■OBaaMtBBBBHH ^ss'^^^ *"'MnMuwB* A- A — ^^^ '- ^ A = : ctj — = cz = T 0^ (1 ^ ™^ L,) 5 ^ ^ 8S ■^'^— 1 — ^_^ 1 — 4 = Unearned iNCKhMtN V. H.DA.WSO^' UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNEARNED INCREMENT: OR, REAPING WITHOUT SOWING, CY WILLIAM HARBUTT DAWSON, AUTHOR OF "CnRMAN SOCIALISM AND FERDINAND LASSALLE," "BISMARCK AND STATE SOCIALISM," HTC. SECOND mff'sl^am EDITION. LONDON: SWAN SONNENSCHEIN & CO., PATERNOSTER SQUARE- ,;', :.' .'.', :>> , "Whereas I heretofore bought of Richard Fallsingham, Esq., divers lands and tenements . . . part [of which] I since sold to several persons for a good sum of money more than I purchased the same for, I thought myself bound to bestow upon the eldest son of John Green and the oldest son of Eichard Hamerton, who married the co-heirs of the said Eichard Palkingham, tlie surplus of all such moneys as I sold the lands for, over and above what, indeed, they cost me." — (From a codicil to the will of John Harrison, of Leeds, 1579-1656, given In Camden's "Britannia," editioa 1695, p. 730 J PEE FACE. CD CO CD Of making of books on agrarian questions there is no end. As yet, however, it cannot be said that the phase of land-law reform treated of in these pages has received the attention it deserves. " Unearned increment " is an expression which has ^ long figured more or less prominently in the works of Liberal ^ and Socialistic economists, both English and Continental, but 3 it has not yet become a commonplace of polemic. If the Hr present inquiry into the meaning and bearings of this still Jj dignified phrase should take away something of its obscurity yj. for the popular mind, a good purpose will certainly have been served. '^ It was the complaint of the elder Pliny that great estates ^ were ruining Italy. We have in the United Kingdom a multi- tude of plethoric domains, and the belief is rapidly growing that their existence is not an unmixed blessing. Yet while we may run no risk, or Httle, of being ruined by the magnitude of individual estates, very great danger may be apprehended from the magnitude of land-values in tliis country, so long as, to use the words of John Stuart Mill, ** an accession of wealth created by circumstances " is allowed to " become an unearned appendage to the riches of a particular glass," .^95 i^-4 iv PREFACE. V _^ Although writing from the English standpoint, I have not hesitated to draw illustrations of the principles advanced from various countries, particularly the United States and Germany ; nor have I scrupled to borrow from abroad the testimony of political economists and social reformers favourable to those principles. The unearned increment question is, in the truest sense of the word, a social question, and if the theories advo- cated and the proposals recommended in these pages are vindicable as applied to one country, they may claim general validity. In endeavouring to establish the position taken up, I have sought to concentrate attention upon great principles, and in the inevitable references to persons, writing without fear or favour, I have nought extenuated while setting down nought in malice. The annotations, which might without explanation be thought superabundant, form in reality an integral part of the plan of the work. Many facts and figures are contained therein which, though they could not properly bo embodied in the text, will be found to throw important light upon the path of the uninitiated reader. W. H. D CONTENTS. CHAPTER I. PAGE Penalties OF Pkogiiess ... ... ... ... ... i CHAPTER II. Reaping without Sowing ... ]1 CHAPTER HI. Private Gain at Public Cost ... ... ... ... 22 CHAPTER IV. The Rent Screw 40 CHAPTER V. The Land Monopoly 63 CHAPTER VI. Land Speculation ... ... ... ... ... 62 CHAPTER VII. Overcrowding in Large Towns ... ... ... 79 CHAPTER Vm. EndorMendP 107 vi CONTENTS. CHAPTER IX. Mines AND Mineral Royalties ... ... ... ...117 CHAPTER X. Half Remedies ... ... ... ... ... ... 127 CHAPTER XI. Root and Branch ... ... ... ... ... 140 Index ... »«« •«« «*• %%» »•« »«« 1^7, THE UNEARNED INCREMENT. CHAPTER I. PENALTIES OF TROGP.ESS. IT is a fact which can need no demonstration that with the pi'ogress of society land acquires a spontaneous increase of vaUie, a value v.'hich is in- dependent of the expenditure of labour or money upon it. One need not be a political economist or a social reformer in order to know this. Anyone who has had occasion to work amongst ancient rent-rolls, or to trace the histories of ancient endowments in land, must often have been impressed by the vast increase which in the course of centuries has taken place in the value of landed property.' In former times, while this ^ Here is an instance falcon at rnndom. In June, 1890, a Leeds eliarity case cam" before ]Mr. Justice Cnitty in London, the Attor- iiH^'-General apphitiii- for leave tn hrinjr in a sclieine to deal witli the iiicDmu ot the Wade Charity (Ilisrliway Trust), administ<-red by the " Leeds Pious Uses Trustees." The testator, by wul dated 1530, left certain lands whose income should " ffo to the use of mending the highways about Leeds." AVhat the original value of these lands THE UNEARNED INCREMENT. augmentation was slow and less considerable than now, the process left all but the few unconcerned, and it was indeed seldom that serious thought was given to it. Only when the increasing value of land had pro- duced evils of- the gravest character did it become recognised that what to the majority of people seemed but a statistical curiosity, or an interesting fact in archceology, was in reality a momentous social problem. Reliable information as to the earlier time is meagre, yet we are not left wholly in the dark. Hallam tells us in his " Europe during the Middle Ages " that arable land in England let in the thirteenth century for sixpence an acre, and meadow land for twice or thrice that sum ; while from other authorities we learn that ten to fifteen years' purchase was a common estimate of value at that time. In the fifteenth century, however, land increased materially in value. Professor Thorold Eogers writes : — " Daring the fifteenth century . . . notwithstanding the diffi- culties and losses of the landowner, the value of land rose rapidly. In the fourteenth century it was constantly obtained for ten years' purchase, the amount of land in the market being probably so abundant, aiid the competition for its purchase so slight, that it easily changed hands at such a rate. . . Land was valued at was, I cannot learn, but in 1827 the yearly value was £627, and now it is £3,000. A^ain, it was stated recently, in connection with proceedings in Parliament, that the living- of Burnley was a hundred years ago worth £220 annually, but the income now approximates £5,000, as the glebe land, formerly let as agricultural land, has been built upon. PEN A L TIES OF PR CRESS. twenty years' purcliase in tlie middle of the fifteenth century. In 1469 a valuation was made of Lord Cromwell's property. His lands were estimated at a capital value of £41,940 9s. OM. ; that is, he was considered to have a rental of £2,097 a year." ^ Yet in the time of Henry VIII, land had a very low value when compared with modern estimates. A quar- ter of wheat, six sheep, or an ox would anywhere buy an acre. By the middle of the seventeenth century the rent of land had increased twenty-fold since the Middle Ages. Arthur Young estimated the rental of the agricultural land of England at £10,000,000, the average rent being 9s. lid. per acre, against sixpence four centuries previously. At thirty years' purchase this would represent a capital value of £480,000,000. During the last hundred years, however, the value of land in England has grown at a prodigious rate. The wars at the end of last and the beginning of the present century contributed greatly to increase rents. Sir \Y. Curtis declared in the House of Com- mons on February 17th, 1815, that "rents have in all cases doubled, and in many cases trebled, during the war." According to IMulhall, too, the land rental of ^ "Six Centuries of Work and "Wages," edition 1SS6, pp. 287. 288. Again, the same writer tells us that during the hut five hundred years the rent of agricultural land has increased in England a hundred and twenty-fold when measured in money, and fourteen-fold when measured in wlieat, the food of the people ; but the value of building land has increased to a vastly greater extent. -■— B 2 4 THE UNEARNED INCREMENT. the United Kingdom increased from £1G,G00,000 in 1750 to £23,400,000 in 1780, and £49,000,000 in 1814. But the rapid increase of population and the unparalleled development of industry have been the principal causes of the great increase in the value of land in England. According to Professor Fawcett, the capitalised value of this land now amounts to £4,500,000,000. The income-tax returns — for whose evidence scientific accuracy cannot, it must be admitted, be claimed — testify in their own rough way to the phenomenal growth of land-values in modern times. Taking the category of land alone — which, of course, excludes the sites of buildings of all kinds — wo find that the gross annual value assessed in the United Kingdom under schedule A increased from £62,000,000 in 18G5 to £04,000,000 in ISGU, to £G7,000,000 in 1874, to £69,000,000 in 1879, and to £70,000,000 in 1880, though after that year it began steadily to fall, owing to agricultural depression and other causes. The gross annual value of messuages, tenements, &c. (in the same schedule), increased from £69,000,000 in 18G5 to £80,000,000 in 18G9, to £93,000,000 in 1874, to £110,000,000 in 1879, to £127,000,000 in 1884, and to £133,000,000 in 1887, the increase of £64,000,000 in twenty-two years representing far more than the increased value due to additional building. The total PENALTIES OF PROGRESS. 5 gross annual value of both categories, together with manors, fines, &c., increased from £132,000,000 in 1865 to £145,000,000 in 18G9, to £100,000,000 in 1874, to £180,000,000 in 1879, to £190,000,000 in 1884, and to £197,000,000 in 1887.* Yet this increase in the value of land is not by any means peculiar to England amongst European countries. In France, Grermany, and Flanders the rent and selling price of agricultural land have at least doubled within the last thirty years. According to M. de Laveleye, too, the same increase has taken place in Belgium since 1830. ^ "It is certainly impossible," says the Hon. G. C. Brodrick in his essay on primoo;eiiitiire, " to ignore the grave political danger involved in the simple tact that nearly all the soil of Great Britain, the value of which is so incalculable and progressively advanc- ing, should belong to a section of the population relatively small and progressively dwindling. More than twenty years ago, Mr. Porter, a very high authority on economical statistics, arrived at the conclusion that, 'with scarcely any exception, the revenue drawn in the form of rent has at least doubled in every part of Great Britain since 1790.' In the period which has since elapsed the same causes have continued to operate with still greater activity. It was stated in a report issued by Mr. Goschen, as President of tlie Poor-law Board, that the annual value of lands, houses, railways, and other property in the United Kingdom assessed for the income tax under Schedule A, rose from £.">3, -11)5, 375 to £143, 872, .588 between 1814 and 1868 ; and this must be exclusive of the immense sums (estimated by Mr. A. Arnold at £100,000,000) received by the landed interest from railway companies over and above the market price of the land thus sold. From a later report of the Inland Revenue Office it appears that the assessment of the United Kingdom under Schedule A amounted to more than £150,000,000, and that of England and Wales alone to £122,509,255 in the year 1873-4, and the Commit sioners give reasons for believing the real advance in the value of landed jiroperty to have been much greater." ( Vide the Cobden Club's " Systems of Land Tenure in various Countries," p. 146, ed. 1881.) THE UNEARNED INCREMENT. But we obtain the most impressive evidence of the growth of land-value when, turning from agricultural land, we consider the land upon which towns are built. The capital value of such land has, especially in recent years, often increased to an almost incredible extent. In a city like London a square yard of a building site may now-a-days be worth as much as an acre of agricultural land. It has been calculated that the agricultural rental •of the land upon which London stands would be £250,000, yet the capital value of that land, without the buildings which have been erected upon it, is placed at the enormous sum of £300,000,000. These are figures deserving meditation : £300,000,000 for the land of London ! Contrast this sum with the value of the site of London before the shores of the Thames were covered with buildings, and we have a most remarkable, an unparalleled illustration of the growth •of land-value and rent. In the City the annual value of laud ordinarily reaches as high a figure as £1 10s. to £2 per square foot, equal to a capital value of £65,000 to £87,000 per acre.