacles to employment, to which attention has been called, would ultimately, as already shown, so enormously increase the wage fund or permanent wealth of the world that rates of interest, with increase of wealth, would inevitably decline. Therefore, if rent were appropriated by taxation and equitably distributed in defraying the expenses of government, labor-saving machinery and improvements of every character would result in directly increasing the portion of the product going to labor, including the wages of employees as well as those of employers. Employers who are mainly interested as laborers and capitalists (using their own or borrowed cap- ital) must be considered apart from those who derive important advantages from rent, or from special privileges or combinations in restraint of trade. The price of the product charged by them is fixed by monopoly, and where this is the case, fluctuations in wages have little to do with the price demanded. The Distribution of Wealth 183 Thus, while the mine-owning employer gets more for coal now than he did twenty years ago, he pays his employees no higher wages ; in fact, as a rule, miners probably are paid less now than formerly. A general increase in wages, however, is often used as an excuse by monopolists for advancing prices, and any argument in favor of destroying monopoly, or regu- lating its charges, is frequently met with the asser- tion that a reduction in prices v/ould cause a reduc- tion in T%^ages; nevertheless, there is no real con- nection between wages and the prices of articles controlled by monopolies, or the charges made for services rendered by them. A reduction in the wages of employees of a gas company is never caused by a reduction in the price of gas. The employer, whether a monopolist or not, pays as little as he can, and a gas company reduces the wages of its employees whenever it can, whether forced to reduce the price of gas or not. The wages of an employee depends, not on what his employer can afford to pay, but on what he is compelled to pay. This is the natural relation of employer to employee, though it is often tempered by kindness and sympathy. A tariff -sustained trust may enable an employer tu sell steel rails at double the cost of manufacture, and to accumulate an individual fortune of hundreds of millions ; but the laborer who assists in manufactur- ing protected rails receives no higher wages than his fellow-laborer across the way who assists in making unprotected brick. Were, for instance, the tariff of 75 cents per ton on anthracite coal removed, so that the coal of Nova Scotia could compete with that of Pennsylvania, coal could be cheaper; but the wages of miners would not fall on this account. A reduc- 184 The Problem of the Unemployed tion in the price of coal would simply reduce the profits of monopoly, including the incomes of those who own the coal beds ; but, since a reduction in the price would be followed by an increase in the con- sumption of coal, the demand for the labor of miners would be increased, and this would have a tendency to enhance rather than to reduce the wages of miners. ¥/hen the quinine monopoly was destroyed by the removal of the tariff many years ago, there was no reduction in wages. On the contrary, the reduction in the price of quinine from several dollars an ounce to but seventy-five cents, stimulated its consumption, and more than doubled the number of laborers em- ployed in its manufacture. It is absurd to suppose that the putting of typewriters, for instance, on the free list v/ould affect the scale of wages paid by the typewriter trust. In fact, if the trust sold type- v/riters in this country for ?65, the price at which it sells them abroad, a greater number of typewriters would be used, and the demand for labor employed in manufacturing them would be increased ; and this would also tend to enhance rather than depress wages. If street car companies in great cities were allowed to charge but three cents where they now charge five, the effect would simply be to render the franchises of these companies less valuable. Stock- holders could not recoup themselves by reducing the wages of employees. On the contrary, a reduction in the price of the service would tend to increase wages, since the increased amount of business brought about by the reduced rates would increase the demand for street car employees. In the same way, if vesting the Interstate Commerce Commission with power to fix rates would have the ultimate effect The Distribution of Wealth 185 of reducing freight and passenger charges, the busi- ness of railroads would be to some extent increased. This would necessitate the use of additional railroad employees; hence, while reduction in rates might make railroad companies less able to pay prevailing wages, the necessity of employing more laborers would increase rather than decrease the difficulty of reducing wages.* And so, as could be shown by numberless other illustrations, in every enterprise in which the price of the product or the price of the service rendered is not fixed by free competition, a reduction in price can in no way affect wages; it can only lessen the margin of profit to the land owner and the monopo- list. This is so because, while the price of the prod- uct is arbitrarily fixed by a monopoly, the wages of employees are fixed, not by the demand for labor on the part of a few employers, but by the demand on the part of all employers, and the few must accom- modate themselves to the scale of wages established by the general demand, whether they feel that they can afford to do so or not. Considering now the employer as an employer only, or, in other words, as a laborer who employs other laborers and vv'ho uses his own or borrowed capital, it will be found that his wages (popularly called profits) are not in the long run lessened by a general rise, nor are they increased by a general fall in the scale of wages of employees. In this connec- tion, reference is of course made to the portion of the employer's income attributable only to interest *The great reduction in railroad rates in Texas, brought about many years ago by a fearless railroad commission, did not lessen the wages of railroad employees in that State. 186 The Problem of the Unemployed and to labor; it does not include the portion which may be due to rent, or to special privileges, or com- binations in restraint of trade. When the wages of carpenters, plumbers and painters, for instance, are either increased or decreased, employers regulate their bids accordingly, and the contractor's profits or wages are unaffected. And this is so as to mer- chants and manufacturers and employers in ail enterprises in which the price of the product is reg- ulated by the cost of the labor employed in produc- ing it. In fact, as a general rule, the profits or wages of employers are highest in countries v/here the wages of employees are highest. Thus, employ- ers make greater profits, or higher wages, in Amer- ica than in Europe, although employees are paid more here than there. The non-monopolistic employer is forced by com- petition to reduce the price of his products to the lowest point which will admit his remaining in busi- ness. And vast numbers of employers, after losing more or less capital, are being constantly forced out of business altogether. It is impossible for com- petitive employers to pay more than current wages ; and when one competitor succeeds in reducing wages, all are compelled to do likewise; for, hov/- ever well disposed an employer may be, he cannot avoid the effects of the law of rent and the law of wages. If he attempted to do so his competitors would quickly force him out of business. The wages of employers, as such, when the losses of the unsuccessful are taken into account, are not excessive. The average income of a business man, if it includes only interest on the capital used and payment for services rendered, is no more burden- The Distribution of Wealth 187 some to employees than interest paid for the use of labor-saving machinery. The law of supply and demand fixes the wages of the skilled manual laborer at considerably more than that of the unskilled laborer ; yet it doubtless gives to each approximately the correct proportion of the wealth which he pro- duces, reference being had not to the amount of the wealth to which each may be entitled, but to the proportion in which it is divided between them. And so, as between the employed laborer and the employ- ing laborer, the same law of supply and demand probably fixes the compensation of each, near the point which gives to each the proper proportion of the wealth produced by each respectively. If the scale of wages generally were raised in the manner suggested in this work, the wages of those who employ as v/ell as of those who are employed would be raised; but, on account of the general improve- ment in morals, education and intelligence which would ^then follow, the same law of supply and de- mand would, in the end, decrease the difference between the wages of skilled and unskilled and em- ployed and employing labor. This would come about because the proportion of laborers qualified for the highest character of service, and to whom capitalists could safely intrust the use and management of capital, would be increased. When Friday landed on Robinson Crusoe's island, Crusoe, we will say, owned every foot of it except the highways, together v/ith exclusive piscatory rights, including the oysters and clams on the sea- shore. Crusoe, on account of his superior mental and physical powers, might have made a chattel slave of Friday, but there was no necessity for it. 188 The Problem of the Unemployed Crusoe's ownership of all the land gave him all the advantage of the slaveholder, with none of the slave- holder's responsibilities or qualms of conscience. In kindness of heart, therefore, Crusoe arranged to give Friday work, and in order that he might be abund- antly supplied with this blessing, he fixed his wages at the equivalent of a dollar a day for twelve hours of it, which was just sufficient to keep Friday in good working order, provided he put in six days' work in every week. Crusoe then told Friday that it was a free country, and that he, Friday, was a free man, and as such could work for a dollar a day or not, just as it suited him. Since Crusoe owned all the land, Friday had the free man's right to starve on the highway or work on Crusoe's terms, and so he went to work. When labor-saving machinery was introduced, which more than quadrupled the wealth which Friday produced, who, except Crusoe, by any natural law, could get any advantage from it ? Cru- soe could still pay the current wage of a dollar a day and pocket four times as much wealth produced by Friday. Friday, however, would begin after a while to feel vaguely that there was something wrong in the system which gave Crusoe all this increased wealth produced by labor-saving machin- ery, while he, Friday, had to work just as hard as ever; and, having learned to read and write and do a trifling amount of thinking, Friday would get sulky and form a labor union and go on a strike. This would make it uncomfortable for Crusoe, although he could hold out and starve Friday into abject submission if he chose to do so. But rather than go to this extremity, and provoke the rioting and bloodshed which would surely follow, he would The Distribution of Wealth 189 make a compromise of it, and so probably reduce Friday's hours of labor a trifle and perhaps raise his wages a little. But trouble between the emploj^er and the employee would not end with this. Friday would always be sulking and demanding more, because he would be becoming more intelligent, although for a long time the real cause of the failure of his wages to advance with the increasing amount of wealth produced would not dawn upon him. Fri- day's discontent and restlessness, brought about to some extent by "agitators," would, from time to time, secure small advances in wages and slight re- ductions in hours of labor. This would not be accom- plished naturally, but arbitrarily, as the result of constant warfare and bickering, accompanied by immense losses from strikes and lockouts, causing bitter feelings between the employer and the em- ployee. Now, suppose the land on this island had been owned by a thousand Robinson Crusoes instead of but one, and that there had been ten thousand Fri- days instead of but one Friday, and that conditions there were the same as in the world today, some of the Fridays being out of work all the time and at all times ready and anxious to get the places of those who had work. Why would not competition alone, among those who must have jobs, when there were not jobs enough for all, reduce wages and keep wages at the point at which the common laborers could barely subsist, no matter what might be the increased amount of wealth produced with the aid of improve- ments in labor saving appliances? V/ould not this inevitably be the case, even in the absence of any formal combination or agreement on the part of 190 The Problem of the Unemployed employers fixing rates of wages ? And this being so, there would then be practically thousands of slaves and hundreds of slave-owners, instead of one slave and one slave-owner. How could such slave-like conditions be ameliorated except by combinations of laborers ? Combinations which, of course, many sin- cere and liberty-loving people would denounce and endeavor to suppress by law. Let the thoughtful reader ask himself in what respects the situation above described differs from that which exists in the industrial world today. As already shown, employers are divided into two gen- eral classes; the unprivileged employer of the one class, being little more than a laborer himself, has nothing to gain by the lowering of the scale of wages; the privileged employer of the other class, however, has everything to gain by it, because his interests, as the owner of valuable land, or the recip- ient of other special privileges, exceed his interests as a laborer and a capitalist. Unprivileged employ- ers, however, being unable to see beyond the first effects of a reduction of wages, and having no knowl- edge of the underlying cause which tends to grind themselves down as well as their employees, and in fact being powerless to do otherwise, join hands with privileged employers in efforts to prevent an increase or bring about a decrease in wages. In this, they are assisted by the natural tendency of wages to fall with increase of population, coupled with an artificial scarcity of land. We are always hearing of the struggle between capital and labor, when in point of fact it is never between capital and labor, but always between those who are principally interested as the owners of val- The Distribution of Wealth 191 uable land or as the recipients of special privileges on the one side, and those who own capital and those who perform labor on the other side. The real interests of capital and labor are, in the very nature of things, harmonious, but always, in point of fact, antagonistic to landlordism and monopoly. Under present conditions, the tendency of wages of employees to fall can only be resisted by trade unions, and by public sentiment, which favors the paying of a living wage. These powers of resistance have so far, to some extent, prevailed as to skilled manual labor, which can more easily protect itself by combinations, and in many instances hours of labor have been lessened and wages of employees increased. But the struggle against advancing pop- ulation and an artificial scarcity of land must finally prove a hopeless one. Labor unions, strikes, boy- cotts, riots, and even bloodshed, can accomplish little in the end against the irresistible law of rent. From the very nature of rent, as heretofore shown and illustrated, it follows with mathematical certainty that the wages of a large and constantly increasing class of laborers must ultimately fall, even in this country, to the starvation point, and the tendency in this direction, under existing conditions, will be- come more and more marked as the price of unused land increases. What of hope has the future then in store for the average working man? There is no hope for him under present conditions. Yet we are all the time, with accelerating ratio, inventing more and more wonderful labor-saving machines ; we are thought to be on the very eve of discoveries which will revolu- tionize industries and increase the total output of 192 The Problem of the Unemployed the comforts and luxuries of life almost beyond the power of the imagination to conceive. But the lot of the average working man will not improve. With increase of population, it will grow worse and worse — even here in America. The present industrial sys- tem contains in it no promise of relief in the future to its millions of victims ; it holds out to them no hope of beneficial participation in the glories of an advanc- ing civilization. The ability of the laborer to produce wealth may be multiplied ten-fold or a hundred-fold, or even a thousand-fold, by further and yet more and more wonderful improvements in labor-saving de- vices, but this will not change the iron law of wages. Armies of unemployed seeking work and unable to find work will then as now compete for employment against the employed, and continue in the future as in the past to drag wages toward the starvation point, while millionaires, and billionaires even, in- crease and multiply. CHAPTER XIV. THE ULTIMATE REMEDY. AND WHY IT SHOULD BE CONSIDERED BY THE POLITICAL ECONOMIST. FROM what has so far been shown it is evident that the failure of labor-saving machinery to bring about a vast change for the better in the con- dition of labor is due to the fact that such improve- ments increase rent without increasing wages. It is also equally clear that one of the reasons, if not the reason, why men v/illing to work are so often out of work, is because individuals can profitably withhold valuable land from use entirely, as well as from the use to which it is best adapted. Having ascertained the cause, the remedy is obvious. It consists in a simple change in the application of the taxing power of government. The question to be first determined, in this connection, however, is not whether the change could be justly made, but whether it would have the effect intended. Should this be decided in the affirmative, it will then be in order to show, if possible, how all who own land and who have invested the fruits of honest toil in its purchase can be suitably compensated for the loss of the privileges which its ownership now confers. But whether this be shown or not, the discussion of the remedy which must ultimately be adopted will, in any event, bring out more clearly the underlying 194 The Problem of the Unemployed cause which accounts for low wages and involuntary idleness. When industrial conditions shall have been regu- lated in harmony with natural laws, everything which increases the ability of man to produce wealth will necessarily increase the wages of the laborer. Mechanical inventions will then lighten the toil of the working man and add to his happiness and inde- pendence. He will no longer look upon them with doubt and trembling, for his wages will keep pace with the increase in the wealth-producing power which labor-saving processes confer. Nor will he dread the competition of his fellow laborers, for no obstacle will then prevent the use of the unused nat- ural opportunities for employment abounding on every hand. Until such conditions prevail, labor will never be satisfied, for neither the moral nor the nat- ural law can be fulfilled so long as progress in the arts and sciences fails to benefit directly all who toil. Socialists insist that the only way in which the laborer can retain the wealth which he produces is through control by the government of all the factors of production, including capital and labor as well as land. Failing to realize that liberty is the dearest of human possessions, the socialist dreams of substi- tuting the benevolent tyranny of a bureaucracy for the selfish tyranny of individual employers. Failing to appreciate the fundamental distinction between ownership of land and the ownership of things pro- duced by human labor, or between the values cre- ated by the individual and those created by the com- munity, he confuses capital with privilege and assumes that justice will only be reached when indi- vidual ownership of both is abolished. The Ultimate Remedy 195 The teachings of the political economists of the new school, however, differing from those of the socialists, may be summed up as follows: First. Every individual can, without injury to others, and in harmony with natural law, appro- priate to himself all the wealth which he produces, be it ten times or a hundred times greater than that produced by another. Second. The natural law demands equality, not in the enjoyment of the rewards of effort, but in the opportunities for applying effort, it being the con- cern of the State, as Ida M. Tarbell says, to see that men have equal opportunities to carry on enter- prises rather than to conduct enterprises for them. Third. Land — the earth — is in effect a great storehouse, filled to overflowing with treasures pro- vided by nature for the equal use and enjoyment of all mankind, and human laws which permit some men to extort tribute from other men for the privi- lege of access to these treasures violate natural law ; hence the confusion, waste and distress which at present characterize industrial conditions. Fourth. Obedience to the natural law, with respect to the bounties of nature, can be secured by requiring all who enjoy the privilege of the exclusive possession of any portion of the earth to pay, in the form of a tax for the support of government, approx- imately what such privilege is worth. Political freedom does not in itself prevent indus- trial slavery. Whatever the form of government, material progress under present conditions only increases the dependency of the employee upon the employer, while with the spread of intelligence the employee becomes more and more discontented with the slave-like conditions under which he is compelled to toil. To escape the tyranny of the employer, the employee submits to the tyranny of the labor union. 