^ At times, however, even this value is greatly exceeded. A land expert, giving evi- dence before the Select Committee who considered the Strand Improvement Bill of the London County Coun- ■^ See also Sir Lyon Playfair's remark at Leeds, December 13th, 1889 : " Take the case of London, spread over a vast space, which formerly was worth £3 or £■! an acre. Some parts of it are now worth from £50,000 to £00,000 in rental value." PENALTIES OF PROGRESS. cil, said (^lay 19th, 1890) he valued certam land within the area of the improvement contemplated at a mini- mum of £10 per square foot, equal to £'90 per sipare yard and £435,G00 per acre. Yet it is only in com- paratively recent times that the bulk of this vast increase of value has accrued. " I could show," says Professor Thorold Rogers in his work on " Work and Wases," " that land for two miles round St. Paul's has increased during the last hundred and fifty years a thousandfold in value." Similarly, while land in the suburbs of Boston sells for £80,000 the acre, the rate is £160,000 in the central parts of the city. That the rapid increase in the value of land, and with it the unexampled augmentation of rent, is a social dano-er, received reco fruition from isolated writers several centuries ago. They saw that the larger the tax claimed by the landlord for the use of the soil, the worse became the position of the cultivator and the lot of the labourer.' A striking passage, referring to the eai-ly part of the sixteenth century, appears in the writino-s of Hugh Latimer, and though often quoted it deserves repetition because of its significance : — " Land which went heretofore for twenty or forty pounds a 3'ear now is let for fifty or a hundred. My father was a yeoman, and had no lands of his own ; only, he had a farm at a rent of ^ " The more there is allotted to labour the less there will re- main to be appropriated as rent." (H. Fawcett, '* Manual of Politi- cal Ecouomy," ix 123.) 8 THE UNEARNED INCREMENT. three or four pounds by the year at the uttermost, and thereupon he tilled so much as kept half-a-dozen men. He had walk for a hundred sheep, and my mother milked tliirty kine ; he was able and did find the king a harness with himself and his horso when he came to the place that he should receive the king's wages. He kept me to school ; he married my sisters with five pounds apiece so that he brought them up in godliness and fear of God. He kept hospitality for his neighbours, and some alms he gave to the poor. And all this he did of the same farm where he that now hath it payeth sixteen pounds rent or more [instead of ' three or four pounds by the year at the uttermost'] by the year, and is rot able to c'o anything for his prince, for himself, nor for his children, nor to give a cup of drink to the poor." Ever since the time here written ot rent has continued to grow, and with increasing rapidity, and as a result the social evils which are the necessary consequence of this increase of rent have tended to become neuter. The higher rent, the less the amount of income divisible between wages and interest. As the produce is distributable amongst the three factors, rent, wages, and interest, it is evident that wages and interest can only benefit by tho low value of land, and that the higher land rises in value relatively the smaller will be the proportions of the produce which fall to these two factors respectively. As with the growth of population the value of land increases, it follows that the produce of labour falls more and more to the landlords, who nevertheless do nothing to deserve this augmentation of income. Society makes the land more valuable by requiring a greater area lor PENALTIES OF PROGRESS. habitable purposes and for food production, yet the increased value, instead of benefiting those who create it, injures them, proves an obstacle to their material prosperity, and is productive of innumerable social evils whose gravity it is often impossible to exaggerate.^ The labourer suffers in an especial degree, because, owing to the growing exactions of the landowners, the fruits of his toil have relatively an ever-diminishing value. As j\Ir. Henry Greorge pertinently remarks : — *'' Not indeed that the introduction of improved processes into agriculture has been for nou<;ht ; it has resulted in a lurge augmentation of the agpre^ate return obtained from the soil, but without permanently hjwerin^- its price, and therefore without permanent advantage to either capitalist t)r labourer, or to other consumers. The hirge addition to the wealth of the country has gone neither to prolits nor to wages, nor yet to the public at large, but to swell a fund ever growing, even while its proprietors sleep — the rent-roll of the owners of the soil. Accordingly we tind that, notwithstanding the vast progress of agricultural industry eiftcted. within a century, there is scarcely an impnrtant agricultural pro- duct that is not at least as dear now as it was a hundred years ago — as dear, m^t merely in money price, but in real cost. The aggregate return from the land has immensely increased ; but tlie cost of the costliest portion of the produce, which is that which determines the price of the whole, remains pretty nearly as it was. Protits, therefore, have not risen at all, and the real remuneration of the labourer, taking the whole field of labour, in but a slight degree — at all events in adegreevf-ry far from commensurate with ilie general progress of industry." (Professor J. E. Cairnes, in "Some Leading Principles of Political Iv^onomy newly E.xpounded," 1874, p. 333 ) So Mr. A. O'Connor, M.P., observes in a minority report of the Royal Commission on De[)ression in Trade and Industry (1885-0) :^ '* Under the existing land system the owners of the soil are able to obtain, and do exact, so large a proportion of the proceeds of the industry of the United Kingdom, that the remainder is insuflicient to secure adequate remuneration to the industrial classes, cither in the shape of wages to operatives, or rtasonable protit to the organisers of labour, the employers, or capitalists." 10 THE UNEARNED INCREMENT. " Labour cannot reap the benefits which advancing civilisation brings, because they are intercepted. Land being necessary to labour, and being reduced to private ownership, every increase in the productive power of labour but increases rent — the price that labour must pay for the opportunity to realise its powers ; and thus all the advantages gained by the march of progress go to the owners of the land, and .wages do not increase. Wages can- not increase, for the greater the earnings of labour the greater the price that labour must pay out of its earnings for the oppor- tunity to make any earnings at all." Thus the Elysium of the labouring classes is not the old country where land is expensive and rent high, but the new country, where, the land monopoly not being severely felt, the proportion of the produce falling to rent is still not excessive. " New countries, where the aggregate wealth is small, but where land is cheap, are always better countries for the laboiu'- ing classes than the rich countries, where land is dear. Where- ever you find land relatively low, will j'ou not find wages rela- tively high ? And wherever lanl is high, will you not find wages low ? As laud increases in value poverty deepens and pauperism increases. In the new settlements, where laud is cheap, you will find no beggars, and the inequalities in condition are very slight. In the great cities, where land is so valuable that it is measured by the foot, you will find the extremes of poverty and of luxury, and this disparity in condition between the two extremes of the social scale may always be measured by the price of land. Land in New York is more valuable than in San Francisco, and in New York the San Franciscan ma}' see squalor and miserj^ that will make him stand aghast. Land is more valuable in London than in New York, and in London thera is squalor and destitution worse than that of New York." ^ 1 << Progress and Poverty," Book V., chapter ii. CHAPTER II. REAPING WITHOUT SOWING. IN considering the increase of land-value and rent we may witli advantage deal with what may, for convenience sake, be called (1) rural and (2) urban (country and town) land separately, since the causes which make for augmented value are not quite the same in both cases. (1.) By rural land is meant purely agricultural land, land which is utilised for food production — as for the growth of corn, for grazing and pasturage, or for market gardening — or is otherwise cultivated and not built upon. Here we have to do with the alimentary needs of the population. As a community grows its greater food requirements demand the cultivation of an extended area of ground. Economic rent is, in the words of Mill, " the excess of the produce yielded by land beyond what would be returned to the same capital if em- ployed on the worst land in cultivation." ' It follows that the greater the area cultivated owing to the necessity for increased food supplies, the more the rent ^ " Principles of Political Economy," Book II., chap, xri., sec- tion 3. 11 12 THE UNEARNED INCREMENT. which the owners of the soil are in a position to claim. The unoccupied land within the immediate periphery of a town is that which is first used for the production of food, and the land farther distant is put to the same use as the necessities of the population require it. As, however, the cultivators of the soil are willing to pay for conveni- ence of access and transport, the eligible land adjacent to a town increases in value as cultivated land, apart from any increase from other causes. Proximity to the market, facility of transport by road, canal, or rail, increased power of production owing to such favourable position, and competition amongst tenants, are all factors which tend to augment the value of this culti- vated land, and yet it will be noticed that these causes are all social. They act, as it were, automatically, and independently of the owners of the soil, who may not be responsible for any fraction of the increasing value. Thus a farm of thirty-thrco acres in Whalley, Derby- shire, let in 1797 for £30 a year, the landlord paying all taxes. In 1834 the same farm let for i?80 a year, the taxes falling uj)on the tenant. Near Sandbach, Cheshire, five f^irms, which towards the end of last century let for £330, bore an aggregate rental of £1,720 in 1834. Again, a case is in mind where land on the outskirts of a small North of England town was let a hundred years ago at what was then regarded as the high rent of 20s. to 30s. per acre as arable land. REAPING WITHOUT SOWING. 13 Now the same land, as agricultural land, brings the owners three and four times the amount, for population has grown and moro food is needed there and else- where.' There is, however, a time when the land round about towns acquires a far greater value than can be obtained so long as it is only required for food production. It is when the land ceases to be agricultural land and becomes eligible for building purposes — again a social incident which is independent of personal exertions or expenditure on the part of the owners.^ Every large town furnishes examples in abundance of this species of value-growth. Take one which is typical.^ Nearly fifty years ago a small estate, lying a few miles from a busy Yorkshire manufacturing town, the value of ^ Compare the following candid statement : — " I once found a rent in a remote North C.niiitry dale which had not been disturbed nnder year to year agreements for sixty years; and when revising the rents I raised it from £i8 to £82." (A Laud Agent in the " Land Agents' Record " for January ^th, Ib'JU.) 2 A land report from Folkestone for 1880, published in an estate journal, says : — " As to the value of land from an agricultural point ot view, we can say but little iu its favour. The soil is of so poor a quality that its average rental value is but thirty sliillings an acre, 'i he most valuable is used for grazing purposes, principally forsheep. Once, however, let it be treated for as building land, and the value immediately assumes immense proportions, £20 a year per acre being asked tor land two miles out of the town." And again :— "Land near towns and popular centres continues to advance in Talue." (Buckingliamsliiiv.) " Lands ripe for building purposes in favourable positions, both in Leicester and the smaller towns of the county, fetch good pi-ices and so do accommodation lands." (Leicestershire.) * llelated to the author by the laud agent referred to. 14 THE UNEARNED INCREMENT. which was £7,000, was entrusted to the management of a local land agent. From the first it was let as agricultural land, yet its value continually increased, owing to the growth of the adjacent town, and the consequent demand for eligible building land. When a few years ago the estate changed hands the value had grown from £7,000 to £50,000. The value had thus increased seven-fold in forty years, though the land was never used for other than agricultural purposes, and the landlord had done nothing whatever to improve it, having, to use the land agent's words, " had his hands in his pockets the whole time." Where the land upon which towns are built is held by single or few persons princely incomes are frequently derived by the monopolists. Cases like those of Bury* (the Earl of DerbyJ, Cardiff (the Marquis of ButeJ, Huddersfield (the Eamsden family), and many districts of the metropolis (the Bedford, Norfolk, Portland, and other noble families) will readily occur to those who have studied this question. In such cases it might seem as though a community only existed and pros- ■^ The municipal boron £^h of Bury contains 5,835 acres, distributed as follows: — Lord Derby, 4,100 acres; g-lebe, 150 acres; other owners, 1,585 acres. lu 1846 the rateable value was £57,G08 and in 1889 it was £22], 490, a quadruple increase in 43 years. It is com- monly understood in Bury that Lord Derby's income from the borough is £70,000. During the last generation large blocks of property built on the 99 years' lease and three-lives' systems have "fallen in," thus adding enormously to the earl's revenue. REAPING WITHOUT SOWING. 15 pered for the purpose of increasing the wealth of the landlords, for even though the latter preserved an attitude of complete passivity, their land would neces- sarily acquire greater value year by year. The more numerous the community becomes and the more it thrives, the higher the tribute it must pay to the owners of the soil upon which its dwellings have been placed. In lending or selling his land the owner renders now no greater service to the community than he did years ago — when land was cheaper — but he requires far greater remuneration for the service. Where the landlord, by his own labour or expenditure, increases the value of his property this growing tribute is, to some extent, justifiable ; but it will generally be found that it is not the owner but society which makes the land more valuable. Nevertheless the law says that society may be rack-rented on its own improvements. Nowhere do we find such remarkable instances of the growth of land-value as in London. The agricul- tural rental of the land upon which the metropolis stands has been estimated at a quarter of a million pounds, yet it is computed that its annual rental is between fifteen and sixteen and a half millions,' the difference of so many millions representing the increased value given to the land by the fact of population ^ " The estimate of Mr. "W. Saunders, a member of the London County Council, is £16,728,830, while Mr. Sidney Webb accepts the lower computation. ij THE UNEARNED INCREMENT. having settled upon it. A short time ago Mr. Sidney Webb made a careful estimate of the unearned incre- ment of London, basing his calculations upon the metropolitan quinquennial valuations, and he placed the yearly addition to this increment at no less a sum than £4,500,000. The estimate was obtained in the following manner : — At the last re-valuation of the metropolitan area, in 1886, the annual rental was found to be £37,027,516, which represents a capital value of roughly £555,000,000, reckoned on fifteen years' purchase. Sixteen years before the annual rental was £22,142,700, representing a capital value of roughly £330,000,000, the gross increase for the period being in rent £14,884,810 a year, and in capital value roughly £223,000,000. The part of this increase which has resulted from building operations is approximately learned from supplementary valuations. Deducting the value thus created by the employment of capital, a balance of £6,092,680 remains as the spontaneous increase of the rental of London between the valuations of 1871 and 1886. As four quinquennial valuations have taken place during the period considered, this increase must be spread over twenty years, and this done the result is an average yearly accession of £304,634, equal to a capital value of £4,560,510. These figures demonstrate the astoundina; fact that during two decades the pox^nlation of London has REAPING WITHOUT SOWING -vj placed an additional six million pounds of rental into the landlords' pockets for no other reason than that the law allows the owners of the soil to appropriate the whole of the increment created by social causes. The capital value of this present to the landlords — reckoned on the basis of fifteen years' purchase — is no less than £91,390,200. If we assume, with Mr. Webb, that the relationship borne by the unearned increment of the last twenty years to the total increase in rental during that period applies also to the gross valuation of the metropolis (in 1886, £37,027,516), we shall have to conclude that the rent of the land upon which London stands — the "annual payment for permission merely to occupy the swampy marsh by the Thames which London labour makes so productive " — amounts to the handsome sum of fifteen million pounds yearly. Yet the agricultural value of the land cannot be more than a quarter of a million pounds, only one-sixtieth of the value which the people of London have given to it by living and toiling upon it.' It would be easy to accumulate examples of the prodigious growth of land- value in and around English towns. Thus in an arbitration case which arose at Halifax during the present year a witness admitted ^ The following is Mr. Webb's calculation, based on olEcial returns : — (For Table see next page.) i8 THE UNEARNED INCREMENT. having sold the Haliflix Corporation four-and-a-half yards of land for £1,000, the rate being £222 a yard.' On etii April. Gross Valuation (annual rental). 1870 1871 1872 187:> 1874 1875 187G 1877 1878 187i) 1880 1881 1882 188:5 188-1 1885 188G of 17 year £ 22,142,70G 21,103,08:? 24,388,01)0 24,756,711 25,148,03;^ 25,574, 3r)(; 27,602,G4i) 28,464,8:3:-5 29,027,795 29,082,269 30,421,071 3:3,384,851 33,855,917 34,470,725 35,100,704 35,689,244 37,027,516 Total increase. £29,401,204 1,960,377 284,917 368,711 391,322 426,333 2,028,283 862,184 562,962 654,474 738,802 2,963,780 471,066 614,808 629,979 588.540 1,338,282 Increase due to new buildings (annual rental). " Unearned increment" of mnual rental. «549,508 284,917 368,711 391,322 426,333 *549,508 862,184 562,962 654,474 738,802 *549,.508 471,066 614.808 G_".M.}7liod nearly uninterruptedly since 1878, as the following figures show :— April 1, 1878, 846 ; October 1, 930 ; land at Berlin. A plot of g:round in the Miiller.-tnisse, which was purchased in IS.").} for £500, is now valued at £loO,(iOO, aud the owner has refused an oiler of £100,000 for it." — Newsjmpeis for September, 1890. ' Aecoidinj? to a return recently laid before the Union of Eerlin Landowners' Associations, the German metropolis had in 1881) 22,400 houses with 385,000 dwellings, representing a value of 5,321,000,000 marks {circa £266,000,000), with aggugate rent of 256,0U0,000 marks (£12,800,000). REAPING WITHOUT SOWING. 21 April, 1879, 8G7; October, 1,024; April, 1880, 1,5G8 October, 1,820; April, 1881, 3,011 ; October, 3,G42 April, 1882, 3,1G0; October, 3,119 ; April, 1883, 3,344 October, 4,775 ; April, 1884, 4,978 ; October, 8,452 April, 1885, 11,0G2; October, 14,95G ; April, 188G 14,533; October, 17,039; April, 1887, 18,422. Later statistics are not available. During this decennial period the population had increased some three hundred thousand. CHAPTER III. PEIVATE GAIN AT PUBLIC COST. IF we take the second class of land, urban land, we find that the causes of the increase in value are in part ■ different, while also more active and effectual. Urban land, the land which is covered by buildings, or which may prospectively be so utilised, acquires greater value from (1) the mere growth of the community — city, town, or village, as the case may be ; (2) from the carrying out of public improvements ; and (3) from the enterprise and exertions of the individual residents. And here again the landowner may play an absolutely passive part. (1.) Groiuth of 'population. — The progress of a community in numbers and wealth will of necessity increase the value of the land occupied, and, there- fore, the income or rent which falls to those who own the land upon and near which the population dwells. The greater the demand for land for building purposes, the greater the competition for houses, the better the dwellings tenanted, and the higher will be 82 PRIVA TE GAIN A T PUBLIC COST. 23 the landlords' rent and the higher the price of land. A remarkable case of value-creation by the mere settle- ment of population upon the land was related in the House of Commons on May Gth, 1890, by Colonel Hughes. "In the parish of Plumstead land usel to be let for agricultural purposes for £3 an acre. The income of an estate of 250 acres in 1815 was £750 per annum, and the capital value at twenty 3'ears' purchase was £15,000. The arsenal came to Woolwich ; Avith the arsenal the necessity for 5,000 houses. And then came the harvest for the landlord. The land, the capital value of which had been £15,000, now brought an income of £11,250 per annum. The ground landloi-d has received £1,003,000 in ground rents already, and after twenty years hence the Woolwich estates, with all the houses upon them, will revert to the land- owner's family — bringing another million — meaning altogether a swap of £15,000 for a sum of £2,000,000." To take an illustration from Irelana. Giving evi- dence before the Select Committee on Town Holdings, Captain Eichard O'Sullivan said : — " Queenstown in the course of a century has grown by tlie sheer industry and enterprise of its inhabitants from a barren rock into a property valued at £21,000 a year, a value for a lump sum equivalent to half-a-million pounds. None of it has been created by the landlord, yet he tries to confiscate it. Nearly eight miles of roads and streets, with their flagged footways, main sewers, private drainage, crossings, channels, &c., costing at least £30,000, have been paid for out of the pockets of the people, and on the expiration of the leases the landlord confiscates them also. The public quays have been built at the public expense, and even the foreshore upon which they are erected had after great and ex- pensive litigation to be paid for to the utmost farthing to the landlords, who refused to contribute in the smallest degree to the 24 THE UNEARNED INCREMENT. erection of the quays. The town as it stands has been paid for many times over by the occupiers, and yet the landlords claim it as their own, and except the occupiers are prepared to purchase ic over again at a fabulous amount they must clear out and leave tho labour of their lives to the landlords, if the Government fails to give them protection." Another witness in the same inquiry, Mr. Beveridge, said of Dublin, that a considerable increase in the value of land had taken place there, this being " due in great measure to the growth of population." Asked, "Is it due to any action on the part of the landlords — the persons who own this land ? " he replied : " There may be individual cases in which a landlord has effected improvements, but I do not know of any." Again, he stated : " The general improvement of the land in Dublin is, in my opinion, attributable mainly to two causes. The first is, the growth of the population in the city. The second is, the enormous expenditure that has been made on new roadways, good sewers, water supply, and so on." (2.) Public Improvements. — These, too, tend to increase the value of urban property. In the category of public improvements fall all the permanent works carried out by local authorities at the expense oi the ratepayers in the interest of the latters con- venience and health ; such are roads, bridges, public buildings, parks and open spaces in large towns, sewer- age, lighting, water supply, &c. The cost of these PRIVATE GAIN Al PUBLIC COST. 25 works — where, as in the case of water and gas, private enterprise does not step in — is a common charge on the inhabitants.^ It is true that these benefit by- improvements of the kind, but they are not the only or the principal ones to benefit. The house occupiers only have a temporary interest in the public works constructed at their expense, and they of necessity renounce that interest directly they change their abode. But there is a class of men whose benefit from public works is permanent, though they do not to any considerable extent, if at all, contribute towards the cost. These are the owners of the land upon which the town stands, for though it might at first sight seem as though the inhabited buildings increased in value as a consequence of public improvements, the augmented value falls in reality to the land they cover ^ " As a matter of fact," writes Professor Thorold Roo-ers, in liis work, " Six Centuries of Work and AVages "_ (ed. 1886, p. 633), "the owner contributes nothing- to local tnxntion. Everylhing- is heaped on the occupier. The land would he worthless without roads, and the occupier has to construct, widen, and repair them. It could not he inhahited without proper drainage, and the occupier is constrained to construct and pay for the works which give an initial value to the ground rent, and, after the outlay, enhance it. It could not be occupied without a proper supply of water, and the cost of this supply is levied on the occupier also. In return for the enormous expenditure paid hy the tenant for these permanent improvements, he has his rent raised on his im- provements, and his taxes increased hy them. The occupier in towns is worse used by far than the Irish tenant was before the ch anges of the Land Act, for if the landlord made liim pay interest on his own outlay the cost of local taxation was shared between the parties." 26 THE UNEARNED INCREMENT. and adjoin.' If any one doubts whether the works alluded to increase the value of property, and are essential to the maintenance of value, let him imagine what would be the effect of their absence upon the property which now they benefit.^ Let a local authority, for example, be supposed to divert its attention from one quarter of a town to another. In one place the roads are allowed to fall into decay ; sanitation is neglected — the streets are unclean, the draining of the houses is deficient, the water supply is faulty ; public convenience is no longer regarded — no more thorough- fares are widened, no more old buildings are removed. All these acts of omission and commission on the part of the local authority will tend to depreciate the value of the property thus neglected, while the parts of the town to which attention is transferred will proportion- ately increase in value. It is evident, therefore, that the value of urban land is at once preserved and auo-mented by the public improvements which are 1 In the United States this is wichly recognised by law and custom. Thus the Muncipal Code of Ohio says :— " An assessment for the construction of sewers is in its nature a charge for a permanent addition to the freehold, and is to be paid by the oicner of the fee or the holder of a perpetual lease, but is not chargeable ag-ainst an ordinary tenant for years." - K'ote the following extract from a land report for 1889 :— *' In Portsmouth, large numbers of small houses have been erected, and land development has been fairly brisk. AVhere roads have been made up, curbed, channelled, and drained, £1,200 to .