196 The Problem of the Unemployed The struggle for freedom, however, will not down. From the turmoil and suffering in which the labor situation is now involved, peace must finally be evolved; that it will be the peace of freedom, and not of slavery, is the conviction of all who believe in the ultimate triumph of righteousness. Let us, therefore, postponing consideration of the method of its accomplishment, which perhaps cannot be predicted with certainty, imagine conditions which would prevail when the inalienable right of every man in the use of the gifts of nature, including land as well as air and water, is at last recognized by law and custom. Land will then in effect be nationalized, but individuals will continue to own it. The people, while enjoying the benefits of govern- ment ownership, will escape the evil connected with such ownership. There will then be no such thing as taxation. The words "tax" and '"taxation" will remain, but taxes and the burden of taxation will in reality have been abolished. The rent v/hich indi- viduals now appropriate will then be appropriated by the government, and collected in the form of a direct tax on land alone, according to its value, regardless of improvements. Rent, or in other words privilege, only will be taxed. The revenues thus derived from the rent of land will be sufficient to enable the government to dispense with every species of taxation now practiced. All who then pay taxes will in effect simply pay the government rent for the land on which the taxes are levied. While indi- viduals will continue to hold the legal title to land, the beneficial ownership will be in the people at large. The values created by the community will then go to the community; now, individuals appro- The Ultimate Remedy 197 priate these values which others create. No change in the machinery in use at the present time for collecting direct taxes will be necessary. The tax will be so adjusted as to take neither more nor less, approximately, than the economic rent of land; therefore, there will be no proifit in the mere owner- ship of land. As land increases in value the tax will increase, and the unearned increment will go to the government, as it now goes to individuals; hence unused land will be free land, and there will then be no profit in owning land without devoting it, by means of appropriate improvements, to the use to which it is best adapted. Land will continue to be bought and sold, and it v/ill descend to heirs and devisees just as it does at present; but the selling price will not exceed, approximately, the value of the improvements on it. Private property in things produced by human toil will be even better safe- guarded than at present, for no man will be permit- ted to take a portion of another man's earnings for merely assenting to the other's employment.* Equal- ity in the use of the bounties of nature will thus be attained. For those who enjoy the privilege of the exclusive possession of any portion of the earth will then pay in the form of a tax what the privilege is worth, while those who do not enjoy such privi- leges will pay no taxes ; hence the burden of taxation will no longer fall upon industry and enterprise. An illustration of what might be made universal is seen in the section of school land formerly belong- ing to the State of Illinois, on which a portion of the City of Chicago is now located. The small remnant *See Chapter IV, on The Nature of Rent. 198 The Problem of the Unemployed of this land still owned by the State has for many years been leased to private parties on terms pro- viding for perpetual renewals and with no restric- tions against subleasing. The lessee was required to pay as rent six per cent of the value of the land, exclusive of improvements on it, the land to be re-appraised every five years. As the land increased in value the rent increased, and the ground rent collected by the government in this way amounted approximately to the economic rent of the land, according to the definition of economic rent hereto- fore given. The lease being perpetual, the lessee is as secure in the ownership and enjoyment of the improvements on the land as he would be if he owned the land in fee simple. The government as a land- lord took approximately the entire economic rent and used it for the support of the public schools. The situation was the same, however, as if the State in the first instance had deeded the land outright to the original lessees, reserving as a condition to its continuous enjoyment the payment of an annual tax of six per cent on its value as unimproved land. The lot occupied by the Chicago Tribune building is a part of this school section, and until recently was leased in this manner to the Chicago Tribune Publishing Company. When last appraised, it was valued at $789,600. Six per cent of this amount, or $47,000, would have been the annual ground rental under such appraisement for the ensuing five years, had not the tenure been changed. The building on the land is worth a million dollars, and its owners would thus have paid the State $47,000 a year for the privilege of the exclusive possession of the land which the building occupied. It would not have The Ultimate Remedy , 199 occurred to them, however, that they were paying any tax in this connection, since they were receiving the use of land worth $780,000, which the people of the State of Illinois owned. But had the land been granted by the State to the Tribune Company, and its successors and assigns forever, with a reserva- tion to the effect that it should be perpetually sub- ject to the payment of a direct tax sufficient to absorb the entire economic rent, the same thing would have been accomplished. The use of the word *'tax" in- stead of the word "rent,'* and the omission of all reference to leasing, would have made no difference. No one holding land under such a grant would feel that he was paying anything more than rent when he paid in the form of a tax the equivalent of rent. And so it will be when all are permitted to use the bounties of nature on equal terms. As already shown, when the values produced by society at large are thus appropriated for govern- mental purposes, land, exclusive of improvements, will have no selling value. The value of the ground itself will add nothing to the purchase price of real estate. Since land will have cost its owner nothing, the so-called tax which he will pay for the privilege of its exclusive possession will, in fact, be no tax at all ; it will simply be rent collected as taxes are now collected. It will be a tax in name only. Had all of the 640-acre school section been con- veyed gratuitously to private owners in the first instance, on terms requiring the payment of the economic rent to the State in the form of a tax, the people of Illinois would now be enjoying an income from it of over $20,000,000 a year. The improve- ments on this section of land would have not been 200 The Problem of the Unemployed any less extensive or less valuable, nor would the city have grown less rapidly. The buildings on the remnant of the land held under leases of this char- acter are fully up to average of those in the same neighborhood on privately owned land. The Chicago Savings Bank, recently completed at a cost of $650,000, stands on school land thus leased in this way to that institution. The State now collects as taxes a portion of the economic rent ; why should the possession of land be less secure if the State col- lected all of it? And if improvements were not taxed, why would not men be even more inclined to improve land, especially since no capital would then be sunk in its purchase? Under the present system, if the owner of land fails to pay the taxes levied against it, he loses his improvements as well as his land ; this would not be the case, however, under the system which must ultimately prevail. When ground rent only is taxed, it will be practicable to provide for fully compen- sating the previous owner for all improvements on land sold for taxes. And not only so, but an auto- matic check will always guard against the levy of taxes in excess of economic rent. All of this is clearly explained in "Natural Taxation," by the late Thomas G. Shearman, in the following paragraphs, which are quoted in full : "When taxation is levied exclusively upon ground rent every man will have, for the first time in human history, an absolute and indefeasible title to all of his property which is the production of human skill and industry, subject only to the right of the State to take it, upon making full compensation for its value. Such compensation would enable the owner to The Ultimate Remedy 20i replace the property thus taken with other property of the same description and value. This general right of the State is practically no limitation upon the absolute right to individual property. "It is perfectly plain that no one has any such right at present, and that no one can have it, under any existing system of taxation. For, so long as the State assumes the right to tax anything besides rent, it is impossible for any man to retain the entire fruits of his own industry. Every year the State will deduct something from those fruits, under the name of taxation; and no one can ever foresee precisely how much will be taken in this manner. The fluc- tuations, both in the amounts and m.ethods of such taxes, are so great and incalculable that no one can have any reasonable certainty as to the extent to which his earnings will be secure against the demands of the State. *'But if taxes were once confined strictly to ground rent, all this would be changed. Chattels of every description would of course be absolutely secure; since the only remedy which would be allowed to the State for the collection of taxes would be the sale of some exclusive privilege on land. But buildings and all other improvements on land would be equally secure against all taking without compensation. This is not at first sight so clear ; and it needs, there- fore, fuller explanation. "The exclusive tax upon ground rent would lose its entire character if the State were allowed, under any pretense, to collect it from personal property or improvements. It is a fundamental condition of such a tax that it be collected only out of rent. It must, therefore, when payment is refused, be col- lected only by selling the control of the taxed land to some person who will not only pay the tax, but will also pay the land holder, thus sold out, the full value of all of his improvements. If no one will pay the tax, subject to those conditions, that is conclu- sive proof that the tax is too high, H2id that it is in 202 The Problem of the Unemployed reality based upon an assessment including other values than the mere value of the land. The pur- chaser in such case would, of course, take the land, subject to the annual liability for taxes; but he would also acquire the same absolute title to im- provements which the previous possessor had; so that he, in turn, could not be sold out for taxes with- out full compensation for improvements. Thus no one would ever pay taxes upon the value of any other property than the bare land. "Universal experience has demonstrated that there would not be the slightest difficulty in carrying such a system into practical operation. This system has long been in operation, upon a great scale, both in public and private affairs. Wherever ferry fran- chises belong to a municipality, as in the city of New York, such franchises are sold at auction, at inter- vals of five or ten years, always subject to two con- ditions: first, the payment of rent to the munici- pality ; and second, the payment of full compensation to the former holder of the franchises, for boats, piers, houses, and all other structures and materials used in operating the ferry. Street railroad fran- chises are sold in the same manner, for terms of years, by every honest municipal body having con- trol of the subject.* So landlords constantly lease their land for terms of years, to men who erect expensive buildings thereon; the landlords cove- nanting to pay the value of such improvements upon the expiration of the lease. There is no more diffi- culty in providing for an annual sale of land, if necessary, subject to these conditions, than there is in providing for a sale in every five, ten or twenty years. A ferry franchise is just as much a title to *"The conception of a really incorruptible city council will seem, to most American readers, too wildly improbable for the basis of even a theory. But effete Europe is so far behind us in the grand march of civilization, that such Utopian bodies are quite common there; and the method of the text is com- mon also." The Ultimate Remedy 203 *land/ within the meaning of the law, science and common sense, as is any other land title whatever.* "Of course, the valuation of improvements would be made upon a common sense basis. The land- owner, upon making default in taxes, would be enti- tled to just as much compensation for his buildings as those buildings really added to the market value of the land on which they were built, but not more. If, as often happens, an expensive building had been put up in a district where it could never be of any use, nothing should be allowed for it beyond the value of its materials, after it had been pulled down. But for any really useful building, compensation would be allowed, sufficient to enable the owner to put up a similar building, in similar condition, upon an adjoining tract of land. In short, whatever loss the owner of the building incurred, by reason of his own mistakes or extravagance, he would be left to bear; but whatever value belonged to the building, exclusive of the land underneath it, he would invar- iably be allowed to retain." No difficulty will be experienced in so fixing the amount of the tax as to take approximately the whole of the economic rent of any tract of land. A few illustrations will make this plain : My neighbor owns a single lot, which, with the dwelling house improvements on it, rents for $400 a year. The improvements are appropriate to the location, and are worth $3,000. The prevailing rate of interest in this community, when the security is ample, is 5%. Allowing 5% interest on the value of the im- provements, and say, $125 a year to cover insurance, repairs, renewals and the expense of collecting rents from tenants, etc., and the economic rent of this lot is, approximately, $125 a year. It is $150+ *Benson v. New York, 10 Barbour, 223, 233. 204 The Problem of the Unemployed §125=$275; $400~$275=$125. The tax on it therefore would be fixed at about $125. Adjoining these premises there are four lots on which there are dwelling house improvements also of the value of $3,000. These lots and improvements belong to another neighbor who can afford the luxury of spa- cious grounds, but each lot being equally as valuable as the one first mentioned, his taxes would be four times as much, or $500 a year. As when a man goes to the theatre, if he chooses to appropriate four seats instead of one, he must pay accordingly, whether he uses all of them or not. Again, the building in v/hich I have an office brings its owner a total net rental of, say, $13,000 a year, after all deductions for insurance, renewals, cost of collecting rents, etc., have been made. It can be duplicated for $100,000, interest on which is $5,000 a year; hence the economic rent of the land which it occupies is approximately the difference between $13,000 and $5,000, or $8,000, which would be about the amount of the tax levied against the land if the rent were appropriated by the govern- ment. On one of the opposite corners is a building worth $40,000, which brings its owner a net rent of $10,000 a year. Making the calculation as shown above, and it is found that the economic rent of the lot on which it stands is also $8,000. But on another corner is a tumble-down one story building which rents for only $6,000. The lot on which it rests is not less valuable than those on the other corners, and if appropriately improved it would yield the same amount of rent ; hence the tax assessed against it would be the same. In other words, the owner of the legal title to this last lot would pay the State the The Ultimate Remedy 205 same amount of rent, whether he properly im- proved it or not. Sales of improved real estate would also furnish the tax assessor data from which the economiic rent of land could be ascertained. Just as the thermom- eter tells whether the temperature is above or below normal, so would prices paid for improved landed property tell v\^hether the taxes assessed against it were too high or too low. Thus, if real estate in any locality should sell for decidedly more than the value of the improvements — if people were willing to pay much more for a tract of land than the improve- ments on it were worth — this would be a certain indication that the tax levied against it should be raised. If, on the contrary, real estate Vvere sold for taxes, under the provision heretofore explained, which would require the purchaser to fully compen- sate the previous owner for the value of the im- provements, this would usually indicate that the taxes should be lowered. It is not claimed that taxes v/ill ever be assessed with mathematical accuracy, or that it is desirable even for the government to take literally all of the theoretical economic rent of land. Those who occupy land will directly or indirectly pay the tax, but those who own the land will often act as tax gatherers, and for this service compensation will be provided by the laws of supply and demand. Thus, a man having $20,000 contemplates erecting, say, ten dwellings costing $2,000 each. To make the invest- ment profitable it will be necessary to collect from his tenants, in addition to interest, a sufficient amount to cover the tax paid on the land occupied, as well as the cost of insurance, repairs and renew- 206 The Problem of the Unemployed als. He must, therefore, become in effect a tax col- lector for the government, and not only so, but to a certain extent a guarantor of the payment of the tax. And so when any one puts improvements on land, either for a home for himself or for any other pur- pose, there is always an element of risk in the invest- ment which the renter does not incur. Increase or decrease of population in the neighborhood, as well as other circumstances, may render improvements unsuitable to changed conditions, and impair if not destroy the value of them altogether. Men will not make investments involving such risks, and often requiring them to act as tax collectors, unless paid for it. Therefore, it is not likely that the govern- ment can ever collect more than 80 or 90 per cent of the theoretical economic rent. The remainder of it will be retained by land owners to cover the risk involved in improving land and the labor involved in collecting from those who actually use land what the use of it is worth. But competition, which will then be free with respect to land, will always so fix the amount of the tax as to give land owners no more, approximately, than they will be equitably entitled to for such service. It may be asked, why will not landlords be able to retain more than ten or twenty