£1,G00 per acre has been readily obtained on estates skirting the populous parts of the town." PRIVA TE GAIN A T PUBLIC COST. 27 carried out at the expense, not of the owners of that property, but of the residents who have only a tem- porary interest in it. Further, we are confronted with the singular anomaly that the community which in this way gives to the property it uses a higher value, actually pays the landlords for the privilege of creating that higher value for them. For the more valuable urban property becomes, owing to the growth of popu- lation, public improvements, and other social causes, the higher become also the rents which are demanded of the occupiers. This second factor in the creation of increased value is the more important at the present time because the tendency of local authorities is to embark more and more boldly upon works of public utility of the kind named. Never before were communities so alive to the importance of careful sanitation ; never before did they pay so much regard to their own physical welfare — as evidenced by the provision of spacious streets, public parks and open spaces ; never before did they devote so much attention to the intellectual and sesthetical sides of social and civil life, in proof of which the public museums, galleries, libraries, and schools estab- lished in such abundance all over the country may be mentioned. Almost invariably the great expenditure incurred by works of these kinds has a tendency to increase the desirability of the towns concerned as 28 THE UNEARNED INCREMENT. places of residence, to promote the material progress of the inhabitants, and thus to augment the value of the land upon which the inhabitants are settled.' A few figures, by way of illustration, will make clear to us the extent to which local taxation is employed in the execution of public improvements which make for greater land-value and higher rent. The aggregate amount of the local budgets of England and Wales for the year 1885-G was £55,738,420 (a good deal more than half the imperial revenue^, of which sum £32,177,883 was levied by rates, though a little more than forty years ago the sum raised in rates was only £8,550,000.'^ This enormous taxation includes, of course, the interest payable on public loans, the amount ^ Givinj? evidence before the Parliamentarv Committee which !i slitirt time ago considered the Liverpool Extension Bill, Mr. Shelmerdiiie, the City Survevor, referred to the purchase of Seiton Park as follows : — " With regard to Sefton Park, there could be no shadow of a donbt that the construction of that park had developed the estates in the immediate neighbourhood. The agricultural value of the land to Lord Sefton was £1,350. Lord Sefton got £250,000 from the Corporation, which, at 4 per cent., would give his lordship a return of £10,000, which was a very- good thing for him. The park had been of enormous benefit to Lord Sefton in developing the land around. No doubt the land around would have been developed sooner or later, but he main- tained that it was developed quicker, and the class of residents were much better than his La-dship would probably have got had the park not been there. Thus, in addition to the £250,000, he had for twenty-three years got this increased income from the accelerated development of his land. The portion of Lord Sefton's land still undisposed of was very small." - These figures are taken from Mr. J. F. Moulton's little work on " The Taxation of Ground Values." PRIVA TE GAIN A T PUBLIC COST. 29 of which several years ago was no less than a hundred and sixty millions. As these loans are only contracted on permanent improvements, it is safe to say that the value of property has increased, or will increase, by every pound spent and borrowed by local authorities. London alone has incurred a debt of something like £40,000,000 on account of public improvements, the effect of which has generally been to make the land on which London stands more valuable.^ The report of the Committee on Town Holdings says : — "In the metropolis the gross debt of the late Metropolitan Board of Works outstanding on the 31st December, 1887, amounied to £27,834,000, expended entirely on works of a permanent character. The charges levied in the form of local rates to meet tliis liability have been paid entirely by the occupiers of the metropolis, but it is important to note that this contributes in n.any cases to increase the value of the premises which revert to the landlord at tlm end of a lease there or in any part of the country where similar conditions prevail." ^ ^ Spealdn? in the Memorial Hall, July 29th. 1SS7. Mr. Gladstone alluded to the Thanns Embankment, and a;^ked, "At wose ex- pense was that preat, permanent, and stable improvement im de ? Instead of beinfr made, as it shoidd have been, at the expense of the permanent proprietary interests, it was charjjed, every shilling of it, upon occupants, that is to say, mainly either upon the waeres of the labouring man, in fuel necessary for his family, or upon the trade and industry and enterprise which belong of necessity to a vast metropolis like this." ^ Sir C. llussell, Q.C., ISLP., stated at a public meetingheld in St. James's Hall, London. February 14th, 1889, to consider the ques- tion of the better housing of the industrial classes, that "the occupying classes of London bore a payment of £800,000 a year in recoupment of money borrowed for great improvements, tlie benefit of which had gone to enhance the value of the property of the landlords; and vtt towards this taxation the landowners contributed nothing." THE UNEARNED INCREMENT. That the anomalies under consideration have not escaped the attention of German economists may be seen from the writings of Professor A. Wagner, of Berlin ; take the following passage : — " The great expenditure of tlie State, and particularly of the community — out of the resources of the entire population, and, with increasing taxation and its effects, for the most part out of the resources of those who do not own land — for streets, cleanli- ness, sanitation, security, education, &c., has ultimately the tendency to increase the height of rente and the value of property in urban land and buildings, because the increase of the urban population is thereby favoured. In such cases the urban land- owner profits doubly, and the land-less population pays in taxes the money for expenditure which indirectly leads to a new in- crease in rents, thus suffering in two ways." ^ It is impossible, of course, to say exactly to what extent the value of land in large towns is increased by the fact of population growing, and to what extent by public improvements. Yet valuable data were placed before the Select Committee which recently considered the Strand Improvement Bill of the London County Council.^ The promoters of this measure instanced the following among other cases where property had 1 " AUsremeine oder theoreti«ehe Volkswirthsehaftslehre," 1st part, " Grundleguns'," pp. <>'''8, 659. - During the hearing of evidence it was proved that owners of property adjoining the projected improvement of the Strand liad boun(\ leasehold tenants to agree to an increase in rent in the event of the improvement being carried out. The following advertisement, showing how public improvements are speculated \ipon, was read: — ■"'' Strand. — Owq door from Newcastle Street. Freehold premises situate Nos. 4 and 5 and 6, Stanhope Market, PRIVATE GAIN AT PUBLIC COST. 31 increased in value after street improvements Lad been executed, and yet no structural alterations bad taken l^lace : — Date of iniprnve- iiient. j\ssessment befoie ini- provemeut. Assessment after improvemeut. Increased value since iniprove- iiif-nt. 1875 1880 1885 £ £ £ £ £ A 1871 l'>o 80(j 1,250 1,250 490 B 99 •J25 1,300 1,300 1,300 375 C »? 7(50 l.KJO 1,030 1,030 270 1) ) 9 140 700 700 700 200 E )9 570 1)00 !)00 900 330 F «* 400 GOO GOO 000 200 A 1875 48 ... 60 110 02 13 1 1 GO • • ■ 80 120 CO A 187G 72 .•• 72 I'iO 48 B )) 75 • • • 100 1(15 30 C H 200 • ■ . 240 240 40 A 1S77 100 • • ■ 120 220 121) B M DO .• • 150 150 00 C f 9 72 ... 150 150 78 D »» 00 a . * 120 90 30 A 1878 54 • •• lOi.) 100 46 B )9 04 ... 100 100 30 C )9 75 • < > 75 1 20 15 1) )f 1(10 ... 100 108 OS E )) 100 ■ • . 170 210 50 F 99 ]2(; ... 105 165 30 Ct 99 1)0 • • * 112 170 SO H 95 70 ■ • • 100 150 80 I 9» lOG . ■ . lOfi 200 •154 J 99 40 ... 50 105 05 K 1 1 120 > • • 155 200 80 A 1884 1,000 ... ... 1,500 500 B )» 1,080 ... • * • 1,800 720 C >» ] 80 . . . * • . 250 70 D )» 3,000 ... ... 3,600 000 Stanhope Street, Clare ^larket, with the dwellin,G:-houses nnd work- shops ia the rear, occupying- an area of about 2,900 superlicial feet, at present let and producing about £340 a year, xviih the j^rospcct of consulerahh/ enhanced value upon co7itc.mplated extensive im- provements m the vicinity being carried out." 32 THE UNEARNED INCREMENT. During the consideration of the same Bill it was str.ted by an official valuer (May IGth, 1890) that the rateable value of the property within the area covered by this measure had risen from £54,159 in 1856 (when the Metropolitan Board of Work* began to carry out street improvements) to £147,986 in 1889. From 1865 to 1875 the increase was £42,648, and from 1875 to 1885 it was £35,505. In this district the percent- age of increase during the period named had been 1 73*34, the percentage for the whole metropolis being 175. Asked, " To what do you attribute the rise in the rateable value in this district ? " witness replied, " Chiefly to the opening of the Law Courts and the general expansion of the value of property in the metropolis."' ^ Pepys, in his famous " Diary " (date December 3rd, 1667), teUs how the value of land in London rose after the Great Fire. Speaking' of the " new street that is to be made from Guildhall down to Cheapside," he instances the case of one owner " who hath a pi°ce of o-round lyinr in the very middle of the street that must be, which, when the street is cut out of it, there will remain ground enough on each side to build a house to front the street. He demanded £700 for the ground, and to be excused paying anythinj^ for the melioration of the rest of his eround tliat he wns to keep. The Court consented to give him £700, only not to abate him the consideration which the man desired ; but told them, and so they agreed, that he would excuse the City the £700, that he might liave the benefit of the melioration without paying anything tor it. So much some will get by having the City burned. Ground, by this means, that was not worth 4d. a toot before, will now, when houses are built, be worth los. a foot. But he [Sir Richard Ford] tells me of the common standard now reckoned on between man and man in places where there is no alteration of circumstances, but only the houses burnt ; there the ground which with a house on it PRIVA TE GAIN A T PUBLIC COST. ■- 33 It is not necessary, however, to restrict ourselves tx) London. Other large towns have also expended enormous sums in public improvements, with the same result.* Take the case of Birmingham, which is a typical illus- tration of the growth of land-value owing to social causes of the kind under consideration. The industrial and commercial energy and enterprise of this city are famous throughout the world. The prosperity of Bir- mingham has been built up by the pluck, the skill, and the enlightenment of its citizens. At the beginning of the century the population only numbered 00,000, but this number is now exceeded by 400,000, a phe- nomenal increase due to indastrial and mercantile development, and to the existence of an unusually intelligent and vigorous municipal life. Birmingham has distinguished itself among the great cities and towns of England by public spiritedness and liberality in all matters affecting the health and enlightenment of its inhabitants, and herein is a very important factor in its progress and prosperity. It was stated at a recent meeting of the City Council, in the course of did yield £100 a year is now reputed worth x33 6s. 8d., and that this is the common market price between one man and another mide upon a good and moderate medium." ^In an arbitration case which arose at Halifax this year, owing £0 the local Corporation requiring two properties belotigiiig to a tradesman for the purpose of public improvements, £14,850 was claimed for premises which between 187-1 and 1878 were purchased for 10,700, to which £2,000 must be added for later iinprovemeuts; a total of £7>700, or just half the sum demanded. 34 THE UNEARNED INCREMENT. a debate on the subject of taxing ground rents, that the ratepayers had expended £700,000 in sewerage works alone, that a further £300,000 had been spent on the improvement of the streets, and that other improvement schemes in progress would increase the capital expenditure on public works to over a million and a half.^ What has been the effect on the value of property? The same authority stated that the unearned increment created in Birmingham during the fifteen years preceding 1885 was £127,000 (the in- crease in the annual value having been from £1,0G 5,000 to £1,192,000, after making allowance for new buildings and other deductions), representing a capital value, at fifteen years' purchase, of £1,905,000 ; and at tsventy years' jjurchase, one of £2,540,000. The yearly increase in the rental value of the land on which Birmingham stands he placed at £8,500, equal to a capital value of £127,500 or £170,000, according as the basis of calculation is fifteen or tvv'enty years' pur- chase. Mr. Fulford said that " The increase in the value of land in Birmingham in recent years had been enormous. If he went back thirty or fifty years he could point to the estate of Lord Calthorpe, consisting of about 2,000 acres, the intrinsic value of which was about as many pounds per annum, but which was now * Speech of Councillor Fulford, meeting of February 18th, 1890. PRIVA TE GAIN A T PUBLIC COST. 35 worth fifty or a hundred times as much." " The enormous value of the land," he added, " had not accrued from the labour or capital of those who owned it. It was the effect of the growth of the population, and of the great commerce and industry which the enterprise of the population had created. Another cause was the public expenditure in maintaining and increasing the value of the landowners' property, for the development of Birmingham would have been impossible if the expenditure had not been incurred." It is well for the ratepayers of England that the exemption of the land from local taxation has become a burning question, u]Don which both political parties are often to be found united. In Parliament itself voices were long ago raised in favour of reform. The Select Committee of the House of Commons which in 1866 reported on the Local Government and Local Taxation of London, recognising the fact that " nearly the whole of the expenditure and obligations of the Metropolitan Board of Works had been incurred for the purpose of supplying the wants arising from the defects of former administration of the metropolis, and of effecting per- manent improvements, which have tended to increase the value of property, and that the effect of works of such magnitude will be felt long after all the charges have been defrayed," recommended unanimously, " That in any arrangement of the financial resources of D 2 36 THE UNEARNED INCREMENT. the Metropolitan Board, a portion of the charges for permanent improvements and works should be borne by the oivners of property within the metropolis, the rate being, in the first instance, paid by the occupier, and subsequently deducted from his rent, as is now provided in regard to the general property tax." Encouraged by this recommendation the Corporation of London promoted a Bill the following year empowering them to levy a tax of sixpence in the pound on owners of property within the City on b3half of improvements to be executed therein. This Bill was considered by the Select Committee, which regarded it as too far-going. Nothing has been done from that day to this. Agaiij, the report of Mr. Groschen's Select Committee on Local Taxation, which met in 1870, declared the conviction of all members, for the report was adopted unanimously, " That the existing system of local taxa- tion, under which the exclusive charge of almost all rates leviable upon rateable property for current expen- diture, as well as for new objects and permanent works, is placed by law upon the occupiers, while the owners are generally exempt from any direct or immediate contributions in respect of such rates, is contrary to sound policy . . . [and] . . . that it is ex- pedient to make owners as well as occupiers directly liable for a certain proportion of the rates." Many years later, as nothing had meantime been PRIVA TE GAIN A T PUBLIC COST. 37 done, Mr. W. Saunders moved in the House of Com- mons (March IGth, 188G), the following resolution : — " That no system of taxation can be equitable unless a direct assessment be imposed on the owners of ground rents, and on the owners of increased values imparted to lands by building operations or other improvements, as recommended by the Koyal Commission on the Housing of the Working Classes." • The resolution was referred to the Select Committee on Town Holdings, and the question was again shelved. Eeform in local taxation will, no doubt, be accelerated ^ Compare Mill :— " It is only in exceptional case?, like that of favourite situations in larg-e towns, that the predominant eleuient in the rent is the ground rent : and among the very tew kinds of income which are tit subjects for peculiar taxation, these ground rents hold the principal place, being the most gigantic exarnpl.^ extant of enormous accessions of riehes actiuired rapidh-, and lu many cases unexpectedly,_by a few families, Irom the mere accident; of their possessing certain tracts of laud, without then- having themselves aided in the acquisition by the smallest exertion, out- lay, or risk. So far, therefore, as a house-tax falls on the ground landlord, it is linble to no valid objection." (" Political Economy," Bi'ok v., chap, iii., sec. C.) Cut an earlier advocate of such special taxation maybe found in Adam Smith himself, who writes: — " Ijoth ground rents and the ordinary rent of land are a species of revenue w hich the owner in many cases enjoys without care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the State, no discouraire- ment will thereby be given to any sort of industry. The annual produce of the lami and labour of society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground rents and the ordinary rent of laud are, therefore, perhaps the species of revenue wliich can best bear to have a peculiar tax imposed upon them. Ground rents setm, in this respect, a more proper subject of peculiar taxation than even the ordinary rent of land. The ordinary rent f land is 595'7 38 THE UNEARNED INCREMENT. by the agitation which, has of late sprung up in the country. Manchester is one of the important towns where an urge at demand has been made for the taxa^ tion of ground rents, and not long ago the City Council adopted unanimously a resolution expressing *' its sense of the great anomaly that arises from the entire exemption of the ground landlords from any liability towards the relief of local taxation," and con- sidering that " the time has fully aiTived when all ground or chief rents, freeholds, and mineral royalties should contribute their equitable share on the same ratio as house and other properties towards the financial burdens of the communities." It was stated in the ■course of the debate that " although houses and build- ings of every description were rated to the extent of 4s. 2d. in the pound on the assessment, the ground landlord took in many cases one hundred-fold the in many cases, owing partly at least to the attention and g'ood mauastment of the landlord. A very heavv tax misht discourage too much this attention and good mauasrtment. Ground rents, so far as they exceed the ordinary rent of laud, are altogether owing to the good government of the Sovereign, which, liy protecting the industry either of the whole people, or of the inhabitants of some particular place, enables them to pay so much more tbau its real value lor the ground which they build tlieir houses upon, or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable than that a fund which owes its existence to the good government of the State should be taxed peculiarly, or should con- tribute something more than tlie greater part of other funds towards the support of that government." (" Wealth of JS'ations," Book V., ehapttr ii , part ii., article 1, section on " Taxes upon the ilents of Houses."} PRIVA TE GAIN A T PUBLIC COS T. 39 original value of the land and paid no local rates whatever." The injustice of the present arrangement is well illustrated by the experience of Bury at the present time. The land on which this large Lancashire town stands belongs to Lord Derby, yet the ratepayers have been called upon to carry out sewage works (for the purpose of keeping the river Irwell pure) which would cost £60,000. As these works benefit the landlord equally with the residents, the latter have declined to execute them until the cost can be fairly divided. A town's meeting on June 3rd, 1890, passed a resolution desiring the Town Council not to proceed until— "having regard to the assurance given to the House of Commons on the 18th July, 1888, by the Right Hon. W. H. Smith, First Lord of the Treasury, in perfect good faith and with absolute sincerity, that it was the intention of the Grovernment to deal with the question of rating at the earliest possible moment" — Parliament " has found opportunity to deal with the question of rating, and to provide a more equitable mode of raising the money required for the construction and maintenance of this great permanent public im- provement." CriAPTEIi IV. TEE REXr SCREV/. r I 1HEN, again, the enterprise and business skill of -L a town's residents produce the same effect of increasing the value of the land upon which the towai stands. The high reputation of a single tradesman may improve all the property surrounding that whicli he occupies ; while the fact of a prosperous industry or trade becoming located in a town or a certain quarter of a town may add enormously to the landlords' revenue. This accident of favourable locality is, indeed, a matter of the utmost importance in large towns.' * Mr. B. r. C. Costelloe, a member of the Londoa Cminty Council, wrote in the Star of London, in Januarj', 1890 :— " I am impressed by the fact that the popuLarily of the cry for leasehold relorm is greatly due to the general conviction that the shopkeepers and small tradesfolk are systematically despoiled by the landlord whenever a lease falls in. The freeholder, or a lon^ lessee, lets a foothold in the business life of London to an industrious and enterprising trader— a butcher, a photographer, a grocer, a printer, a draper, what you will. The working occupier gets a lease for a few years, puts in what needful capital he can raise, spends freely his own time and brains, and ' makes a business.' But that business is often whully and always partially annexed to the spot where it is made. '1 here are not a dozen bakers in London ■who would not pay a heavy fine rather than move a mile. There- fore, you have him in a tiap. Some security you must offer him, THE RENT SCREW. 41 Evidence of indefinite extent might be adduced to show that both in large and small towns, though especially in the former, occupiers of property frequently suffer great injustice and hardship at the hands of landlords who are enriched by their energy, industry, and enterprise. In London, for example, recent agita- tions and consequent revelations have established the existence of infamous rack-renting as a result of the prodigious value to which land has there been forced up. The " bitter cry " of the Tenant Tradesmen's National Union' and the Fair Eent League, both or he will rot put, his money down. But the competition is keen, and he will take a wonderfully short tenure. That done, you watch his business with aifeclionate interest, for you will skim the cream oft" it by-aud-by. Knowins- he cannot leave without a loss of, say £1,000, yuu will line him £900 for your leave to stay. You first charge him what you like for ' dilapidation ' so called ; then you lay on a rent pnjbably beyond what another man would give you ; then you a>k a line in cash or in tlic form of building- improvements, remembering all the while that amazing axiom ot the law. that whatever of his property he aflixes to tlie sdiI forth- with belongs to you." ^The programme of the Tenant Tradesmen's National Union lays down the following among other objects: — "To oppose generally the exactions of unjust landlords; to secure to the tenant tradesman the full value of the goodwill which he has created or purchased ; to secure to the tenant the value of permanent improvements made by him dnrinL' his tenancy." A news report which appeared in the I\ill Mall (Jnzdtc in January, 1890, is, to say the least, signiticant : — " Last night a company of London rack-rented tradesmen met in conference at Exeter Hall. The speakers hailed from all districts of London, and the meeting was unanimous in its condemnation of the law winch permitted land- lords to extort arbitrary rents. If rack-rented, the speakers were not robbed of their forcefulness of expression. ' Slaves,' said one speaker, ' I should think we are, onlv we pay our slave-owners.' It was shown that the more successful a tradesman proved himself THE UNEARNED INCREMENT. formed in the metropolis in 1889, is that impossible rents are demanded in wealthy and poor neighbomiioods alike.' Leaseholders suffer severely under the system which gives to the landowner all the unearned increment created by the community. As the law now stands, the more was he fleeced because of his success, and instances were given of the exorbitant rates tenants paid in comparison to those levied on the ground landlords. Another speaker exclaimed of the landlords, ' Bring them forward before us, and if they escape may heaven help them* ; and then he appealed to the audience to join the Tradesmen's Union. The following- resolutions were carried ■with enthusiasm:^' That this meeting condemns the system by which the arbitrary exactions of unjust landlords are legalised; that this meeting pledges itself to support the Tenant Tradesmen's National Union in its elForts to secure to tenants the value of the goodwill which they have created, and of all permanent improve- ments t'nat they have made at their o'svti cost.' " ' In May, 1890, the London newspapers recorded the formation of a Uair Ptent Union, with the object of "sweeping away the slums and all other unsanitary structures," and of uniting in " a demand for the extension of the principle of judicial rents to town and countrj'." A passas^e from a letter WTitten to the Times in November, 1889, by Lieut. -Col. G. H. Lloyd-Verney, who styled himself " a ground landlord on a small scale in London," seems to show that the tenants have reason for dissatisfaction. " I venture to think," he says, "if landlords in Loudon took as much interest in and were as easily accessible to their tenants as they are in the country the relations between landlord and tenant would be less strained ; but many landlords in London leave the whole of the administration of their properties in the hands of agents, who are often paid by a percentage on the rents obtained, and to whom the rack-renting of tenants is a decided advantage. Few tenants in London have the same access to their landlords that tenants have in the country, and can only approach the landlord through his agent, who, though perhaps a sharp man of business, thinks more of his own percentage and endeavours to squeeze all he can out of the tenant than to accept an equitable rent and promote harmony and kindly feeling between landlord and tenant." THE RENT SCREW. 