per cent of the eco- nomic rent of land which tenants occupy? The answer is, that rents are regulated wholly by supply and demand, the desire of landlords having little to do with the matter. If the demand for houses in any locality exceeds the supply, rents (using the word in its popular sense) will rise; if the supply exceeds the demand, rents will fall. With no tax on buildings, and land owners being no longer fined The Ultimate Remedy 207 for putting improvements on land, a demand for houses will be more easily supplied than under pres- ent conditions; it will, therefore, be impossible, except temporarily, to charge more for the use of real estate than the economic rent of land added to interest on the value of the improvements, together with allowances for insurance, repairs, etc. The question asked, however, when put in the concrete answers itself. Thus, why could not that neighbor of mine, by raising the price charged for the use of his house and lot to $500 a year, obtain a gross income of $375 from the property, instead of $275, after payment of the tax of $125? Were he thus to increase the charge, and the tenant, finding it impossible to do better elsewhere, should submit to the advance, this would be conclusive proof that the economic rent of the land was more than $125 a year. It would show that the tax ought to be $225, or thereabouts, instead of $125, and so the tax asses- sor would soon raise taxes in the same proportion on all lands in that immediate vicinity. Hence the gov- ernment, and not the landlords, would ultimately get the benefit of any crowding up of rents. But this suggests another question : If landlords had nothing to gain by it, why would rents advance at all? And why would not the people at large be deprived of much of the benefit which ought to accrue to them from increase in the value of the use of land? The answer is, that competition among tenants, and the fact that a landlord here and there could always secure a temporary advantage by advancing rents, would cause rents to increase gen- erally as the value of land increased. Landlords would simply be compelled to collect all the ground 208 The Problem of the Unemployed rent possible. Whenever, for instance, on account of increase in the demand for dwelling house improve- ments, tenants in any locality could be forced to pay more, some vigilant landlord would require his own tenants to do so, for it would always be to his indi- vidual interest to increase the gross income of his property. His example would soon be followed by others, and then by all, and thus a higher level of economic rent in that vicinity would be established, and taxes would be advanced accordingly. Tax assessors, however, would not be compelled to rely wholly upon data obtained from rented property in ascertaining the economic rent of land. Improved real estate then, as now, would be constantly chang- ing hands, and the prices paid for it, as already shown, would furnish indisputable evidence of true economic rental values. The economy and absolute impartiality with which public revenues could then be collected, as compared with the present wasteful and demoralizing methods, also present a strong reason for favoring the system suggested. All who are familiar with the subject must admit that if land were in effect nationalized, and the right of the people to its beneficial ownership established by law, no practical difficulty would stand in the way of the State appropriating economic rent with the present machinery of taxation. The question, how- ever, which always tends to divert attention in this connection is, how can land be in effect nationalized ? What reasonable hope can the political economist have that land owners will ever consent to relin- quish the privileges which the mere ownership of land confers, or that any method by which the gov- The Ultimate Remedy 209 ernment can condemn the land and buy out the landlords will ever meet with popular approval? But this is a question which the political economist should not be required to answer. For his functions do not include those of the statesman. As a philos- opher he points out the conflict between the human law and the natural law, and shows what change in the human law is necessary to make it conform to the natural law ; while the statesman, as a politician, considers how the change can be accomplished. If the political economist has diagnosed the disease correctly, and prescribed the proper remedy, some time, and in some way, statesmen will finally secure the adoption of the remedy. CHAPTER XV. IMMEDIATE NATIONALIZATION OF LAND. WITH COMPENSATION TO LAND OWNERS.* POLITICAL economists are asked to tell why it is that inventions do not increase wages, and why- men want for work in the midst of abundant unused natural opportunities for work. Those of the new school say it is simply because individuals instead of the government appropriate rent. If this answer is true, it follows that if the government alone appropriated rent and distributed it among the peo- ple by relieving every one of the burden of direct and indirect taxation, all unused land would be free land, involuntary idleness would disappear, and labor-saving inventions would naturally increase wages. If it can be shown that this would in fact be the case, then a simple cause which accounts for the economic evils referred to has been discovered, and a correct answer to the questions propounded in *It is Hot to be inferred from what is contained in this book that the writer either favors or disfavors compensation to land owners. The subject of compensation, as well as that of natural taxation, is discussed for the purpose only of more clearly showing the underlying cause of involuntary idleness, and the failure of wages to keep pace with improvements in labor-saving processes. Nothing else is germane to the purpose of this work, as stated on its title page. The details of a plan in accordance with which land owners can be compensated is suggested tentatively only, as one method of bringing about conditions with respect to land tenures which must ultimately prevMl. Immediate Nationalization of Land 211 the introductory chapter has been given, whether it be practicable to induce people to adopt the rem- edy or not. Hence, for the purpose alone of testing the truth of the answer, the effect of nationalizing land and collecting economic rent by taxation is worthy of consideration, no matter how remote the prospect of its being put into actual operation. In the United States, as everywhere else, land will ultimately be in effect nationalized, but it is by no means certain that the forebodings of Macaulay will not in the meantime have proven well founded. For the forces of want, corruption and brutality engendered by an acute artificial scarcity of land are incompatible with democratic institutions. In 1857 Lord Macaulay wrote in the famous letter to H. S. Randall, the autobiographer of Jefferson — a letter which President Garfield said startled him "like an alarm bell at night" — as follows : "I have long been convinced that institutions purely democratic must sooner or later destroy lib- erty or civilization, or both. You may think that your country enjoys an exemption from these evils. I v/ill frankly own to you that I am of a very differ- ent opinion. Your fate I believe to be settled, though it is deferred by a physical cause. As long as you have a boundless extent of fertile and unoccupied land, your laboring population will be far more at ease than the laboring population of the old world, and while that is the case the Jefferson politics may continue to exist without any fatal calamity. But the time will come * * * when wages will be as low and will fluctuate as much with you as with us. You will have your Manchesters and Birming- hams, and in these Manchesters and Birminghams hundreds of thousands of artisans will assuredly 212 The Problem of the Unemployed some time be out of work. Then your institutions will be brought to the test. Distress everywhere makes the laborer mutinous and discontented, and inclines him to listen to agitators, who tell him that it is a monstrous iniquity that one man should have a million while another cannot get a full meal. * * * "I have seen England pass three or four times through such critical seasons as I have described; through such seasons the United States will have to pass in the course of the next century, if not of this. How will you pass through them? I heartily wish you a good deliverance. But my reason and my wishes are at war, and I cannot help foreboding the worst. * * * 'The day will come when, in the State of New York, a multitude of people, none of whom has more than half a breakfast and expects to have more than one-half a dinner, will choose a legislature. Is it possible to doubt what sort of legislature will be chosen? On one side is a statesman teaching pa- tience, respect for vested rights, strict observance of public faith. On the other is a demagogue ranting at the tyranny of capitalists and usurists, and ask- ing why anybody should be permitted to drink champagne and ride in a carriage while thousands of honest folks are in want of necessaries. Which of these candidates is likely to be preferred by a working-man who hears his children cry for more bread ? "I seriously apprehend that you will, in some such season of adversity as I have described, do things M^hich will prevent prosperity from returning. There will be, I fear, spoliation. The spoliation will in- crease the distress. The distress will produce fresh spoliation. There is nothing to stop you. Your Con- stitution is all sail and no anchor. "As I said before, when a society has entered on this downward progress, either civilization or liberty must perish. Either some Csesar or Napoleon will Immediate Nationalization of Land 213 seize the reins of government with a strong hand, or your republic will be as fearfully plundered and laid waste by the barbarians in the twentieth cen- tury as the Roman Empire was in the fifth, with the difference that the Huns and Vandals who rav- aged the Roman Empire came from without, and that your Huns and Vandals will have been engen- dered within your own country by your own insti- tutions. "Thinking thus, of course, I cannot reckon Jeffer- son among the benefactors of mankind." Equality with respect to the use of the bounties of nature may, however, be established without an intervening period of bloodshed and anarchy. For the sake of illustration let it be assumed that the nationalization of land will be accomplished in the United States suddenly, and in a direct and straight- forward manner. This assumption is, perhaps, a violent one, but it will nevertheless aid in showing that the questions mentioned in the first chapter of this work have been correctly answered. If the Constitution were appropriately amended, the Federal Government could issue three per cent bonds, interest payable annually in gold, and use them in compensating land and franchise owners for the loss of the special privilege which the mere ownership of the gifts of nature now enables them to enjoy. These bonds could be made exchangeable at any time for legal tender currency, and the latter could be made re-exchangeable for bonds of large denomination, such bonds to be exchangeable again for currency, and so on, the principal of the bonds being payable in gold at any time at the will of the government. Tom L. Johnson, when in Congress 214 The Problem of the Unemployed during the panic of 1893, offered a bill providing for the issuance of currency exchangeable for bonds of this kind. Reflection will satisfy one that there could be no undue expansion or contraction of a currency thus based on interchangeable gold inter- est bearing bonds. For the volume of the currency would expand and contract automatically in accord- ance with the laws of supply and demand. The bonds would doubtless be worth par in gold, but whether this would be the case at first or not, such bonds at par would surely provide reasonable com- pensation for those who are now depriving their fellow men of the heritage so clearly intended for the equal use and enjoyment of all. Taking the census of 1910 as the basis of the calculation, both as regards wealth and population, and it will be found that the government at that time in thus nationalizing land would have incurred an indebtedness of about one hundred billion dollars, had land and franchise owners been fully and lib- erally compensated. This would have meant com- pensation to them in full for the loss of all taxing privileges connected with the mere ownership of land. In this estimate six billion dollars are allowed for the land and franchise values alone of railroads and all public utility corporations. It would there- fore have required a revenue of about $5,800,000,000 to meet interest charges and all expenses of govern- ment, including national, state and municipal, or $63 per capita, had the nationalization of land taken effect in 1910. A large part of the required reve- nue, however, probably a third or more, would from the start have been derived from economic rent Immediate Nationalization of Land 215 paid in the form of a tax for the use of land which was in effect owned by the government. It would have reduced the real per capita taxation to about $42 a year. In 1910 the per capita tax in the United States was $29, hence it would only have been nec- essary to have raised by real taxation $13 more per capita than was in fact raised in 1910, or an increase from $29- per capita to $42 per capita. And there- after, as the revenue from ground rent increased, real taxation w^ould decrease. Taxation amounting only to $42 a year per capita would not be a serious burden if all unused land were free land and if economic rent went to the government instead of to the individual, as is nov/ the case, and if transportation and public utility charges were limited to reasonable returns upon improvement and equipment valuations only. It would in fact be a mere bagatelle in comparison with the enormous increase in real land values, in wealth and population which would quickly follow. A large part of the revenue required, probably a third or more, would from the start be derived from economic rent paid in the form of a tax for the use of land which was in effect owned by the government.* New Zealand, probably the richest and most pros- perous country in the world in proportion to pop- ulation, collects a revenue of $36 per capita, only $11 of which comes from her government owned railways, leaving about $25 per capita raised by real taxation. The American people are now spend- *In the year 1910 $2,799,497,765 was spent in the United States for the support of government. Taxation in America amount- ing to but $42 per capita will be small, indeed, compared v/ith the per capita taxation in Europe when the present war is over. 216 The Problem of the Unemployed ing $15 per capita annually for alcoholic liquors. They surely could stand additional taxation to the extent of $14 per annum per capita in order to accomplish the nationalization of land. It is true that much of the nearby unused oppor- tunities for employment now held for speculation and mere investment purposes, whose owners would have received immense sums in the process of nationalization, would yield no revenue at first. But just as people rushed to the wilderness of Oklahoma for free land, so would capital and labor rush for the valuable vacant lots and lands and unused coal beds and mineral deposits to be found at present on every hand. Within two or three years, probably, all valuable land of this character, most of which is now situated in and near cities and towns, and in well settled farming communities, would be used and occupied. This increasing use of valuable lands now unused would rapidly swell the public revenues. The income from ground rent taxation would shortly equal and then vastly exceed the interest on the bonds issued to land owners. Capital could only be profitably invested then in wealth-producing enter- prises — enterprises which would give employment to labor and add to the world's stock of wealth. None of it could be invested in the unused bounties of nature for the purpose of blackmailing Effort. All the obstacles to employment and to the most effect- ive use of land, to which attention has been called, would be swept away. An era of business pros- perity would be inaugurated, nor could it be checked and throttled by a panic-breeding increase in the price of unused land. Population would multiply, Immediate Nationalization of Lana 217 and wealth would accumulate with unprecedented rapidity. While interest on the public debt incurred in buying out landlords would remain a fixed charge, the revenues of the government would constantly increase with the increase in the value of land. Is it not reasonable to suppose, under free land condi- tions which would then prevail, that in ten or fifteen or at most twenty years the indebtedness incurred in depriving land and franchise owners of the right of extorting tribute money from their fellow men would have been paid, and the heritage of the people relieved from all encumbrances? By free land conditions, as used above, is meant conditions under which individuals would hold land on payment to the government of the economic rent of it and nothing more or less. Unused land would then be free land, and no land could be profitably withheld from the use to which it was best adapted. To attain such conditions, it would be necessary to abolish taxation of personal property and improve- ments on lands, since such taxes obstruct the free use of land — the source of all employment — and are in effect fines upon industry and enterprise. While all real taxation inevitably has this effect in greater or less degree, and the burden of it in the end is borne by consumers and users, nevertheless the exemptions referred to would minimize the tendency of such taxation to obstruct enterprise and discour- age the employment of labor. The question as to how it would have been possi- ble to have obtained a revenue of $5,800,000,000 in 1910, and especially so if at the same time improve- ments on land and personal property were exempted from taxation, and the land value tax limited to 218 The Problem of the Unemployed economic rent only, will be briefly considered. The required revenue could have been easily raised by a budget made up somewhat as follows : Ground rent taxation, not in excess of economic rent estimated to amount at first to only one- third of total revenue $1,950,000,000 Customs, double the amount collected in 1910... 750,000,000 Internal revenue on liquor and tobacco 1,000,000,000 General stamp tax 300,000,000 Ad valorem tax on railway freight and passenger rates, collected by stamps applied to tickets and bills of lading to extent of 40 per cent 1,000,000,000 Inheritance tax 400,000,000 Increase postal rates 50,000,000 Licenses, occupation taxes and miscellaneous.... 350,000,000 Total , $5,800,000,000 Taxes levied as above could be collected by a single set of Federal tax gatherers at less expense and with less partiality than is possible under the present complicated and cumbrous system. After deducting the amount needed for the general government, the remainder could be apportioned among the several States, according to some equitable method of dis- tribution. Each State government could then, after making a similar deduction, distribute what was left among its counties, cities and towns according to population or otherwise. The principle of local self- government would not be impaired. Every political subdivision would retain the right to spend as it saw fit the portion of the public revenue to which it was entitled. The ultimate end being the abolition of all taxation, it would be consistent and probably expe- dient for the general government to collect the rev- enue from the ground rent tax, since the people collectively create the values which such a tax appro- priates. People living in New York, for instance, do Immediate Nationalization of Land 219 little more to produce its land values than people living in Iowa, whose products may be exchanged in that city for the products of people living in Maine. In the estimate given above, it is assumed that the land value tax on improved lands in and near cities and towns, on mines, railroads and public util- ities, which ought in no case to exceed the economic rent, would yield at first only $1,950,000,000, or one- third of the amount necessary to pay interest on the bonds issued to land owners. It is assumed in this connection that the economic rent of all improved lands would fall at least 50 per cent ; also, that land whose owners would have received $25,000,000,000, or one-fourth of the $100,000,000,000 of bonds issued, would yield at first no economic rent to the government, most of the unimproved land and much of the land in cultivation being embraced in this class. So also as to the 243,000 miles of railroads in the United States in 1910. The par value of railroad stocks and bonds amounted to $17,942,282,515, an average of $73,000 per mile. It is assumed that one-third of this sum represented the value of land, including terminals, rights-of-way and franchise holdings, and the other two-thirds improvement values. The gross receipts of railroads in 1910 were $2,500,000,000 ; the net earnings amounted to $852,^ 153,280. It is estimated that $6,000,000,000, or one-third the par value of the stocks and bonds, would have been used in paying railroads for relin- quishing land and franchise values and the water in stocks and bonds. It follows, however, that the elimination of these factors in fixing rates would have resulted in reducing rates to the extent of, say, 2'20 The Problem of the Unemployed 5 per cent on the $6,000,000,000, or $300,000,000 annually. Hence a stamp tax of 40 per cent ad valorem paid by shippers and passengers on railroad charges as thus reduced would have amounted in fact to only a 31 per cent, instead of a 40 per cent, increase in rates, and v^ould have added over $1,000,- 000,000 to the revenue of the government. The bur- den of the additional $2,000,000,000, or thereabouts, of real taxation collected in the manner thus sug- gested would have been collected at a minimum of expense and borne by all consumers in proportion to the amount consumed by each.