43 not only is society as a whole unable to share in the increasing value which it gives to the land it uses, but the individual citizen is debarred from compensation for the improvements he may have made to the property he occupies. Worse than that, it is in the power of the landlord — and the power is not ignored — to make tenants' improvements a pretext for demanding addi- tional rent. Indeed, so far is this practice of exploitation carried, that often where a tenant has established a business which cannot easily be removed, whose success is depen- dent on local circumstances, the landlord converts his prerogative of changing tenants into a weapon for enforcing higher rent.^ The Select Committee on Town Holdings has reported : — ^ The following is from a daily newspaper (ISS'J) • — "As an ilhistratioa of what a London landlord can exact I may quote the case of a well-known and most prosperous theatiical mana.^er. He now pays £10,000 a year for his theatre. The rent has been i-teadily raised for years, till it is more than double the original amount, though the lessee lias spent £3(i,(MiO in im- provements. If he were to quit, the landlord would probably not get a tenant, certainly not at such a rental. Eut the manager cannot quit, because no other theatre would suit him as well." The toUowing passage from Adolph AVagner's work on the " Theory of Political Economy " (his Gnoidlcgioig, Leipzig, various editions) given us the views on this question uf one of the foremost political economists of Germany : — " A still nnirequented quarter of a town, with new houses, or hitherto either without retail busi- nesses or without good ones, is improved by the owners of the latter. But the fruits of individual industry— which often are very considerable — and even of the expenditure of capital are only enjoyed by the shopkeeper during the tirst period of liis leasehold. Afterwards he must hand them over to the landlord either wholly 44 THE UNEARNED INCREMENT. " Numerous cases have been laid before the Committee where it lias been alleged that greater injustice has been done to tenants ■who iMve expended Urge sums in improvements by their having, at the termination of their lease'^, either to give up the property so improved without any compensation for the improvements made, or to pay an increase-! rent for the premises in consequence of the improvements made at their own expense. Somewhat similar grievances are alleged to exist in relation to the tenant's goodwill. This is said in many cases to be practically confiscated by the land- lord, who takes advantage of the fact of the tenant having worked up a good business, in order to obtain on a renewrd of the lease a rent higher than the market value, and that the tenmt is induced to pay such lent in consequence of the great injury that would ensue to his business if he hal to quit." Again, we may read in the same report : — " There is a v.ddely-spread sense of injustice among lessees in having, at the end of the lease, to give up the buildings they have erected, or to pay a rent calculated on the principle that such buildings are the property of the landlord. This feeling is pro- e or in part in the form of increased rent — so easy to enforce — and in any case he must divide them with him. From henceforth the shopkeeper works and stru^^des essentially for him — a tar more unfavourahle economic relationship than the feudal hiirdeuins,'- of the peasantry with services and dues to the landowner in the middle a,"-es. For those burdens might not be increased at will, and if tlie peasant did his duty he could not be driven away. But the shop- keeper m a hirire town is continually being more encumbered, and may be immediately driven away, audmust ever suU't-r from ihe often so dishonest competition of his rivals — this being, too, an effect of the rent-screw— everything tending ultimately to the increase of the landlord's income. He is not, indeed, bound to the ^oil, he is 'personally free'; that is, he_ can go when his lease expires, and — begin asrain from the beginning. In such cases, which are typiciil of retail businesses in large towns, because tiieir customers are es-^eiitially heal, and which might be instanced in hundreds, it is clear that private property in land and houses can lead to an ponnomic exploitation which is not often reached in unfreedom." (See note to page 65G.) THE RENT SCREW. 45 bably especially strong in cases where worldng men and others build their own houses, and where, being unable to obtain land eitlier as freehold or Lmg leasehold, tliey are practically com- pelled to build on leases for short terms. A good deal of evi- dence has been laid before us as to places whor'^ these conditions exist, such as the quarry districts of Festiniog and Bethesda, and the mining districts of Cornwall, where large numbers of houses are built by workmen for their own occupation on land previously of little or no value, and Avhere, in many cases, the Avhole labour and expense of preparing the site, erecting the house, and all other outlay on the property is paid by the lessee. It cannot be a matter of surprise that such a lessee should feel that he is un- justly treated under a system which gives the value of the build- in"- and improvements to the lessor at the expiration of a term, in many cases, comparatively short." ^ In regard to the complaints of rack-renting upon tenants' improvements, the Committee — while not justifying them generally — reported that it was of opinion that — " As a rule, any improvements wliich may have been made by the tenant are regarded as the rightful property of the landlord on the termination of the lease, and tliat in such cases rents are commonly raise :1 in consequence of such improvements to the extent of either a part or the whole or the increased value they may have given to the i^remiscs." And, again — " It cannot be doubted that cases of hardship do occur in cou- ^ Captain U. O'Sullivan stated befor? the Connmittee that he leased a house site in an Irish town for 20 yenrs at £'i 17s. ptr annum, building a residence which cost £400. On the expiration of the lease the structure went to the landlord, to whom the huildyr liad in future the pleasure of paying £10 a year rent f^r his own house. 46 THE UNEARNED INCREMENT. nection with gooflwill, and that landlords sometimes take an undue advantage of their tenants' position in such cases; and it is clear that when the renewal of a lease of business premises is under discussion, the fact of the tenant having created a valuable! goodwill gives the landlord considerable power to settle the terms of such renewal in his own favour." ^ The Committee did not, save in exceptional cases, recommend the compensation of tenants under existing contracts for improvements or goodwill on the termina- tion of their tenancies, but as to future contracts they felt that "No injustice would be involved in such an alteration of the law as would entitle the tenant of trade or business premises, on the expiration of his tenancy, to compensation for such improvements as he may have bonajide made for the purpose of carrying on his trade or business, and as may have added to the permanent letting value of the premises." ^ One witness declared : " The tenants are not considered at all now in a renewal ; they are simplj^ told by the aa:ents, no matter wliom they represent, that they must pay just such a full price as they could get from any stranger outside. Of course, the tenant in possession, who has spent a lot of money in making- a goodwill, is bound to pay more than anyone else, and a stranger will pay a higher price for the sake of petting the goodwill of the business that the other man has made." Another witness said that "the landlords do in a large number of instances trade upon the special interest a man has in his lease," and yet another " showed that in his own case he had been obliged to pay as heavily for the business he had established as its protits would allow of by way of increase of rent." The Committee's report adds to these statements : " The general answer of the land agents to the^e complaints was, that when a tenant takes up a lease he does it with his eyes open to the risks of being either turned out or being forced to pay an increased rent at the end of the term." THE RENT SCREW. 47 The Committee reported to the same effect regarding Ireland : — " There is no doubt tliat a constant increase of rent is made on the tenants' improvements in most of the towns of Ireland ; and that the circumstance of their possessing a goo;I\vill is an important factor to induce the tenants to accede to such a rise. In many cases the grievance does not arise from the action of the ground landlord, but from that of the middleman. It is difficult to devise any fair remedy for such a state of things, but the Committee are of opinion that a considerable number of hard- ships arise owing to the short tenures on which houses have been built, and substantial improvements effected, in many of the Irish towns, although this is being to some extent reme^ieil, either by the influence of public opinion, or by landlords seeing that it is for their interest to grant longer terms.'' It would be easy to multiply evidence of the evils of urban landlordism when combined with the power of appropriating the whole of the socially-created value of land. The very existence of such a power will always be a social danger, for land being a monopaly article, society is, beyond the limits within which the rights and privileges of the monopolists are restricted, abso- lutely at the mercy of the owners of the soil, whose demands upon the material resources of the commu- nity are often not even limited by the latter's ability to respond. Take the following instance of a land- lord's power being asserted to the direct injury of society. The Committee on Town Holdings reports : — " Mr. Burr gave some most unpleasantly cynical evidence to the effect that, in the course of his individual management of leasehold estates at Wimbledon, Torquay, and S.vausea, he sys- 43 THE UNEARNED INCREMENT. tematically worke 1 the covenants in the leases so as to obtain the utmost money advantage, and that he meant in one instance, by the use of the covenants restricting the carrying on of trades, to throw a monopoly in the hands of a favourite baker, with the lesult of raising the price or h^weriug the c[ul tlnoughout ; the { I'operty to be insui ed by me in the Portman Fire Office. Upon remonstrating at the ex- orbitant terms I received a letter from the agent that I could accept them or not, but in the event of my not accepting I should not have any further opportunity of applying." The remonstrant naturally asked : " What right can the landlord have to take my house ? He has never spent a penny towards its improvement. Of course, the ground has increased in value, but that is through the tradespeople, and not through the landlord." '^ ^ Letter of " Englishwoman" (Baker-street, London) in the London Echo of Octuber, 1882. THE RENT SCREW. ^9 Perhaps the worst evils of the leasehold system arc found in that form which makes the duration of a lease depend upon that of several lives. The life system is nearly universal in Cornwall, or at any rate in the western part of that county. There land is leased to a person, not for a term of years, but for the duration of three lives, named in the lease. Directly these lives have expired, the land and the buildings raised upon it revert to the landlord, independently of the time which may have elapsed since the covenant was drawn up. The result of this obnoxious system of tenure — which has well been described as a "flesh- and-blood lottery " — is that property in great quantities 4and to great value, for which no equivalent has been given, often falls to a landlord owing to the early ■expiration of the lives. Thus the families and relatives of leaseholders are literally robbed of the fruits of the latters' providence, industry, energy, and enterprise. It is related that " on one estate in West Cornwall five farm leases on sets of lives ' fell in hand ' within the space of ten years. This extraordinary occurrence was the result of an epidemic of typhoid fever, and here ■were seen the evils of the system in their most flagrant form. Not only was suffering entailed by a loss of life, but the grief of the survivors was aggravated by a loss of those means of subsistence which, under altered and more reasonable conditions, would have been still 50 :4^ THE UNEARNED INCREMENT. at their command.'* ' In another case 3,917,641 „ 280 )> 5,425,764 (one-sixth of the enclosed land) 523 5) one-fifth of all England and Wales 710 ?> one-fourth „ „ 450 » one-half „ „ 10,207 » two-thirds „ j, Scotland. (Total area 18,946,694 acres.) 1 person owned 1,326,000 acres 12 persons „ 4,339,722 „ (a q^uarter of Scotland) 24 „ ,, a quarter of Scotland 70 ., ,, a half „ J-'-'- » » » »' 330 „ ,, two-thirds 1,700 J, ,, nine-tenths Ireland. (Total area 20,159,677 acres.) 1 person owned 170,119 acres 1,297,888 „ 6,458,100 „ or a tliird of the island 9,612,728 „ or half „ „ two-thirds of the inland returns show that the number of separate holdings in France exceeds five and a half millions, and in Germauy exceeds five and a quarter millions. 