* An impcjrtant factor to be taken into account in considering the feasibility of compensating land owners in full is the diiierence betv^^een the govern- ment rate of 3 per cent interest and the rate of 4 per cent to 8 per cent now paid by individuals and cor- porations. Thus, the land which furnishes the site for the office building mentioned in the preceding chapter is v/orth $160,000, the economic rent of it being $8,000 per year, or 5 per cent of its value. The government, however, would have obtained the land owner's taxing privilege pertaining to this lot for $160,000, paying for it in 3 per cent gold interest bearing bonds, the interest on which would amount to only $4,800 annually. Thereafter the full eco- nomic rent as determined by the rate of interest *At first the income of the government from ground rent taxation would be abnormally low, owing to the immense amount of near-at-hand unused land which would become at once available to capital and labor; but within a very short period these lands would all be occupied, and then the ground rent fund would rise to normal figures. Hence no harm would result if during this period of transition it became necessary for the government to issue additional bonds to provide for deficits. Immediate Nationalization of Land 221 prevailing among individuals in that locality would be paid the government in the form of a tax on this tract of land. It might soon amount to $6,000 or $8,000 a year ; hence, in many instances the revenues from valuable lands v^ould soon from this cause alone more than equal the interest on the bonds given in exchange for them. This v^ould quickly offset the shrinkage in economic rent resulting at first from the opening up to capital and labor of all nearby valuable unused land. It v^ould perhaps enable the government to retire the bonds referred to v^ithout perceptible increase of the burden of real taxation. Again, the fact of these gold interest bearing bonds being exchangeable for currency, (the cur- rency being also re-exchangeable for gold interest bearing bonds of large denominations) would pro- duce an artificial stimulation of business like an inflation of the currency, which would also aid in tiding over the first few years of increased taxation. But this could produce no disastrous inflation of values. The price of land and of stocks, bonds and securities based on lands and franchises could not be advanced, since all increase in these values would be appropriated by the government; a rising real estate market, therefore, the cause as well as the premonitory sign of every panic in the past, would be lacking. The stimulus to business could show itself only in an enormous demand for labor to be applied to the development of valuable near-at-hand unused building lots and farming lands, coal beds and mineral deposits, the use of which would then be secured without encountering the obstacle which the purchase price of land at present always inter- poses. 222 The Problem of the Unemployed At this point a question of morals again arises. Thus, if land belongs by natural right to all, if the value which attaches to it is the product of the common energy and enterprise of all, what right has the government to compel the people to pay for what they already own? If compensation is to be awarded at all, why should it not be given to those who have been deprived of the heritage rather than to those who have enjoyed its exclusive use and possession? In point of fact, however, the political economist, for reasons already given, has nothing to do with the question thus suggested. He sees that the natural law demands equality with respect to the use of the bounties of nature ; that the violation of this law produces confusion and waste, and that harmony with it can only be effected by requiring those who possess land to pay, for the benefit of all, what the use of it is worth. In other words, that harmony with the natural law can be reached only by what is in effect the nationalization of land. When it is proposed to compensate land owners, the economist must test the matter, not by trying to determine the right or wrong of it, but by consid- ering how it would affect the demand for labor and the distribution of wealth. Applying this test, the conclusion is reached that the government could well afford to pay the owners of land in full for all the privileges which its nationalization would force them to relinquish. For it is evident that the payment of the fixed amount of indebtedness incurred in doing so, bearing the low rate of interest at which the government can float its bonds at par, would be far less burdensome upon capital and labor than the continuance of the present system of constantly in- Immediate Nationalization of Land 223 creasing exactions on the part of land and franchise owners. And especially so, if free land conditions from the very start could thus be obtained. The British Government is now engaged upon a huge scale in buying out great estates in Ireland and establishing tenants upon small farms of their own. The Act of 1902 appropriated $800,000,000 for this purpose. The government charges 2% per cent interest with 14 per cent added as a sinking fund. At this rate the tenant acquires absolute ownership of his farm in sixty-eight and one-half years. In Hugh Southerland's "Ireland, Yesterday and Today," it is stated that out of the 70,000 purchasers under acts of Parliament previous to that of 1902, only two purchasers failed to meet their payments, and that up to the time the book was written, in 1909, a total of over 215,000 tenants had purchased their holdings. The land question, however, is not solved by a mere multiplicity of land owners. The natural law demands that all who enjoy the legal right to the exclusive possession of any tract of land shall pay into the common treasury, for the benefit of all, what such right of exclusive possession is annually worth. Hence government land purchasing acts should not require the repayment to the government of money paid landlords, but the land so purchased should be held subject forever to the payment of a land value tax equal to the annual economic rental value of the land. In no other way can justice be meted out, and the evils flowing from private ownership of the gifts of nature be wholly avoided. The success of the government in its treatment of farm tenantry in Ireland, imperfect and incomplete 224 The Problem of the Unemployed as the method pursued may be, suggests a plan by which the nationalization of all land could be grad- ually effected. The government could create boards of commissioners, as in Ireland, and give them povv^er not only to condemn unused and but partially used land and fix the price to be paid for it, but also to fix its annual economic rental value at the time of condemnation, such rent to be paid annually in the form of a special tax on the land condemned. The actions of these boards could be invoked, under proper limitations, by any individual or corporation desiring and able to use the land sought to be con- demned for any v^ealth-producing and labor-employ- ing purpose for which it was adapted, be it for a mercantile, manufacturing, agricultural or residence purpose. In the State of Texas there are over 150,000,000 acres of arable land, less than 20,000,000 acres being in cultivation. More than 50 per cent of the actual farmers of the State are tenants. The unused and fertile lands of Texas, moderately well located with respect to railroads and markets, are held at $20 an acre and upwards. Under laws of the character suggested any one with capital sufficient to enable him to improve and cultivate, say, 100 acres, would be saved an investment of $2,000 or more in land. The economic rent on such a tract of land would hardly exceed $30 a year. In place of $160 a year, the interest at prevailing rates on the purchase money value, the party in whose favor the unused land was condemned would only pay $30 a year to begin with in the form of a land value tax. Imagine what an era of brisk business and uni- versal prosperity for all classes would instantly be Immediate Nationalization of Land 225 inaugurated if any unused piece of land in Texas could thus be made available for a home or for any labor-employing enterprise without the investment by the individual making use of it of the enormous sum now required to be paid for the bare privilege of employing labor on a gift of nature. The great increase of wealth resulting from the slight progress toward the nationalization of land effected in Ireland by the land purchase acts is strik- ingly shown by Mr. Southerland from comparing present conditions of certain sections of Ireland, where the act has been applied to large estates, with conditions existing in the same neighborhood seven years before its application, thus proving conclu- sively that government indebtedness incurred in buy- ing out landlords would be easily liquidated by the increase of wealth resulting therefrom. CHAPTER XVI. THE NATIONALIZATION OF LAND, Continued SPECULATIONS IN REGARD TO EFFECTS WHICH WOULD FLOW FROM IT, INCLUDING ITS EFFECT ON LABOR UNIONS, TRUSTS AND SOCIALISM. WHILE the nationalization of land, brought about at once, and without hardship or exces- sive loss to any individual, may be but an "iridescent dream," further speculation in regard to it and to the effects which would flow from it are nevertheless interesting and instructive. For in this way the maladjustment of the forces of government in the particular to which attention has been called can be made even more clearly apparent. The fact that the subject may be at present without practical interest to politicians and statesmen does not render it of less importance to the political economist. Nor is interest in the matter from his point of view diminished because people at present have neither the intelligence nor the patriotism which the remedy calls for. As a scientist, he considers the subject simply for the purpose of ascertaining whether the cause of increasing poverty in the midst of increas- ing wealth has been discovered, and if so, whether the ultimate remedy is to be found in socialism or in individualism, in tyranny or in freedom. The Nationalization of Land 227 Let us then try to imagine what would have hap- pened had the landlords of the United States been compelled, on the terms stated, to relinquish, in 1910, in favor of the government, all the taxing privileges previously enjoyed by them as mere owners of land. The land value tax for the first year on every tract of land would of course have equaled the interest on the bonds awarded its owner. If, for instance, a farmer's tax was sixty dollars, he would have received two thousand dollars in bonds, on which the interest in gold would have been sixty dollars. With this he could pay all his direct taxes, for there would then be no tax on personalty or improvements on land. The year before, this farmer would have paid the tax on his farm and personal property out of money which he earned ; the year after the change was made, he would pay it with money furnished by the government in the form of interest on the bonds awarded him ; yet he would be in no way de- prived of the use and enjoyment of his farm. This would be the case at first as to every land owner. All would still have the exclusive use of the land owned by them, and all would at first in effect be relieved entirely of the burden of taxation in con- nection with it. For the money with which to pay the taxes assessed against land would, for the first year at least, as stated, be furnished by the govern- ment. Taxes levied against owners of improved real estate, therefore, on the start would be de- creased, and the burden of direct taxation as to them would at first be lessened. This condition, however, as to all highly valuable lands, would only be tem- porary, but as to cheap lands it would be more or less permanent, and would continue for many years 228 The Problem of the Unemployed following the change. Probably half or more of the land-owning farmers of this country would pay no direct taxes on the lands used by them, because such lands would not, for many years after the new sys- tem went into effect, have any real economic value. Since improvements existing at the time the nationalization of land became effective would stand as security for the payment of taxes, it would be to the interest of all owning fairly well improved lands to pay the tax assessed against them rather than permit such lands to be sold for non-payment.* As to unimproved lands, hov/ever, the case would be different. Unless the owner of an unimproved tract intended to utilize it himself without delay, there would be no inducement for him to pay taxes on it. If, therefore, he could not sell his title for a small premium to one who wished to use the land at once, he would let it revert to the government. Thus, suppose A owned a vacant lot formerly valued at a thousand dollars, on which he had received a thou- sand dollars in 3 per cent gold interest bearing bonds, and that he was unable or unwilling to im- prove this property himself. He would have noth- ing to gain by paying the $30 which it would cost to hold the land in idleness the first year. Suppose he paid the tax, however, with the intention of making some one, some time, give him a premium of a hun- dred or two hundred dollars or more for the land. It would be impossible for him to succeed in such a scheme unless others with unused tracts of land in *The plan proposed by Mr. Shearman, supra, 201-203, under which land owners would be saved the loss of improvements in case of tax sales, could not be applied until sufiacient time had elapsed for a complete readjustment of rental values. The Nationalization of Land 229 the same locality also held on to them for the same purpose. If this were done, it would be conclusive evidence that the economic rent of the land was more than $30 a year ; hence the tax would be raised, and it would cost, say, $40 or $50 to hold the land in idleness the next year. And so the tax would be increased year by year if need be, and the govern- ment, and not the individual, v/ould appropriate the unearned increment. The knowledge that the gov- ernment possessed this power, and that it would be its interest and its duty to advance the tax on vacant as well as improved lands until all economic rent collectible was appropriated by taxation for the ben- efit of the people at large, would effectually deter any one from acting "the dog in the manger" by trying to hold land in idleness for investment or speculative purposes. It follows, then, that every vacant city lot, all the millions of acres in the aggregate of unimproved lands within the zones of vacant land surrounding cities, towns and villages, to which attention has been called, and the hundreds of millions of acres of unused farming lands in the midst of well settled farming communities, as well as the tens of thou- sands of acres of unused coal beds and mineral deposits within convenient distances of great cen- ters of population, and unused land everywhere, would be thrown open to use and settlement on terms requiring practically no investment of purchase money. The fact that here and there an owner might be able to exact a small premium for the mere privilege of immediate possession would not affect the general rule that capital could no longer be sunk in buying land. 230 The Problem of the Unemployed A few illustrations will bring home to the reader the momentous effects of the change outlined above. Thus, the clerk or mechanic, for instance, who for- merly would have been compelled to surrender $1,000 of capital in buying a conveniently located vacant lot, on which to build his home, would now obtain a secure title to it with an initial outlay of but the first year's tax of $30. The five-acre tract of unimproved land in the suburbs of a city, really useful only for market garden purposes, which would formerly have cost $5,000, the gardener would now get with an initial investment of but $150, and this assessment might settle to even lower figures v/ithin a year or two. So, also, the tenant farmer and the sons of small land-owning farmers would obtain conven- iently sized farms on similar terms, not in remote wildernesses, but on the unused or but partially used lands to be found in the very neighborhoods in which they were living. They would thus have the advan- tages at once of schools, churches, good roads and nearby markets, and all the comforts and interests in life which highly civilized society affords. As already shown, a given amount of effort applied to such lands will often produce quadruple the wealth which it can bring forth on cheaper lands at greater distances from centers of population. Again, the manufacturer looking for a site for a new factory would no longer be forced to pass by an unimproved block in the heart of the manufac- turing district of the city, convenient to railroad and wharf, to schools and comfortable sanitary dwell- ings for employees, and locate his enterprise in a distant suburb, remote from such advantages. No "dog in the manger," by demanding a more or less The Nationalization of Land 231 exorbitant price, could prevent the employer from taking up the unused land most suitable for his pur- pose. He would always, therefore, be able to select the tract of unused or but partially used land on which the greatest amount of wealth could be pro- duced with the least expenditure of labor. Nor would the employer be compelled to take the chances of a land speculator in connection with a labor-employing enterprise. If his ground rent tax increased, it would be because his land was becom- ing more valuable and he could therefore afford to pay the additional rate; if the land decreased in value, his tax would decrease accordingly ; for, under no circumstances, after the system was fairly inaug- urated, would a land owner ever be required to pay as taxes more than the economic rent of the land which he owned. And so it would be as to all farm- ers, merchants, miners and homeseekers; nowhere would the purchase price of land, the greatest of all obstacles to employment, stand in the path of prog- ress. Nor would, for instance, appeals to philanthropy be necessary then to secure the construction of com- modious and sanitary tenement houses in the slums of great cities. All improvements on land being exempt from taxation, and land owners being no longer fined by an increase of taxation for improv- ing land, and sites for such tenements being obtain- able on easy terms, self-interest alone would quickly bring about the employment of labor in tearing down unsanitary rookeries, and in the construction of comfortable dwellings in place of them. As it is now, before the capitalist can build a model tene- ment house, he must pay some one for a suitable 232 The Problem of the Vnem^oloyed site from 25 to 100 per cent more than its present economic value. He is compelled to do this because of the anticipated increase in value always to be discounted and added to the real value in fixing the purchase price of land. This renders the invest- ment a more or less doubtful one. In a city like New York, the land alone on which to erect a com- fortable tenement often costs far more than the building itself; hence, error of judgment with re- spect to this speculative value may result in disas- trous loss instead of sure and moderate gain. "Busi- ness," instead of sweeping towards the proposed site and doubling and trebling its value, as its owner hopes will be the case, may go in another direction. At present, such investments at best partake in large part of the nature of a lottery. It is sometimes more of a land speculating scheme than a wealth-produc- ing and labor-employing enterprise. For every dol- lar invested in it in the payment of the products of labor, several times as much more must often be invested in the purchase of privilege. Under the conditions which would then prevail, however, not only would the land speculator's risk be eliminated, but this particular form of investment, as well as all others calling for the employment of labor, could be made with a much smaller amount of capital than is now possible. This of itself would largely facili- tate the employment of labor, and increase the de- mand for laborers. So also as to the settlement of land in cities and towns generally. Vacant lots, to be found every- where at present in the midst of improved premises, would soon disappear. Population, in obedience to natural law, would be attracted to the unused sites The Nationalization of Land 233 for homes and business purposes nearest at hand rather than to those among wildernesses of vacant lots in the suburbs. Nothing would then interfere with the natural tendency to use all land for some purpose, and to devote each particular parcel of it to the purpose for which it was best adapted, be it for a business block, a factory, a dwelling house, a farm, a sheep walk, or a cattle ranch. Hence unnecessary congestion of population in the slums of cities, and its unnecessary diffusion in the suburbs and rural districts, would be avoided. Highly improved roads, sidewalks and sewers, electric light, heat and power service, and all public utilities now impossible of enjoyment except in a limited degree by a limited number, would then be possible of enjoyment in the highest degree by the greatest number; and the expense would be trifling in comparison with what so wide a diffusion of these public utility privileges would cost under present conditions. This would be brought about by the natural and common sense manner of using land which the appropriation of eco- nomic rent by taxation would induce. The plan pursued in regulating the use of coal beds and mineral deposits would be slightly differ- ent. In the case of coal, the method for many years practiced by the City of New York in disposing of its wharf privileges would doubtless be followed. Coal beds would be leased for terms not exceeding, say, ten years, in lots to suit, to the bidders offering the government the greatest royalty per ton of coal produced. Forfeiture of the privileges granted would be the penalty for failing to mine in any one j^ear a stipulated minimum number of tons, the num- ber being in proportion to the magnitude of the bed 234 The Problem of the Unemployed leased. On the expiration of a lease, whether from forfeiture or lapse of time, so much of the coal bed as then remained would be leased for another term to the best bidder, the new lessee being required to pay his predecessor the actual value of the improvements. A miner, therefore, on finding out that his bid was too high — ^that he could not continue to pay the roy- alty agreed upon and compete with other operators — could safely submit to a forfeiture and take the chance of leasing the land on better terms, since, if any one bid over him, he would still recover the value of his improvcmonts. The purpose of the government would be, not to obtain the greatest possible income from royalties, as in the case of pri- vate ownership, but to bring about conditions under which consumers would be furnished with coal at as near the cost of production as possible. This would be accomplished in the manner described, since no one would then be able to derive profit from holding coal lands in idleness, unused coal beds being practically free to whoever chose to operate them. It would, therefore, take little capital to become a coal mine operator ; hence the number of coal mine employers would be increased to the advantage of employees as well as consumers. Under these conditions, only the coal beds most conveniently located and most easily worked would be operated at first — beds from which the greatest amount of coal could be produced with the least amount of effort — but the royalties paid would never- theless be small, on account of proximity to vast quantities of unused and practically free coal lands. It follows, therefore, that prices to consumers would The Nationalization of Land 235 be but little above the cost of production, provided railroad rates were alike to all and were limited to reasonable profits on improvement and equipment values. It may be remarked that a people with suf- ficient virtue and intelligence to accomplish the prac- tical nationalization of land would not submit to unjust discrimination, or extortionate charges on the part of public service corporations.* Assuming that this would be the case, and it can be easily shown that 6% interest on all capital invested in mining, transporting and selling coal could be allowed, the wages of miners, railroad employees, and all engaged in handling it could be doubled, and yet the price of anthracite coal in New York City would be reduced perhaps one-third. As it is now, on an average the consumer pays, say, $5.00 a ton for coal, of which labor gets approximately $1.25, capital 75 cents, and land and railroad franchises $3.00. Under the free land conditions described, the consumer would pay $3.50 per ton for coal, of which labor would get *No difficulty will be experienced in preventing rebates, and in securing uniform and reasonable rates, when it is fully realized that railroads and all public utility corporations are mere servants of the people, and as such entitled only to the chance of making reasonable profits, say, not exceeding six or eight per cent on the actual capital invested. The prob- lem will be simplified rather than rendered more complex by mergers and combinations carried no matter to what extent. Effective publicity alone will secure the observance of law on the part of such corporations, and render it easy to obtain all reasonable reductions in rates, either by the aid of commis- sions or otherwise. But the publicity must be effective, and it cannot be made so unless the books of public utility com- panies are kept under the supervision of government experts and in accordance with uniform methods prescribed by them. It is now a penitentiary offense to make a false entry in the books of a national bank. Why should the penalty be less in the case of a franchise-enjoying corporation? 236 The Problem of the Unemployed approximately $2.50, capital 75 cents, and land 25 cents.* Let the reader consider for a moment what a reduction of 33 1-3% in the price of coal, resulting not from lower wages, but from the abolition of mon- opoly, would signify. It would bring needed warmth and comfort to hundreds of thousands of dreary homes. It would stimulate manufacturing enter- prises, and reduce the cost of producing and trans- porting every article which contributes to the com- fort and happiness of mankind. An enormous increase in the demand for coal would produce an enormous increase in the demand for labor employed in mining it, and from this would follow an increase in the wages of the miner. And so in all departments of industry everywhere, in like manner and from like causes, the exactions of monopoly would melt away and the rewards of effort would increase proportionately. What, then, would the man of means do with his wealth as it accumulates ? He could no longer invest it in land, and, snapping his fingers in the face of labor, buy with it the privilege of taxing his fellow men. All such avenues for increasing one's wealth would be closed. As a general rule, no income could be realized from wealth unless it was so invested as to give employment to labor, while the obstacles to such investment which the price of land now inter- poses would have vanished. Everywhere on the borders of compactly settled communities, where *The figures used above are intended merely as illustrative of how free land conditions with respect to coal would reduce the price and change the ratio of the division of the product between the factors of land, capital and labor. The Nationalization of Land 237 all the advantages of a highly developed civiliza- tion could be enjoyed, would be found land prac- tically free and open to all who cared to use it for wealth-producing purposes. Is it not evident that the position of capital and labor would then be reversed? Capitalists would then beg for employers to use idle capital, and em- ployers would beg for employees even as employees beg now for employment. This being so, labor unions, Vv^alking delegates, strikes and boycotts would be unheard of. If economic rent were appropriated by taxation, there would be no occasion for trade unions, and working men would no longer be required in self- defense to submit to the tyranny of labor organiza- tions. No grinding down of wages could then result from individual freedom of contract between em- ployer and employee. If one laborer worked fifteen hours in a day instead of eight hours, and if another did twice as much work in a given time as the aver- age of his class, none would object. For additional wages would then inevitably be the reward of addi- tional effort; therefore, the pace set by the extra efficient workmen could not result in the reduction of the wages of the less efficient ones. At present, however, extra efficiency on the part of a few tends to reduce the wages of all; hence the necessity of trade union regulations compelling all to conform to a dull average of mediocrity. This not only destroys individuality and lessens the interest of the working man in his task, but it also largely decreases the amount of wealth which would otherwise be pro- duced; yet, but for such regulations, wages under 238 The Problem of the Unemployed present unnatural conditions would inevitably sink to the very starvation point.* The truth of what is stated in the preceding para- graph, that labor unions would then be unnecessary, can also be proven by the law of rent and its corol- lary, the law of wages. The reasoning, though some- what technical and calling for the close attention of the student, is unanswerable. Briefly recapitulated, it is as follows : Wages never naturally rise above, but always tend to fall to the level fixed by what labor can earn on free land, since all which a given amount of effort can produce on any land in excess *The effect on wages generally at present of some workmen trying to excel other workmen in the same line of employment is shown by the following extract from "The Story of a Rus- sian Workman," published in The Outlook: "Some years ago, my boss said to me, 'For every bolt you make we pay three copecks. Now, you are a fast man. Why don't you make more money? You can make more than all the other men.' So I worked faster. In a few weeks I was making one hundred and fifty bolts a day — four and a half ($2.25) rubles a day. Then the gentlemen who directed the factory said, 'Oh, this is too much for so simple a fellow.' So they decided to pay a lower price for each bolt. They did. But the baby had come, and I worked still faster. The other men had to keep as close behind me as they could, and so they all worked faster. Then again I got up to $2.25 a day. Again they said, 'Oh, this is too much for so simple a fellow.' They decided to lower the price again on each bolt. * * * In a few years this clever boss, who gets a commission, he has made us work faster and faster, while our wages stayed the same. Only a few of us are making more money — a little more, per- haps fifteen per cent. But even for us it is bad to have so many others working cheaper. Some of them may any day do our work for still lower wages. Now, what are you going to do about this? Is it right to keep always working faster? I want no more of the old slow factories; they are all over Russia and are very bad for this country. But lo^k here — when I keep working faster, I want to get paid more and more. And how can this be if the employers keep lowering the price for each bolt I make? And who wants to stop them from lowering the price? Only the workmen. If we don't stop them, no one else will. So we must have more and more labor unions." The Nationalization of Land 239 of what it can produce on the least productive land in use, or on free land, goes in the long run to land owners, either in the form of rent or of increase in the value of land.* Free land, or the least product- ive land in use, is now so remote from centers of population, or so lacking in fertility, that wages made upon it are little more than sufficient for the laborer's maintenance, hence wages in general natur- ally tend to fall.f This natural tendency can be resisted at present only by artificial methods. It therefore follows that trade union combinations are necessary under existing conditions, and that, but for them, wages would ultimately decline to the very starvation point. Under free land conditions, how- ever, it would be different. Now, the agricultural laborer on free land, which can only be found remote from markets, and where he is denied the co-oper- ative advantages of a highly developed civilization, can ea}Jn, say, but a dollar a day; then free land being always close at hand and adjoining thickly set- tled communities, he could earn upon it, say two or three dollars a day, since, on unused land of this character much more wealth can be produced with the same amount of effort. This increase in the wages of the agricultural laborer would cause a proportionate increase in the wages of all labor- ers, and such increase would come naturally, with- out the aid of trade union combinations, and not- *The law of wages, as already stated, is to the effect that the higher wages are on free land, or on the least productive land in use, the higher wages will be on all lands; the converse of this is also of course implied. fThis is the cause of the so-called iron war of wages announced by Ricardo. 240 The Problem of the Unemployed withstanding perfect individual freedom of contract between employer and employee. For it is evident if comparatively unskilled labor could always make two or three dollars a day on free land, laborers of the same grade in other lines of employment would never work for less on any land; and if the wages of this class of labor were thus by natural methods doubled and trebled, the wages of all classes of labor would be increased in something like the same pro- portion without artificial aids of any character. Again, since under prevailing conditions improve- ments in labor-saving processes do not naturally increase wages, the working man can reap no benefit from the increased amount of wealth which they enable him to produce, without resort to the arti- ficial aid of trade union combinations. This is so at present, because such inventions naturally in- crease rent and the value of land without increas- ing wages or rates of interest. In other words, in the division of the product among land, capital and labor, the additional wealth produced by such im- provements goes to land owners in the form of increase in rent and increase in the value of land, and not to laborers and capitalists in the form of increase in wages or increase in rates of interest. With free land conditions, however, none of this increase would go to land owners as such ; hence all of it would go to capitalists and laborers, and since, as already shown, rates of interest would not ad- vance, all of the increase in the product resulting from improvements in labor-saving processes would ^0 to labor in the form of increased wages, includ- ing the wages of both employer and employee. But the employee, owing to the small amount of capital The NatioTialization of Land 241 which would then be required to enable any one to profitably employ himself upon nearby free land, would be so independent of the employer that he could command and receive as wages approximately all the wealth which he produced. The wages of employees as well as those of employers would there- fore naturally increase with every invention which increased their wealth-producing powers ; and thus, with the removal of the cause which rendered them necessary, trade union combinations would disap- pear. Not only would the cause which produces the labor union be removed, but, to a great extent at least, the causes which bring about trusts and combina- tions in restraint of trade. For no one would then contend that a tariff was needed for the protection of the American working man. It would then be clearly seen that the sole cause of the high wages which he enjoyed was the abundance of practically free land to be found everywhere close at hand. Wages in the early part of the nineteenth century, for instance, before a protective tariff was inaugu- rated, were higher in America than in any of the countries of Europe, the advantage in favor of the American working man being even greater compara- tively than at present. This was so because land was cheaper here than in Europe ; or, in other words, because the rewards of effort on the least productive lands in use were greater here than there. And for this reason wages have always been higher in the United States than in England. Without a protective tariff — so well described by Mr. Havemeyer as the "mother of trusts" — with no discrimination in railway charges, with railway 242 The Problem of the JJnempUyed rates based largely if not solely on the improvement and equipment valuations of railroads, v^ith free land conditions in respect to coal beds and mineral de- posits, the very life v^ould be taken from nearly every trust which now defies the law of competition and prevents the exercise of individual initiative. Again, with increase of wages to employees as well as to employers, would come a general increase of intelligence, and voluntary co-operative associa- tions would doubtless assume proportions undreamed of at present. Consumers of all classes would thus be guarded against the rapacity of merchants and middlemen, as is already largely the case in England. Nor is it clear (theories of doctrinaires notwith- standing) that any line would then be drawn, put- ting an arbitrary limit to the functions of govern- ment at the franchise or anywhere else. Man ever strives to bring about the greatest results with the least amount of work, and it is difficult to see how the natural law could be violated by allowing the gov- ernment to do anything which experience shows it can do with less expenditure of human labor than would be the case if it were done by private citizens. The only questions to be then considered in deciding whether any certain enterprise ought to be under- taken by the government or not, would perhaps be, which will perform the service cheaper, the govern- ment or the individual? With unlimited opportuni- ties for profitable private employment produced by free land conditions, it is possible that little attention would then be paid to the plea that it is unfair for the government to compete with private interests in any field of enterprise in which it can serve the The Nationalization of Land 243 people cheaper and better than they are being served by individuals and corporations. The City of Boston sells coal to its school board and eleemosynary institutions ; if so, what real objec- tion can there be to its selling coal to private indi- viduals, should experience prove that coal can thus be distributed among consumers generally in that city at a saving of cost and labor? What better or simpler method could be devised for rendering inef- fective an agreement among coal dealers to charge unreasonable prices? Some years ago, the steamship companies engaged in carrying the twelve million dollars' worth of refrigerated meats annually exported at that time from New Zealand to England, formed a pool and raised freight rates. They were notified by the Prime Minister of New Zealand that unless the old rates were restored, the government would put on its own line of steamers. This threat was effective, and rates were at once reduced to the former level. The manufacturers of twine used in harvesting small grains formed a tariff protected trust, and doubled the price of this article. Minnesota