12 persons » 292 „ j> 744 „ » 1,942 „ » THE LA ND MONOPOL Y. 55 It is bad enougli when the monopoly extends to rural land — to the soil that is cultivated, to the forest, and the moorland — but it is infinitely worse when a few persons, or perhaps one, can claim to possess the ground upon which a large community lives and has its being. There are many instances of this in the United King- dom. In some cases a single individual practically holds the destinies of a town in his hands. The state of things even in London — heterogeneous as the city is in so many respects — is appalling, and a metropolitan journal only spoke too truly when it said not long ago :^ " Unquestionably legislation in some form will be necessary to reform a system under which nine-tenths of the inhabitants of the metropolis have no interest in their own houses, and the soil of London is rapidly passing into the hands of a few millionaires."' Owing to the existence of a huge monopoly in land, and to the exaggerated estimate taken by landlords of their legal rights, society has been injured in a multitude of ways. Private enterprise has been harassed, projects of public utility have been thwarted, and their promoters exploited ; in fine, society has been given to understand that the landlords do not exist for it, but it for the landlords. The history of railway enterprise is an apt illustration of the manner in which the interests of the community have invari- 1 The Observer of September 23rd, 1SS8. S6 THE UNEARNED INCREMENT. ably been made subservient to those of the landed class. The opposition of the owners of the soil has been a constant obstacle in the way of railway con- struction, and often the public convenience has per- manently suffered by reason of the hostility of those through whose land projected railways would have passed. Then, too, the great cost of railways has generally been due to the opposition of the landowners, and the extortionate conditions on w^hich they had agreed to part with the required land. Nobody now defends the monstrous imposition practised upon rail- way promoters in the past by many landlords. Not only did they demand exorbitant prices for their land, but they imposed an extra tribute of from 10 to 25 per cent, for compulsory purchase, not to speak of allowances required for " severance " (the division of an estate by the line) and other special circumstances, the money received being frequently double the real value, and even more. iNIr. Brodrick says : — " The landed interest of England is estimated to have received a sum exceeding the national revenue ^ from railway companies alone over and above the market value of the land thus sold." And Professor Thorold Rogers recently wrote : — "In the early days of railway legislation owners constantly got forty or fifty times as much as their jjroperty was worth, and, I regret to say, constantly in exchange for their votes in * Mr. A. Arnold says £100,000,000. THE LAND MONOPOLY. 57 Parliament. One of these persons, a man of rare integrity and honour, the late Lord T;iunton, actnally refunded to the Groat Eastern Company £100,000, which ho inferred had been paid to him for land in excess of its value." ^ A natural consequence of expensive railway con- struction is that the public have to pay needlessly excessive rates for carriage. Thus the injury done by the landlords to the railway promoters in the first instance fell ultimately upon the entire community ; and yet, while the landlords have done their best to prevent the construction of railways, and to make their construction as costly as possible, they have derived the principal benefit. Owing to the provision of railway facilities their land has often been given a vastly greater value. Agricultural land has become eligible for building purposes, and even as agricul- tural land its value has increased by the existence of improved means of communication and transport. Take the following extracts from land reports of recent date : — ''That the new direct line between Canterbury and Folkestono is materially assisting in the opening up of the country for residential purposes, there can be no doubt. Land companies already have an eye on it, having scented afar off the increasing comand for residences Avith from one to four or five acres of land within a few miles of Folkestone." ^ Professor T. Rogers in an article, " Vested Interests," in the Contemporary Review for June, 181)0 58 THE UNEARNED INCREMENT. " The liundred of Wirral (Cheshire) is rapidly becoming the choice residential district of merchants and professional gentle- men carrying on business in Liverpool, to which there is excellent accommodation by rail through the Mersey Tunnel and the various ferries across the Mersey. Land is therefore in great demand for building purposes, as well as for the production of milk, butter, fruit, and garden ijroduce for the Liverpool and Birkenhead markets. The no^ railroad to be made from North "Wales to Liverpool across Wirral will so open up the various building districts that property of all kinds will be materially enhanced in value." ^ Again, writing this year (1890) of Fort Worth, in Texas, two English visitors, ]Mr. S. Smith and Mr. B. S. Brigg, said : — "A few years ago it had only a single railway ; its inhabitants were determined to make it a great railroad centre ; now there are eleven systems running into it, seven of which are great trunk lines. A glance at the map of Texas gives the impression that every company is striving to reach Fort AVorth. The natural effect has been a wonderfully rapid development and a great increase in the value of property. One gentleman told us that thirteen years ago he bought a site for 300 dollars, and on it built a house, in which he has since resided, costing 1,000 dollars ; in February of this year he sold this property for 15,000 dollars. We heard 22,000 dollars offered for some plots that cost the present owner a short time ago 11,000 dollars." Similarly, Mr. Henry George tells us that while the Transcontinental Eailway which was to connect New York and San Francisco was in progress, the value of land in California grew enormously : — ■ ^ Land Agents' Record for January, 1S90. THE LAND MONOPOLY. 59 " Lota on the outskirts of San Francisco rose hundreds and thousands per cent., and farming land was taken up and held for high prices, in -whichever direction an immigrant -was likely to go." ..." AVliat thus -n-ent on in California -went on in every progressive section of the Union. Everywhere that a rail- road was built or projected, land was monopolised in anticipation, and the benefit of the improvement was discounted in increased land values." ^ Where the land upon which a town is situated is monopolised by a single person, as is often the case, one of two results occurs : either enterprise is stifled (the condition of the communit}' being stationary) or it is laid under heavy and unjust impositions. More to the purpose of this inquiry is the latter alter- native, for we can here see how the primary effect of individual exertion and public progress is the unlimited enrichment of the owner of the soil. " One nobleman is known to have received three-quarters of a million sterling for the mere sites of docks constructed by the enterprise of others." Monopolists of this kind are able to dictate terms to a town's inhabitants — to say how they shall live, to lay down the conditions of their occupation, and to a great extent to determine the degree of their material prosperity. They may provide them with what dwellings they choose ; they may favour an industry or stifle it ; they may encourage trade, or drive it away. A correspondent of the Land Agents' Record, writing to thatjournal on January 18th, 1890, said of Folkestone : — ^ •' Progress and Poverty," Book V., chapter 1. 6o THE UNEARNED INCREMENT. " The town labours under the disadvantage of bein^ mostly held by one man, the lord of the manor, and the consequence is, that every buildin;^ operation — nay, more, every proposed improvement of the Corporation's — is subject to the will and pleasure of his lordship, or of his agents. Appreciating his position to the full, the lord of the manor has but to await events, knowing that all who wish to build must apply to him for what amounts to permission to increase his already overflowing exchequer. lie does not seek to open up his property for developing it by competition, but rather allows it to stand idle luitil a bidder comes along prepared to pay the exaggerated ground rent demanded. Mark : none of the land is sold! What is the result of all this ? Why, tliat instead of there being fair villas, and other residences in their own grounds, dotted about, all are crowded together, with barely a piece of ground that can be dignified by the name of garden. . . Thetendency of land and residential properties, a few miles out, is cei-t duly to increase in Talue to a wonderful extent. Where, but a short time since, £3,000 was given for a small freehold residential estate, £6,000 is now confidently expected for it. A cottage and three acres formerly let at £30 a year cannot now be had for less than twice that amount. Land in the neighbourhood of Ilythe, too, which some years since was bought for the proverbial ' song,' is no.v on. sale and actually realises at the rate of £400 an acre." The manner in whicli the land monopoly affects industry and commerce for ill in England is well dealt with by Mr. A. O'Connor, M.P., in the special rei^ort prepared by him as a member of the Eoyal Commission on the Depression ia Trade and Industry (appointed in 1885) :— " What are tne circumstances under which manufacturing industry is carried on in this country in respect of the use of land ? With the falling in of leases so much higher a ground rent is charged that even -with an increase of business there is THE LAND MONOPOL V. 6l less profit. Not only in London does the amount paid for tlie occupation of ground bear a higher proportion to the profits of trade than it formerly did, but in Birmingham too, where trade prices have been lowered, profit reduced, and wages are less, and where there are large numbers of persons vainly seeking employ- menr, the price which has to be paid for the use of land has increased. The evidence on tliis point from Sheffield, again, was of the clearest ; and it was shown that in Jarrow, which the shipbuilding industry may be said to have created, the land- owners draw from the earnings of the industrial classes an immense income in consideiation of the occupation of ground the improvement in the value of which is in no way attributable to them. And so of other places. As in the agricultural and mining districts, so in the industrial and manufacturing centres, the amounts which have to be paid for the use of land constitute a burden vipon industry which is constantly becoming heavier, both absolutely and relatively." And he adds : — " It tlius appears that over the entire country there is a cause at work — general, permanent, and far-reaching — affecting every branch oi: industry, in mine, and farm, and factory, the effects of which are traceable in the languishing condition of the agricultural, and tlie mining, and the manufacturing interests. That cause is the fact that under the existing land system the owners of the soil are able to obtain, and do exact, so large a proportion of the proceeds of the industry of the United Kingdom that the remainder is insuflicient to secure adequate remuneration to the industrial 'classes, either in the shape of wages to operatives or reMsonablo profit to the organisers of labour, the employers, or capitalists." Thus the land monopoly is not merely an abstract injustice ; its injurious effects extend in all directions of social life. It is a wrong in itself, and it is a begetter of wrongs. The narrowness of this monopoly in civilised countries is the greatest cause of land speculation, with its attendant evils, which it is now necessary to consider. CHAPTEE YI. LAND SPECULATION. SO certain is it that in a progressive society land will increase in value, that there is now-a-days always a speculative element in the value of land. Men buy land with the expectation that it will, like wine, improve by keeping, and when it changes hands in the market regard is had not only to present but to prospective worth. It was stated in evidence before the Committee on Town Holdings that speculation in ground rents is very common in London. " Ground rents," said one witness, "are particularly favourite investments for investors who are more careful about absolute security and the increasing value of the 'property in the future than they are about a higher rate of interest," and the same witness estimated the gross value of the ground rents sold at the London Auction Mart alone in the years 1884-85 at £900,000. Speculation in land, as at present carried on, may justly be regarded as one of the greatest evils associated with the institution of private x^i'operty in 62 LAND SPECULA T. ON. 63 the soil. Eightly described, it is nothing more or less than gambling over the probabilities and possibilities of social progress in one form or another. While the speculators benefit, the community as a whole suffers, and so long as the owners of land are entitled to appro- priate the entire increase of value which accrues from the operation of social causes, this will continue to be the case. Illustrations demonstrate more readily than argument the evils to which speculation in land leads, but it must be self-evident that a practice whose effect is to create fictitious values and bloated rents cannot be a healthy one. It is not too much to say that but for the speculation which forces up the value of urban land to an unnatural height the grave evil of overcrowding, with its concomitant, the excessive rent- ing of the working