and Iowa then began the manufacture of binding twine with convict labor, and the price of it soon fell 50% in those States. Who shall say that methods of the character noted above would not prove to be the best which could be adopted for the protection of the people against the exactions of such trusts, if any, as might survive the abolition of every form of legalized special privi- lege? The experience of New Zealand shows that methods of this kind would be effective at least. The government there not only operates all public utili- 244 The Problem of the Unemployed ties, but it also competes with individuals in the busi- ness of banking, of loaning money on real estate, of insuring lives and property, of mining coal, and even to some extent of carrying on ordinary manu- facturing establishments. There are no trusts, as we use the term, in that country, nor is it probable that they could thrive and prosper under conditions existing there. Whenever, in the manufacture or distribution of products, in the insuring of lives or property, or in the performance of any character of service, unrea- sonable charges are extorted by means of oppressive combinations, the real remedy for the evil may be found in the readiness of the government, either national, state or municipal, as the case may require, to become an active competitor in the business thus monopolized. The fear of arousing competition from such a source v/ould doubtless in most instances be sufficient in itself, as in New Zealand, to prevent the formation of any combination in restraint of trade. We may smile at the idea, but should the State of Kansas, by means of a great oil refinery which it was once proposed to build, be able to demonstrate that illuminating oil can be produced and sold by State governments at prices greatly below those now charged by the Standard Oil monopoly, would it not be foolish to allow the mere spectre of State socialism to deter us from extending the experiment into other fields and into other lines of enterprise ? What is there in the dream of the most ultra socialist to terrorize one who believes in the fullest measure of individual liberty? Is it likely, when special privi- The Nationalization of Land 245 leges and the private appropriation of rent shall have become things of the past, and all shall have tasted the fruits of industrial freedom, that the people will then consent to be shackled by a socialistic bureau- cracy ? Suppose the vision of Bellamy about the carrying on by the government of immense factories, shops, stores, and hostelries, banking and insurance enter- prises, were realized, and most of the waste of energy now resulting from competition were thus avoided ; this would only signify that experience had shown that in many instances and under certain cir- cumstances the government could obtain the same or better results with less expenditure of human effort than the individual, but it would not prove that it could do so in all cases and under all circumstances. With a telephone and an electric motor on every farm and in every home, and a trolley line or its equivalent at almost every door, numberless articles of comfort and luxury could doubtless then be made to greater advantage in small shops, and at the very homes of the workmen, than in great factories ; and especially so v/hen the craftsman's individuality of design or finish was desired. Again, it is impossible to conceive of any saving of labor by the govern- ment's engaging, for instance, in the cultivation of the soil. In this, the most important of all pursuits, as well as in all others in which energy is not largely dissipated by competition, labor would be wasted rather than saved were the State to attempt the role of employer. It therefore follows, since man always seeks to accomplish as much as possible with as little work as 246 The Problem of the Unemployed possible, that no matter how rapid the drift in this direction may seem, the socialistic commonwealth can never be attained, nor need the fear of it lead the individualist to dread any extension of the func- tions of government which imply either a saving of labor or relief from monopoly. CHAPTER XVII. NATURAL TAXATION. THE nationalization of land can be brought about gradually by dropping one after the other taxes levied on industry and the products of industry, and concentrating all taxation on the rental value of land. In other words, it can be accomplished by a single tax on land values. Since this method of taxation is in harmony with the natural law, and violates none of its canons, it is rightly called Natural Taxation. It is obvious that no tax should be levied which cannot be collected economically and without invid- ious distinctions between individuals ; neither should a tax directly discourage the production of wealth, nor should it be so adjusted as to bear with unneces- sary weight upon the very poor. These are self- evident truths, and any scheme of taxation which fails to harmonize with them is unsound, and must ultimately be discarded. It is sometimes thoughtlessly remarked that since a certain amount of money must be raised for the support of government, the manner of obtaining it is of small importance. As well might it be said that since a horse must haul a certain amount of freight, it is immaterial whether the cart be fastened to his tail or to his shoulders. An improper adjustment of the burden of taxation will not only lessen the amount of wealth which would otherwise be pro- duced, but it may result in the total destruction of 248 The Problem of the Unem^oloyed the wealth attempted to be taxed. Thus, the Egyp- tian government once increased the tax on date trees to such an extent that owners cut them down in self-defense, and thousands of acres of date groves, some of which had been producing wealth for centuries, were destroyed, being literally taxed to death. Nothing is more conducive to health, contentment and energy than plenty of v/indows for light and ventilation in the homes in which human beings must rest and eat and sleep, yet in some of the countries of Europe, even to this day, windows are taxed; hence in such countries as few windows as possible are placed in houses occupied by working men ; and huts in which tens of thousands of peasants are living have no windows at all. It is evident that such a tax reduces the wealth-producing power of those by whom it must be directly or indirectly paid. Again, farmers for instance cannot produce wealth with which to pay taxes v/ithout teams, cattle, agri- cultural implements and household furniture. Yet in hundreds of thousands of instances the Russian tax gatherer on his annual rounds ruthlessly strips the peasant of these tools of his trade, and in this way whole communities are often pauperized. The goose which lays the golden e^g is thus destroyed by taxation. Everywhere, even in this country, people are crowded into ugly, inconvenient and unsanitary buildings. Everywhere the man who, risking loss of capital in doing so, erects upon his land a dwell- ing, a barn, a storehouse, or a factory, or opens up a farm, or makes any other kind of improvement, is a public benefactor. Yet we punish him for thus em- Natural Taxation 249 ploying labor on land previously unused, by increas- ing his taxes. We fine him for making his land useful to mankind. Before he improves the land, he pays the government in the form of a tax a certain sum of money for its exclusive possession; as soon as he ceases to be a dog in the manger and does something with it of benefit to the public, something which gives additional value to all the land in the neighborhood, we reward him for his enterprise by doubling his taxes. A hard working farmer moves into a sparsely settled region, buys 100 acres of vacant land from some speculator, owning perhaps thousands of acres oi adjoining unused land, and opens up a farm. The new comer receives a hearty welcome from those who have settled there in advance of him. All of them are eagerly looking forward to the time when, with increase of population, will come better roads, schools, transportation facilities and the thousand and one economic and social advantages of a com- pactly built community, but the speculator's consent must first be obtained. Consent having been se- cured, at the cost perhaps of half or more of the settler's meager capital, the government then steps in and, by taxing his improvements, compels him to pay often three or four times as much every year for using the land as the speculator pays for holding his land in idleness. Ask the owner of any vacant lot surrounded by handsome buildings in a city, why he allows such valuable land to remain idle, and his reply will probably be that in his judgment non-use of it pays better than use. As it is now he can afford to let it lie idle, since the energy of those who improve ad- 250 The Problem of the Unemployed joining lands will, year by year, add to its value without risk or exertion on his part. Would this so often be the case if improvements were untaxed and the deficit made up by an increase in the land value tax? It can thus be shown by numberless illustrations that a tax on improvements on land discourages industry and enterprise, and encourages idleness and stagnation. And this is also true as to taxes levied upon chattels coming within the definition of personal property. If it were not so, why do enlight- ened communities sometimes, for instance, exempt from taxation fine stock used for breeding purposes ? Such an exemption is merely a remission of the fine which would otherwise be imposed on the owner for importing the stock. The fine is remitted on the theory that the community is benefited by having the stock brought in. But would not the community be benefited also by an increase in the stocks of goods of its merchants, by an increase in the capital of its banks, by an increase in the labor-saving machinery used by its farmers, by an increase in the number of looms and spindles in the factories? Why not then remit the fine imposed by taxation upon these things also, and in fact upon everything produced by labor which is useful in the production of wealth ? A tax on improvements, or on personal property, not only violates the canons of natural taxation, by discouraging the production of wealth, and by plac- ing unnecessary burdens upon enterprise, but it does so also because it is a tax which cannot be collected impartially or with any degree of fairness between individuals. This is especially true as regards all attempts to tax credits, whether evidenced by bonds Natural Taxation 251 or promissory notes or otherwise.* On this point, Mr. Shearman, in Natural Taxation, wrote as fol- lows: "If anything in human experience as applied to methods of taxation is settled, it certainly is the fact that taxation upon personal property never can be made a success. Taxes can be raised from personal property, no doubt ; for large sums of money are thus raised ; but that they cannot be levied with any reas- onable approach to accuracy or equality is demon- strated, not only by conclusive reasoning, but by the more conclusive fact that they have never been thus *"It makes liars and perjurers of all wlio are subject to its operations, as shown in the following illustrations: Some years ago a returned missionary took up his abode in a town of about 10,000 inhabitants in Ohio. His entire fortune, amounting to the munificent sum of $3,000, was loaned at 5% interest. When the time for preparing the assessment rolls came around, he was furnished by the tax assessor with the usual blanks to be filled out and sworn to, in which he was required to list and appraise, among other things, his house- hold furniture and library, and also all money loaned on mort- gage or otherwise. He was an honest and truthful man. His furniture and library had cost about $1,800, which he, with some qua,lms of conscience, however, appraised at $500, on the theory that while it was really worth more, it would not bring more at forced sale. He also made aflidavit to the simple fact that he had $3,000 loaned on mortgage security, and that this credit was worth $3,000. How could he, with the fear of God in his heart, do otherwise? Now while there were in this town one or two millionaires, and numbers of people worth more than a hundred thousand dollars each, and scores of residences In which the books and furniture were worth from five to ten thousand dollars, yet the assessment rolls that year showed that this poor missionary was living in the most expensively furnished house in the place, and that he was one of the largest lenders of money which it afforded. The tax rate was 2i/^%, hence the missionary was able to net 2^^% interest on his loan. He had the poor satisfaction of knowing, however, that of all the people in that town who had filled out and sworn to an assessment blank, he was the only one who had not delib- erately committed perjury. It is safe to say that instances like this can be duplicated in every community in the United States where a single honest rendition of personal property for taxes can be found, even if this story is not literally true in all respects. 252 The Problem of the Unemployed levied. It is not for want of earnest and long sus- tained effort that the failure of this system of taxa- tion has come to pass. For centuries the effort has been made; and for at least six centuries it was backed by all the power of a government which com- manded the whole civilized world, and which armed its tax-gatherers, not with the paltry weapons of oaths and penalties, but with the more substantial powers of indiscriminate search, the lash, the rack, the thumbscrew, the gridiron, and the cross. The Roman empire fell to pieces under the pressure of this vain effort to reach personal property by taxa- tion. * * * "Gibbon mentions, quite as a matter of course, that fathers murdered their children on a large scale, principally as a result of fear of tax-gatherers ; that racks and scourges were freely used; that the ap- proach of the tax-gatherer *was announced by the tears and terrors of the citizens'; and that false returns were punished with horrid deaths, as being both 'treason and sacrilege' (History, chapters xiv and xvii). "That which all the tremendous power of Rome in its grandest days failed to accomplish, that which the infernal tortures of Spain could not accomplish, when it beheaded hundreds, burned thousands, and massacred tens of thousands, letting loose a brutal soldiery in a vain struggle to tax the Netherlands, American farmers are still apparently convincc^d that they can accomplish by distributing blank forms, administering long oaths, and threatening penalties of fifty per cent. How far they have suc- ceeded, governors, assessors and tax commissions in New York, Ohio, Maryland, West Virginia and many other States have set forth again and again, lament- ing the utter failure of the system. Their complaints have become monotonous in their uniformity. * * * "The result of the widespread maintenance of these taxes is to fill the land with liars and perjurers. In some States the business of perjury is mostly Natural Taxation 253 confined to the assessors; who regularly make re- turns which they know to be false, but cannot make true. In others, such as Ohio, Vermont, Connect- icut, all the Southern States and most of the West- ern States, perjury is the business of the tax-payers. Their scrupulous consciences in many cases find a way of escape by omitting, in fact, to take the oath which they sign; and they are innocent of every- thing except lying. The delicately conscientious get some one to sign for them; and where an oath is absolutely required, a considerate notary certifies to the oath before it is taken; after which, of course, it is not taken at all. On surveying the whole field, however, one's faith in American truthfulness is cheered, and we entertain large hope for the future of humanity. For it appears that where blanks are diligently circulated and oaths insisted upon, the average man will return ten, if not fifteen per cent, of his personal property; whereas, in the absence of this appeal to piety, he will return nothing at all. * * * In one town (in New York) the proceeds of a single auction sale of cattle, belonging to one resident, amounted to $360,000; while the whole assessment of personal property in that town was $28,850; 'a sum very much less than that obtained for one cow.' "The assessors say: *A large percentage of all the personal property assessed is found entered on the rolls to women, minor heirs, lunatics, who can- not watch with the eagle eye of business men, or to trustees or guardians.' In some towns these classes held more than one-half of all the personal property on the assessment roll. Two women, residing in the village of Batavia, were assessed for more personal property than all the individuals in the neighboring city of Rochester, with a population of 70,000. In one town a girl, mentioned in the assessment as a lunatic, was assessed $5,000 for personal property, which the assessor stated was the full amount of her personal estate. All over the State 'the amount of 254 The Problem of the Unemployed the assessment depends more on the will, craft, con- science (or want of conscience) of the party assessed than upon the law or its enforcement.' "The state of affairs has grown worse with each succeeding year. In 1892 a ridiculous law was passed, much lauded by the governor, requiring applicants for reduction of assessment to make oath that they had not incurred debts in the purchase of non-taxable property, or for the purpose of avoid- ing taxation. It ought to have been entitled: *An act to punish truthfulness and to reward perjury.' "Experienced assessors in every State say that the most honest returns of property are always made by the poorer classes, and the most inadequate returns by millionaires; while widows who have no experi- ence in business, and trustees who represent widows and orphans, are taxed upon every dollar that they own. "The experience of California furnishes perhaps the latest example of the utter failure of all schemes for taxing personal property to work out anything like an approximation to justice. "In 1879 a new constitution was adopted. * * * Under this constitution and these laws, not only were bonds, money and credits made taxable, with- out any deduction on account of debts, except from credits, and then only such debts as are due to resi- dents of the State of California ; but holders of stock in corporations were avowedly and intentionally subjected to double taxation; first, upon the cor- porate property, and again upon the capital stock, which is merely their evidence of title to that prop- erty. It was supposed, alike by the friends and enemies of the new constitution, that under its oper- ation personal property of every description would be thoroughly reached, and at any rate, that what- ever was by chance overlooked would be more than made up by double taxation upon that which was found. The actual result has been to falsify all the predictions of both the friends and enemies of the Natural Taxation 255 constitution ; for it has done almost none of the good or evil which was anticipated; for the reason that the capacity of the patriotic taxpayer to commit per- jury has been altogether underestimated. Some of the results are positively ludicrous. "If the assessment returns are to be believed, in nine-tenths of California there is not a pound of butter; in four-fifths of the State the sheep do not produce any wool; fifty counties have quantities of beehives, but only four have any honey; personal property is vanishing from San Francisco ; loans of money are becoming unknown in the rest of the State; municipal bonds of all kinds are not held within the State to an amount equal to one-tenth of those outstanding ; and finally, money has been smit- ten by a pestilence, two-thirds of all that was there before the adoption of the constitution having already taken to itself wings, and showing no signs of returning. * * * "The general result has been that the proportion of personal property to the whole assessed value of property has steadily fallen from 50 per cent in 1861 to 34 per cent in 1874, 26 per cent in 1880, and 13 1/2 per cent in 1894. * * * While improvements upon land in San Francisco increased about one- third in six years, money fell ofl^ more than two- thirds, and other personal property nearly one-third. In the rest of the State, which is mainly agricul- tural, the value of improvements increased nearly one-half; personal property, other than money, in- creased nearly one-sixth; while the loss of money among the farmers, though severe, did not compare with the affliction which befell the capitalists of San Francisco. The general result was to reduce the share of San Francisco in the State tax from 40 per cent to 30 per cent. In other words, the city paid 25 per cent LESS, and the farmers 16 2/3 per cent MORE. This result has continued ever since. 256 The Problem of the Unemployed "According to unanimous testimony, the city of Boston is so fortunate as to possess a board of assess- ors in whose honesty and ability every one has confi- dence, and who are fanatical believers in the taxa- tion of personal property. These assessors are armed by law with almost despotic powers of search and with absolutely despotic powers of valuation. They can ransack every man's books; they can disregard all the evidence, when they have finished. After exhausting all their powers of inquiry, they are allowed to meet in secret, to go through a process of arbitrary assessment, fitly known by the name of 'dooming.' Their return of details for the year 1889 showed that the whole amount of taxable property, which they were actually able to discover, was $39,000,000, exclusive of bank stock. Being dissat- isfied with this estimate, which was all that was justified by any facts which they could state, they proceeded to multiply it four and a half times by a mere guess. In their dooming chamber they guessed that personal property, other than bank stock, ought to be valued at $186,000,000; and the citizens of Boston were compelled to pay taxes upon that amount. Could anything be more monstrous or more absurd than a system of taxation which, even when administered by phenomenally honest and compe- tent men, produces such results ? * * * Almost the whole of the things visible to Boston assessors consisted of merchandise and > machinery. Taxes upon these, of course, if equally distributed, simply increased the cost of goods to consumers, just as excise duties on whisky increases the cost of whisky to drinkers. But it is manifest, from the arbitrary increase made by the assessors, that these taxes were not equally distributed, and therefore one large section of taxpayers was robbed for the benefit of the other section. For unequal taxation upon pro- ducers makes it impossible for those who are taxed beyond their just share to recover such excess from their customers; while those who are taxed below Natural Taxation 257 their share recover all which they have paid under strictly equal taxation. It follows that those who are taxed most are simply plundered, under forms of law, for the profit of their competitors who are taxed least. If Havemeyer and Spreckles were the only refiners of sugar, and both were taxed equally upon their production, both would recover the tax from their customers. But if Havemeyer should be taxed, while Spreckles went free, Spreckles could undersell Havemeyer, who would be practically robbed for Spreckles' benefit. * * * **In Illinois an even more drastic method prevails. A Board of Equalization, if of the opinion that the valuation of any county is too low, increases every- body's taxes fourfold, on the assumption that all have made false returns alike. Thus the conscien- tious taxpayer is made to feel that virtue must indeed be its own reward." The poorer classes, including the small farmer and the modest home owner in town or city, are those who suffer most from any maladjustment of the powers of government. For not only are the rich better able to stand the losses resulting from it, but it is easier for them to evade or ward off the ill effects of legislation which violates the natural law. This is nowhere more manifest than in matters of taxation. Thus, the buildings and improvements of small farmers and home owners in moderate circum- stances everywhere approach a certain degree of uni- formity, and the approximate value of improvements of this class is a matter of common knowledge. It is, therefore, difficult to under-appraise them for taxation. Not so, however, as regards the palaces of the rich and the immensely valuable improve- ments in the cities. Again, in the country, every one has more or less knowledge of his neighbor's 258 The Problem of the Unemployed business, of the live stock which he owns and the amount of money which he may have loaned out, etc. This is not the case in cities and towns ; hence tax assessors in small places are more likely to list a greater percentage of personal property than in larger communities. In fact, experience shows that this is nearly always so, and the burden of this species of taxation falls with greater weight upon the country than upon the town, upon the man of small means than upon the man of large means. Not only so, but the man in moderate circumstances can- not afford, like the millionaire, to spend time and money, legitimately or otherwise, on tax assessors and boards of appraisement for the purpose of se- curing a small rendition and low assessment of his property. And so in every State in the Union, not- withstanding all kinds of legislation to prevent it, the greater a man's possessions in stocks and bonds and personal property generally, as well as in im- provements on land, the less in proportion are the taxes which he pays on property of this kind, com- pared with the man of moderate means. While the tax collector is som^etimes able to list thirty or forty per cent of the poor man's wealth in personal prop- erty and improvements he is compelled to let the rich man off on far better terms. As shown in previous chapters, a tax on economic rent, or, in other words, a tax on land alone, accord- ing to its value without reference to improvements, is a tax on privilege. It is merely the taking by the government of a portion of the tribute paid for the privilege of employment, which would otherwise go to individuals ; while a tax on the products of indus- try is, in effect, the levying of a fine on enterprise. Natural Taxation 259 On the average, the more valuable the land the less valuable in proportion are the improvements which rest upon it. Thus in a sm.all place a mechanic puts up a thousand or fifteen hundred dollar house on a five hundred dollar lot, while in the best residence portions of a city the ground on which a handsome dwelling is built usually costs as much if not more than the building itself, and in the business districts this is almost invariably the case. In New York, for instance, as already mentioned, land values on Manhattan Island, exclusive of improvements, are assessed at $4,000,000,000, while improvem.ent val- ues are assessed at only about half that amount, and in that city there are comparatively few buildings which are as valuable as the land on which they stand. As to the farmer, the less valuable the land which he cultivates, the more valuable in proportion are the improvements and personal property upon it, including the value of the work done in reducing the land to cultivation. This is the rule when land in actual cultivation only is considered, but it cannot apply when much of the farmer's land is unim- proved, and when he is in fact more of a land specu- lator than a farmer. It is thus evident that every one whose personal property and improvements exceed the value of his land will be directly benefited by the transfer of taxes from the products of labor to land alone, or, in other words, by the remission of fines upon indus- try, and the consequent increase of taxes on privi- lege. That this would result in the reduction of the direct taxes of an overwhelming majority of the land owners of this country, including the farmers, is 260 The Problem of the Unemployed clearly shown in the work on Natural Taxation already referred to.* Indirect taxes, such as those raised by means of a tariff on imported goods, and those levied through the internal revenue department of this country, are collected impartially from all consumers, rich and poor alike; but such taxes involve enormous waste, and bear with crushing weight upon the small prop- erty owner as well as upon the poor who have no property at all. The merchants who sell goods which have been taxed by this method must collect from the consumer not only the amount originally paid the government on the article taxed, but enough more to provide a profit for himself and for all who have previously handled it, on the additional outlay of capital thus required. This, like all attempts to tax wealth generally, has the effect of reducing the purchasing power of wages in this country 15 per cent or more.f In other words, if we could abolish indirect taxation and all taxes levied upon the prod- ucts of industry, without in any way shifting the burden upon consumers, the income of all workers would in effect be increased at least 15 per cent from this cause alone. Our present method of raising public revenues is well characterized by Mr. Shearman as "crooked taxation." It is crooked, because, while based in some instances on the theory apparently of making those who have the most pay the most, in practical *The subject of this chapter is so thoroughly and interest- ingly covered in Shearman's "Natural Taxation," that nothing more than a mere outline of the single tax will be attempted in this work. fSee Natural Taxation, Chapter II. Natural Taxation 261 operation it compels every citizen, whether a prop- erty owner or not, to contribute to the support of the government, not according to his ability to pay, nor according to benefits received, but according to the number of mouths he must feed and the number of backs he must clothe. For the effect of all at- tempts to tax wealth is to increase the prices of things taxed, or the amount paid for the use of them. In the long run, and on the average, the consumer or the user reimburses the property owner for all taxes which the property owner pays on the things which the consumer uses or consumes. The tax on a build- ing, for instance, is taken into account in fixing the rent of the tenant, as much so as the cost of insur- ance, repairs and janitor service. As a general rule, an additional tenement will not be put up in any locality until the demand is strong enough to enable the owner to collect sufficient rent to cover taxes on the building as well as interest on the cost of it. Hence tenants pay the taxes assessed against tene- ment house improvements. So also, if it were pos- sible to tax credits with any degree of uniformity, rates of interest would rise, and users of capital borrowed would in effect pay the taxes levied against lenders. Not only is the present system of taxation crooked in that it enables those who in the first instance pay taxes on wealth to largely shift the burden upon those who must use or buy the articles taxed, but, in the very nature of things, such taxation falls with crushing effect upon the poor, as compared with its effect upon the rich. This is so because taxes must always be paid out of the taxpayer's possible savings. The average working man in the United States, 262 The Problem of the Unemployed taking into account the time lost in involuntary idle- ness, earns less than $400 a year.* Of this amount he uses, say $395 for support of himself and family (little enough, surely), leaving possibly $5 a year to lay by for old age ! If no taxes were levied on the products of industry, i. e., on v^ealth, and if taxes were so levied that the burden could not be shifted, the laborer's income, and all incomes derived from labor, would, as shown by Mr. Shearman, be ad- vanced 15 per cent or more. In other words, the average working man could live just as comfortably then on $335 a year as he can now on $395. He could just as easily save $60 a year then as he can save $5 a year now. His possible savings would be increased twelve-fold. He could save money twelve times as fast. The burden of taxation at present, therefore, is so adjusted as to take eleven-twelfths or more of the possible savings of the average work- ing man, or nearly one-sixth of his entire income. When we think of the taxpayers of a community, we usually leave out of consideration the heaviest taxpayers of all, the people who own no taxable prop- erty. We lose sight of this truth, because of our crooked system of taxation; it is unwittingly, yet skillfully, arranged to increase the burdens of the poor to the benefit of the rich, without either rich or poor suspecting that such is in fact the case. Take another illustration: The direct taxes of a farmer worth $10,000, who has an income of $1,000, are, say, $100 a year. He can live comfortably on $800. His possible savings, therefore, amount to $200 annually, one-half of which is consumed in the *See "Natural Taxation"; also Carrell D. Wright's "Prac- tical Sociology." Natural Taxation 263 payment of direct taxes; hence his net savings amount to $100 a year. He has a neighbor worth twice as much, or $20,000, whose direct taxes are therefore twice as great, or $200. Suppose this neighbor's income to be twice as great also, or $2,000 a year. The neighbor can also live comfortably on $800 a year; his possible savings, therefore, are $1,200, of which $200, or only one-sixth, is consumed in the payment of direct taxes, and his net savings amount to $1,000 a year. The burden of direct taxa- tion upon the farmer worth $10,000 is therefore ten times as heavy as upon the farmer worth $20,000. The latter, although worth but twice as much, can live as well as the former and yet save ten times as much. And so, *'The destruction of the poor is their poverty." If these comparisons be extended so as to include incomes of a million dollars and upwards, it will be seen that the burden of taxation often bears upon the man with a small income a thousand and some- times ten thousand times heavier than upon million- aires and multi-millionaires. The result of this crookedness is to render it more difficult for the poor, and less difficult for the rich, to accumulate savings than would otherwise be the case. This to some extent explains the fact that while the number of those who have large fortunes is rapidly increas- ing in America, the percentage of the total popula- tion who have no taxable property at all is increas- ing much faster. It may be said in reply that an overwhelming majority of workingmen would continue to spend all they made as fast as made, no matter to what extent wages were advanced; but even so, a permanent 264 The Problem of the Unemployed increase in the purchasing power of wages would nevertheless make it easier for thrifty workingmen to save. More therefore would save. The number of property owners would be increased and the foun- dations of good government would be broadened. At present extraordinary strength of character is necessary to enable one to support himself and fam- ily and save anything on $400 a year. The few who are thus endowed usually rise above their fellows and become employers and managers themselves. The causes of increasing discontent in the ranks, however, cannot be safely ignored simply because privates who deserve promotion have the chance of attaining it. Should the present ratio of increase of tenants on farms and in the cities and towns be maintained for a few decades longer, less than one per cent of the families of America will soon own the land on which the other ninety-nine per cent must live. It is evi- dent that the mildly restraining powers of a free government will be utterly incapable of coping with the forces of discontent which the house of Want will then marshal against the house of Have. And unfortunately this kind of discontent is intensified rather than alleviated by common schools and the spread of intelligence generally. Hence, just in pro- portion as we approach the conditions referred to, government by injunction, martial law and methods of like character will become more and more fre- quently necessary. A ^'strong government" must in the end appear, which will habitually ignore all con- stitutional guarantees of individual freedom. Was not something of this kind recently seen in Colorado ? It is evident that methods for raising the public Natural Taxation 265 revenue, which waste so much in the collecting, which put a premium upon fraud and perjury, which impose fines upon industry, which shift the burden from the rich to the poor, and tend to steadily lessen the size of the property-owning class, cannot con- form to the natural law. But it is claimed in some quarters that there is no natural law pertaining to taxation ; that nature has given no intimation of any plan by which means for satisfying the increasing social or governmental wants of mankind can be obtained without waste, confusion and injustice. Can this be so when all human progress is the result of the effort of man to ascertain the natural law, be it moral or physical, and conform his actions to it? In no other way does he conquer nature ; in no other way can he conquer himself. Man's relation to his fellow-men, and to the land on which all must live, is such that government is necessary. It is necessary not only to prevent the strong from imposing upon the weak, but to enable man to rise above the tyranny of physical environ- ment and most effectively subject to his use the forces of the universe. Government, for instance, enables him to lay out and improve highways, with- out which he could never have risen from the savage state. It enables him to dot the seacoast with light- houses and life-saving crews, to warn the mariner and the farmer of approaching storms, to conserve life and health by public sanitary measures, and at a minimum of effort to provide means of education through public schools and means of communication through public mails. Government is necessarily something more than the big policeman, whose du- ties, it is claimed by the laissez faire school of econ- Z66 The Problem of the Unemployed omists, should end with the preservation of order. Government is in effect a great co-operative organ- ization, actively engaged even now in assisting men in the production of wealth. And it is more than probable that, with increase of intelligence and im- provements in morals, the functions of government will be largely extended, and an immense saving of human energy thus effected which would otherwise be wasted in misapplied efforts and senseless com- petition. To enable government to best serve the people in the constantly extending sphere of its activities, a constantly increasing revenue is necessary. Since this revenue is to be used for the benefit collectively of all the people, would not the ideal fund from which it should be drawn by taxation be a fund produced collectively by all the people? If there is such a fund, if taxes can be so adjusted as to be drawn entirely from it, would it not seem as though this fund had been created for this very purpose? Would not the natural law clearly indicate that this fund, produced by the common energy and enterprise of all, ought first to be used by the government for the benefit of all, before drawing from funds pro- duced by individual effort? In land values, we have in all respects a fund of the character above indicated. The value which a certain tract of land has, exclu- sive of all improvements on it, depends not on what its owner does, but upon what the people collectively do. If they settle around it and improve adjoining lands, they collectively create and bestow upon this particular tract additional values ; if they move away from it, if the population of the neighborhood de- Natural Taxation 267 creases, the value of the land decreases also. And when public revenues are expended in its vicinity in the improvement of streets and highways, and in the maintenance of good schools and good govern- ment generally, the land is thereby directly enhanced in value. And as population and the needs of gov- ernment increase in any community, the land value fund of that community automatically increases in like proportion in accordance with an apparently preconceived plan to supply in this way a fund with which to meet the growing wants of government. If nature has decreed that the values attaching to land shall ultimately be appropriated by taxation for the common benefit of the people who in common create them, then none of the evils connected with attempts to tax wealth* which have been pointed out should flow from the taxation of land values. In point of fact, a tax on land alone, according to its value, and not in excess of economic rent, can never give rise to such evils. For such a tax is merely the appropriation by the government of tribute money which would otherwise be appropriated by indi- viduals. If we consider the effects which would result from levying all direct taxes on land values alone, we find that none of the objections which necessarily flow from all attempts to tax wealth would apply. In the first place, such a system of taxation would con- stantly tend to lessen instead of constantly tending to increase the burden of small property owners; *The meaning of wealth as used in this chapter and else- where in this work must not be confused with the broader popular definition of the word. 268 The Problem of the Unemployed it would tend to distribute wealth among the many rather than to concentrate it among the few. Again, no taxpayer would have the slightest incli- nation to commit perjury. It would be impossible for him to conceal his land, and it would be useless for him to place any value upon it. The improve- ments on any particular tract of land not being con- sidered in determining its value, tax assessors and boards of appraisers would fix the values of all lands by reference to maps showing the location of the property, and without regard to the ownership of it. In fact, no other course would be possible, since excuses could not be trumped up for placing different values upon tracts in the same neighbor- hood having in fact the same value. Every prop- erty owner would be able to compare the valuation placed upon his own land with that placed upon his neighbor's, unembarrassed by questions relating to the value of improvements; hence almost absolute uniformity of taxation would be secured, and this, too, at a minimum of expense, since vast hordes of tax-gatherers and tax officials could be dispensed with.* Not one of the evils necessarily accompanying all attempts to tax wealth, to which attention has been called in the preceding pages, can be urged against the system of natural taxation referred to in this chapter. Not only would taxpayers be re- lieved from all attempts on the part of dishonest tax officials to extort blackmail, not only would unfair discriminations between individuals be ren- *Many progressive cities in the United States have already adopted this plan of assessing property under what is known as the "Somers System." Natural Taxation 269 dered practically impossible, but no one would then be deterred by fear of increase of taxation from employing labor in putting improvements on land. Neither would there be any shifting of the burden of taxation ; consumers would reap the entire benefit in the reduction of prices, and tenants in the reduc- tion of rents. For instance, it costs less than 25 cents a gallon to manufacture whisky, yet the article sells at wholesale for $1.75 a gallon and upwards. This difference between the cost of production and the price paid by the wholesale dealer results from the fact that whisky is taxed by the Federal Gov- ernment 90 cents a gallon. The consumer therefore pays this tax, together with the additional profit received by middlemen on account of the additional capital required, by reason of the tax, to handle the thing taxed. Can one doubt but that if the tax were removed, consumers would buy whisky for less than 80 cents a gallon, instead of paying $1.75 and up- wards? It is thus evident that consumers, and not manufacturers and dealers, would reap the benefit of the exemption from taxation of personal prop- erty. It is equally clear that the renter, and not the land-owning landlord, would also in the long run obtain all the advantages resulting from exempting buildings and improvements on land from taxation. Take even the modern office building as an illustra- tion, which occasionally, though very rarely in large cities, exceeds in value the land which it occupies. At first thought one might conclude that owners of properties of this kind would reap the benefit, and not the tenants who occupy them. For the first year or two such might be the case, but the owners 270 The Problem of the Unemployed of equally valuable unimproved or but partially im- proved lots in the same neighborhood could not afford to have their taxes doubled, without any increase of income from the property taxed, as would be the case if no taxes were levied on improvements and personal property. They would, therefore, be com- pelled to put up improvements themselves of a char- acter suitable to the locality. There being no taxes on buildings, it costing no more to hold a tract of land with a suitable improvement on it than to hold it in partial or absolute idleness, land owners would respond more quickly than under present conditions to an increased demand for tenements. Competition among landlords for tenants would therefore reduce rents.* Reflection will satisfy the reader that a tax on land values cannot be shifted, so long as it does not exceed the economic rent of the land; that it is always a straight tax, and never a crooked one ; that it must always be paid by the land owner in the end, and never by any one else. This is so, because it is an appropriation by the government of a portion of the economic rent, or a portion of the increase in the value of land, which would otherwise be appropri- ated by the land owner. A tax on buildings increases the amount which must be paid for the use of them ; a tax on money or on credits (if it could be collected) would increase rates of interest ; a tax on food, cloth- ing, or any other article of consumption, increases its cost to the consumer; but a tax on land values has just the opposite effect, it simply makes land cheaper. It increases the difficulty of holding land *See pages 206 and 207. Natural Taxation 271 in idleness ; and if the tax were gradually increased this difficulty would be gradually increased also, until the time would finally come when all idle land would be free land ; and hence the paradox that the wealthy would be the least benefited by abolishing taxes on wealth. APPENDIX. THE RIGHT TO THE USE OF THE EARTH. THE following is from the first edition of Mr. Herbert Spencer's ''Social Statics,'' Chapter IX, on "The Right to the Use of the Earth":* "1. Given a race of beings having like claims to pursue the objects of their desires — given a world adapted to the gratification of those desires — a world into which such beings are similarly born, and it unavoidably follows that they have equal rights to the use of this world. For if each of them 'has freedom to do all that he wills, provided he infringes not the equal freedom of any other,' then each of them is free to use the earth for the satisfaction of his wants, provided he allows all others the same liberty. And conversely, it is manifest that no one, or part of them, may use the earth in such a way as to prevent the rest from similarly using it; seeing that to do this is to assume greater freedom than the rest, and consequently to break the law. "2. Equity, therefore, does not permit property in land. For if one portion of the earth's surface may justly become the possession of an individual, and may be held by him for his sole use and benefit, as a thing to which he has an exclusive right, then other portions of the earth's surface may be so held ; and eventually the whole of the earth's surface may be so held ; and our planet may thus lapse altogether into private hands. Observe now the dilemma to which this leads. Supposing the entire habitable ♦This chapter was omitted in the subsequent editions of "Social Statics." 274 Appendix globe to be so enclosed, it follows that if the land owners have a valid right to its surface, all who are not land owners have no right at all to its surface. Hence, such can exist on the earth by sufferance only. They are all trespassers. Save by the permission of the lords of the soil, they can have no room for the soles of their feet. Nay, should the others think fit to deny them a resting place, these landless men might equitably be expelled from the earth alto- gether. If, then, the assumption that land can be held as property involves that the whole globe may become the private domain of a part of its inhab- itants ; and if, by consequence, the rest of its inhab- itants can then exercise their faculties — can then exist even — only by consent of the land owners; it is manifest, that an exclusive possession of the soil necessitates an infringement of the law of equal freedom. For men who cannot 'live and move and have their being' without the leave of others, cannot be equally free with those others. *'3. Passing from the consideration of the possi- ble to that of the actual, we find yet further reason to deny the rectitude of property in land. It can never be pretended that the existing titles to such property are legitimate. Should any one think so, let him look in the chronicles. Violence, fraud, the prerogative of force, the claims of superior cun- ning — these are the sources to which those titles may be traced. The original deeds were written with the sword, rather than with the pen ; not law- yers, but soldiers, were the conveyancers; blows were the current coin given in payment; and for seals, blood was used in preference to wax. Could valid claim be thus constituted? Hardly.. And if not, what becomes of the pretensions of all subse- quent holders of estates so obtained? Does sale or bequest generate a right where it did not previously exist ? Would the original claimants be nonsuited at the bar of reason, because the thing stolen from them had changed hands? Certainly not. And if Appendix 275 one act of transfer can give no title, can many? No ; though nothing be multiplied forever, it will not produce one. Even the law recognizes this prin- ciple. An existing holder must, if called upon, substantiate the claims of those from whom he pur- chased or inherited his property; and any flaw in the original parchment, even though the property should have had a score of intermediate owners, quashes his right. " *But Time,* say some, *is a great legalizer. Im- memorial possession must be taken to constitute a legal claim. That w^hich has been held from age to age as private property, and has been bought and sold as such, must now be considered as irrevocably belonging to individuals.* To which proposition a willing assent shall be given when its propounders can assign it a definite meaning. To do this, how- ever, they must find satisfactory answers to such questions as, How long does it take for what was originally a wrong to grow into a right? At what rate per annum do invalid claims become valid? If a title gets perfect in a thousand years, how much more than perfect will it be in two thousand years ? — and so forth. For the solution of which they will require a new calculus. "Whether it may be expedient to admit claims of a certain standing, is not the point. We have here nothing to do with the considerations of conventional privilege or legislative convenience. We have simply to inquire what is the verdict given by pure equity in the matter. And this verdict enjoins a protest against every existing pretension to the individual possession of the soil ; and dictates the assertion that the right of mankind at large to the earth's surface is still valid; all deeds, customs and lav/s notwith- standing. * * * "9. No doubt great difiiculties must attend the resumption, by mankind at large, of their rights to the soil. The question of compensation to existing proprietors is a complicated one — one that perhaps 276 Appendix cannot be settled in a strictly equitable manner. Had we to deal with the parties who originally- robbed the human race of its heritage, we might make short work of the matter. But, unfortunately, most of our present landowners are men who have, either mediately or immediately — either by their own acts, or by the acts of their ancestors — given for their estates equivalents of honestly earned wealth, believing that they were investing their sav- ings in a legitimate manner. To justly estimate and liquidate the claims of such, is one of the most intri- cate problems society will one day have to solve. But with this perplexity and our extrication from it, abstract morality has no concern. Men having got themselves into the dilemma by disobedience to the law, must get out of it as well as they can ; and with as little injury to the landed class as may be. "Meanwhile, we shall do well to recollect that there are others beside the landed class to be considered. In our tender regard for the vested interest of the few, let us not forget that the rights of the many are in abeyance, and must remain so, as long as the earth is monopolized by individuals. Let us remember, too, that the injustice thus inflicted on the mass of mankind is an injustice of the gravest nature. The fact that it is not so regarded proves nothing. In early phases of civilization even homicide is thought lightly of. The suttees of India, together with the practice elsewhere followed of sacrificing a hecatomb of human victims at the burial of a chief, shows this ; and probably cannibals consider the slaughter of those whom *the fortune of war' has made their prisoners, perfectly justifiable. It was once also universally supposed that slavery was a natural and quite legitimate institution — a condition into which some were born, and to which they ought to submit as to a Divine ordination ; nay, indeed, a great pro- portion of mankind hold this opinion still. A higher social development, however, has generated in us a better faith, and we now, to a considerable extent, Appendix 277 recognize the claims of humanity. But our civiliza- tion is only partial. It may by-and-by be perceived that Equity utters dictates to v^hich we have not yet listened ; and men may then learn that to deprive others of their rights to the use of the earth, is to commit a crime inferior only in wickedness to the crime of taking away their lives or personal liberties. "10. Briefly reviewing the argument, we see that the right of each man to the use of the earth, limited only by the like rights of his fellow-men, is imme- diately deducible from the law of equal freedom. We see that the maintenance of this right necessarily forbids private property in land. On examination all existing titles to such property turn out to be invalid; those founded on reclamation inclusive. It appears that not even an equal apportionment of the earth amongst its inhabitants could generate a legitimate proprietorship. We find that if pushed to its ultimate consequences, a claim to exclusive possession of the soil involves a land-owning despot- ism. We further find that such a claim is constantly denied by the enactments of our legislature. And we find lastly, that the theory of the co-heirship of all men to the soil is consistent with the highest civilization ; and that, however difficult it may be to embody that theory in fact, Equity ster? ly com- mands it to be done." INDEX Alabama: Effect of discovery of coal in, 148. Agriculture: Wages as standard, 83. Bellamy: Vision of, 245. Boston: Public OwnershiiD in, 243. Capital: Definition, 22; Relation to wages, 23; First appear- ance of, 32; Labor saving machinery and, 54; Labor's dependence on, 127; Free land and, 127; Wealth and, 143; Clark's treatment of, 179; In new countries, 181; Struggle between labor and, 190; Nationalization of land and, 216. California: "Boom" in, 118; Taxation in, 254; Wages at the time of placer mining in, 174. Carlyle, Thomas: 116. Census: As to tenant farm^ers, 7; per capita wealth, 7; of 1850 and 1910, 63; as to wealth and population, 214; Massachusetts, 137. Charity: Effect on rent, 169. Chicago: School land in, 200. Clark, John B.: Treatment of capital, 179. Clay, Henry: Tariff and labor, 108. Coal Mines: As wealth, 18; Under nationalized land condi- tions, 233; Of Alabama, 148. Compensation to Landlords: Ethics of, 222; In Ireland, 223. Consumption of Wealth and Over-production, 87. Copyright: As wealth, 14. Dickens, Charles: American notes, 108. "Effort": Defined, 174; Labor unions and individuals, 238. Egyptian Tax on Olive Trees, 248. "Enfield": Parish of, 45. England: Poverty in, 7. Fairbanks, Ex- Vice President: As to wages, 59. Fetter, Frank A.: Ownership of wealth in the U. S., 7. George, Henry: Malthusian theory and, 79. Ghent, Mr.: "Benevolent feudalism," 115. Havemeyer, Henry: Trusts and, 241. Idleness: Involuntary, 69. Index Improvement; On land as wealth, 18; Effect of improvements. Chap. V; Labor saving, 53; Labor saving and in- terest, 54; And wages, 55. (See Labor.) "Independent, The": Extract, 114. India: Famine, 78. Indian Terpjtoey: Opening reservation in, 86. Interest: Definition, 29; Nature of. Chap. Ill; First appear- ance of, 32; Necessity of interest, 34; On money, 38; As deferred wages, 39; Rent and, 42; In New York City, 55; Free land and, 125, 181; Rate in U. S., England and New Zealand, 182. Interstate Railroad Commission, 184. Ireland: Compensation to land owners, 223. Japan: Land in cultivation, 76; Density of population, 137. Kansas: Government ownership, 244. Labor: Definition, 24; Effort not labor, 53; Scarcity of, 71; Temporary scarcity of, 72 ; Effect of unemployed on employed, 74; Free land and, 80; In agri- cultural pursuits, 83; Wakefield and labor in U. S., 109; Dependence on capital, Chapter X; Struggle with capital, 188; Under nationaliza- tion of land, 216. (See Wages.) Laborer: Efficiency of and wages, 5; Standard of living, 71. Labor Saving Inventions: Effect of, 54; On land and wages, 54; On interest, 56; On land, 56, 113; Wealth producing power today, 62; Effect of on rent, 167; Wages, 74; Under natural laws, 194; On free land, 239. Land: Definition, 20; Wealth produced on, 20; Private owner- ship of, 42; Title to, 44; Labor saving inventions and, 56; Cheap land and wages, 74; Real scarcity of and employment, 76 ; In England and Greater New York, 76; Mormons and land, 80; In suburbs, 84; Wealth in purchase of, 95; Speculation in, 97; Prohibitive price of, 97: Cheap land and wages, 108; New Zealand land laws, 110; Increase of population and, 120; Wealth in land not capital, 151; Economic rent of, 161; Free land in U. S., 174; In England, 175; In Siberia, 177; In Europe, 177. Law: Diminishing returns, 79, 108; New Zealand land laws, 110; Malthus, 79, 109; Supply and demand, 40, 111, 185, 206; Wages, 170, 113, 239; Rent, 161, 239. Macaulay, Lord: To H. S. Randell, 211. Malthus: Theory of, see Law. Index MiNEEAL DEjPOSITS AS WEALTH, 18. Money: Definition of, as wealth, 15. Monopoly: Genuine, 183. (See Trusts.) Nationalization of Land — (See next page.) New York City : Unused land in, 77 ; Tenement district, 102 ; suburbs, 104; Wharfage privilege, 233; Land values in, 259. New Zealand: As to land, 110; Per capita tax, 215; Methods as to arbitrary prices, 243. Nationalization of Land: Cost of, 214; How accomplished, 213; Effect on land values, 227; On improve- ments, 228; On mineral deposits, 233; Upon in- vestments of wealth, 236. Oklahoma: Opening of, 119. Ownership op Land: Private, 42; Government, 196; Security of property under, 200. "Outlook, The": Extract from, 238. Panics: Cause of, 97. Political Economists and Private Ownership of Land, 129; Teachings of New School, 195. Political Freedom and Industrial Slavery, 195. Population: Density of, 137. (See Land.) Privileges: Special. As wealth, 14. Production: Over, 86. Prosperity: Definition of, 98. Rent: Definition, 26; Law of supply and demand, 43; Labor- saving inventions and, 64, 193; Economic rent, 161, 198, 203; Charity and rent, 169; Under na- tionalization of land, 203. Ricardo: Law of wages, 239. Robinson Crusoe: Example, 187. Rogers, Thorold: Six centuries of work and wages, 60. Shearman, Thomas G.: Natural taxation, 200, 251, 260. Siberia: Free land in, 177. Socialism: Vision of Bellamy, 245, 129; Government owner- ship, 194, 242. Spencer, Herbert: "Right to the Use of the Earth"; Ap- pendix. Stock: Shares of, as wealth, 14. Tariff, Protective: Argument for, 108, 241. Tax: Assessment of New York City, 22; Land tax of New Zealand, 110; Under nationalization of land, 200; Window tax, 248; Indirect, 260. (See Thomas Shearman.) Index Taxation: Present condition of, 200, 208; Per capita in U. S., 215; Natural taxation. Chapter VII; Egyp- tian government tax, 248; Russian, 248; On improvements, 250; Gibbons' Roman, 252; Tax assessors, 253; California, 254; Burden of, 257; Of privilege, 258. Tenants: Increase of, 7. Texas: Unused land in, 224. Wages: Definition, 29; EflEiciency and, 5; Labor saving in- ventions and, 57; In the Fifteenth Century, 59; Effect of unemployed laborers on, 73; Cheap land and, 74; Trade unions and, 136; Law of, 113; Free land and, 174; Tariff and, 183; Em- ployers, 182. (See Labor.) Wakefield, E. Gibbons: On labor in America, 109; Theory in Russia, 177. Wealth: Definition, 13; Money as, 15; Improvements on land as, 18; Mines as, 18; Production of, 50; In U. S. per capita, 63; Division of, 67; Invest- ment of, 94, 123; In land for speculation, 94; Of farmer, 130; Capital and, 143; Produced on non-agricultural lands, 159; Distribution of, Chapter XII. Work: As a fixed quantity, 88; Effect of lower wages on, 90. Wright, Carroll D.: As to hours of labor, 59; On employ- ment, 72.