classes for the inferior accommoda- tion afforded them, would never be heard of in oui large towns. It is a fact worthy of the thought of political students that this practice of speculating in land, in the hope of profiting by the progress of society — opposed though it is to the interests of the community — is nowhere more common than in democratic America. Dr. A. E. Wallace writes : — ■ " Land speculation, which we think is had enough with us, is but a trifle here compared with what it is in America. In America land speculation is everywhere excessive. It is the great mode of making money, and it exists more or less all over 64 THE UNEARNED INCREMENT. the country wherever laud is for sale and is not monopolised by great capitalists. Men buy land on speculation for the purpose of selling it again quickly." ^ And the author of " Progress and Poverty " tells us : *' The man who sets out from the Eastern seaboard in search of the margin of cultivation, where he may obtain land without paying rent, must, like the man -who swam the river to get a drink, pass for long distances through half-tilled farms, and traverse vast areas of virgin soil, before he reaches the point where land can be had free of rent, i.e., by homestead entry or pre- emption, lie (and with him the margin of cultivation) is forced so much farther than he otherwise need have gone, by the specu- lation which is holding those unused lands in expectation of increased value in the future." ^ It is a common thing in America for people to speculate in land far West, whore the trail of civilisa- tion is still faint, yet where in time busy communities will no doubt plant themselves. This land is purchased in the certain expectation that it will increase in value as civilisation presses onward across the prairie, A man who invests to even a moderate extent feels sure that the augmentation of value will in time provide ^ " Land Lessons from America." Again, the same writer Fays : — "An enormous proportion of the wtll-Tn-do people of tlie couutry either have made money by land speculation or hope to do so. . . The result of these sperailations is that in the cities — in thes-uburbs of the cities, in the plac*-s wlure working-men live, Ave find the land cut iip into still smaller strips than iu England, and the houses are built still more closely together. . . Here you have private property making land the sut)ject of specnlation, producing all the evil eflucts, such as crowded cities and bad tenement houses, that YOU have in our great cities at home." Mr. Henry George's " Progress and Poverty," Book IV. chap. 4. LAND SPECULATION. 65 him with a satisfactory competency. He may never see his land, and may only know its approximate situa- tion from the map, yet it is year by year increasing in value and accumulating for him a revenue which he never earned. Such a man, to use Mill's words, " grows richer in his sleep, without working, risking, or economising." A characteristic example of American land specula- tion is related by Dr. A. R. Wallace, in a record of -his travels in the States in 1887. He tells us : — " I stayed some time in a growing city in Iowa, called Sioux City, wliich has a pojiulation of 20,000. They were having what is called a land boom — ^every city tries its best to have one — we should call it a land fever; and the consequence was that land "which sold at £10 an acre three years ago was selling at £150 an acre. It was two miles from the city, and it was sold with the idea that the city would soon stretch out and reach it. In the residential suburbs the price obtained was £4,o00 an acre, and in the centre of the city it was £40,000 an acre. In the town of Salina, in Kansas, with a still smaller population of only 8,000, which was first settled by Colonel Phillips thirty years ago, land in the suburbs is now selling at £4,oOO an acre, and in the centre of the town at £30,000 an acre. Here also they had a boom, and land had doubled in value in a few months." Take also the following passage from a description of Texas published this year (1890) by two English visitors, Mr. S. Smith and Mr. B. S. Brigg, of Keighley :— " In America the ownership of land is more widely diffused than with ns. Almost every man you meet either is, or has been, or hopes to be, the possessor of ' real estate,' and he is generally wishful to own as much as he can possibly find means to buy. A wealthy and very shrewd genth man in Chicago said to us : 66 __,- THE UNEARNED INCREMENT. * I keep myself poor by buying land, because I know that it is the way to make my children rich.' Another prominent man in Texas smilingly said : ' It is true I own thousands of acres of land, but I am often in want of a few dollars of ready money.' " An extract from the report of a British Consul for 1887 will give an idea of the extent to which specula- tion is a factor in the growth of land-values in the United States. Pealing with the price of land in Los Angeles in that year, Consul Donohoe wrote : — " The price of real estate has advanced steadily for the past four years, and in this city has reached such a figure that the prospect of a further rise can only be predicated on the assump- tion that within four years the pojiulation will have reached 250,000, which I think by no means improbable. The extraor- dinary demand for landed property is best illustrated by the fact that in this city alone there are nearly 2,000 persons paying licence as land agents. £8,000 was recently paid for a lot 20 by 100 feet, or at the rate of £400 a front foot; £600 per front foot was offered and refused for another lot in the centre of the city. At this rate an acre divided into lots 100 feet deep would be worth over £260,000. Upwards of 100 towns and settlements have been laid out within the past year in this district, and I am in- formed that there are 40 new cities on the line of the Atlantic and Pacific Eailroad between Los Angeles and San Bernardino, a distance of 60 miles. At the first sales of lots in many of these new cities, in May and June last, many persons remained stand- ing in line in front of the places of sale for more than 24 hours for the privilege of buying a lot. It has been stated, half seriously, that one can walk on ' city ' lots from Ontario to Los Angeles, a distance of 40 miles. Several of these new-boirn cities are being built up very rapidly, and are increasing mar- vellously in population ; many of them, however, are destined to revert to farming lands. The frantic speculation in lots in almost all the new cities has entirely ceased, and the ' boom ' has to Bome extent abated throughout the whole district." LAND SPECULATION. 67 A very different tale was told when the land " boom " was over. In a report, which well presents the reverse side of the picture of profitable speculation, Viee- Consul Mortimer wrote from Los Angeles respecting the gambling mania : — " The area of the city of Los Angeles (40 square miles) was not sufficiently extensive for the siDeculators in city lots. Suburbs were laid out on every side, and upwards of a hundred ' cities ' were projected within forty miles of this city. Many of these * cities ' have no inhabitants as yet, and never will have any. It is no exaggeration to say that city lots (50 by 150 feet) were sur- veyed and staked out in the county of Los An-cles sufficient for a population of several millions. In the period of the ' boom ' lands were sold and resold at intervals of a few weeks, the j)rice being considerably advanced on every sa^e. The small profits from the cultivation of the soil were despised, and many fine orange orchards and vineyards were neglected, the owners hav- ing purchased with a view only to reselling at a higher figure. Many of the new ' boom ' cities have reverted to farming lands, and in others, where some improvements were made, and so many lots were sold that they could not be converted into farms, the value of the sub-divisions is merely nominal. I am informed that lots in Monrovia,v/hich were sold during the ' boom ' at from £3,000 to £4,000, cannot now be sold for £100." The experience of America is the experience of older countries. Wherever there is social and material progress the land speculator is found building his home, for he knows that he can there live and thrive. The history of Berlin after the war of 1870 is very instructive in this respect. The success of Germany led to a remarkable awakening in the political, muni- cipal, and commercial life of the metropolis. Building f2 68 THE UNEARNED INCREMENT. began to be carried on at once upon a large scale, and furious speculation in land set in. Writing in 1873, before the fever had reached its height, Dr. Engel, the eminent statistician, enumerated many estate and building companies which were then making enormous profits on speculation in land in the periphery of the city. One of these companies had bought land at £21 per square rood, and sold it directly afterwards for £51. Another had purchased at £13 10s. per square rood, and sold at £37 IGs. Yet another bought at £213 per Prussian acre, and sold at once at £450. " Thus," he wrote, "hundreds of thousands of square roods of building ground in the neighbourhood of Berlin have been bought " (in the early days of Berlin's phenomenal development) " and sold again, yielding millions of thalers to the first happy purchasers. What labour has been done," he asked, " proportionate to such profits ? What injury is not inflicted by such high middlemen's profits upon the future tenants of the houses which will be built upon ground thus made so expensive ? " A strange anomaly in the incidence of local taxa- tion — one to which reference has already been made — encourages speculation in unoccupied land in and around towns. This is frequently withheld from use, to the public detriment, because its owners count on increasing value. It does not matter to them that the ^ See Verhandlungen der Eisenacher Versammlung (Leipzig, 1873). LAND SPECULATION. 69 residential requirements of the population demand that the land shall be built upon. They hold it as a speculation, and as they are not called upon — in England, at least — to pay rates upon its market value, but only upon the income derived from it, the ex- pectation of rising value allows them to treat it for the present as dead capital. In large towns this prac- tice of keeping land, eligible and eventually intended for building purposes, out of the market, leads fre- quently to scarcity and costliness of dwellings. All classes of the population suffer, but it is well known that the working and poorer classes suffer most accord- ing to their means. Speaking of house rent, Professor Thorold Rogers says : — " The cost is greatly increased by the power which the law confers on coi-porations and private proprietors to withhold land from the market at a minimum of cost. It will be clear that if the law encourages an artificial scarcity, it creates an unnatural deirness. By permitting corporations to hold land in towns, and by allowing private owners to settle land in towns, it gives sucli persons a power of exacting the highest terms possible for the use of their property, by keeping it out of the market till they can enforce their price. To use an American phrase, taken from the slang of speculators, the Russells and the Bentincks, the Cecils, the Portmans, the Grosvenors, and the rest, with the cor- porations, have had for a long period a ring or corner in the land market, and can force buyers to give famine prices.^ Now what ^ " There are large tracts of land allowed to be idle in the out- skirts of rising towns, like our own Kensington Fields (London), that they may be sold at a vast advance in price when required for building purposes. Some of our greatest fortunes have been made in this way, and yet these lands escape taxation as long as they are unoccupied." (Mr. S. Smith, M.P.) 70 THE UNEARNED INCREMENT. is an injury to the moderately wealthy is oppression on the poor. It is well known that vile and loathsome buildings, probably the property of some opulent landowner, yield from the misery of their inmates a far larger rent than the plots on which the most luxurious and convenient mansions are built. The law which levies rates on occupancy instead of on property makes the evil worse, for it puts the minimum inconvenience on the person who holds the strongest position." '■ The same testimony comes from the United States.^ There, too, the land in and around large towns is fre- quently kept out of use for speculative reasons. This land so lying waste may not always be needed for building purposes, yet it would be of great utility if devoted to productive uses. Thus ]Mr. Henry George says: " Within a few miles of San Francisco Is unused land enough to give emijloyment to every man who wants it. . . What is it, then, that prevents labour from employing itself on this laud ? Simply that it has been monopolised and is held at speculative prices, based, not upon present value, but upon the added value that will come with the future growth of pox^ulation." * ^ " Six Centuries of Work and Wages," pages 425 and 426. ^ Speaking for America, Mr. Henry George says :— " If the land of superior quality as to location were always fully used before land of inferior quality were resorted to, no vacant lots would be left as a city extended, nor would we find miserable shanties in the midst of costly buildings. These lots, some of them extremely valuable, are withheld from use, or from tlie full use to which they might be put, because their owners, not being able or not wishing to improve them, prefer, in the expectation of the advance of land values, to hold them for a higher rate than could now be obtained from those willing to improve them." ('' Progress and Poverty," Book JV., chap. 4.) ^ Ihid, Ijook v., chap. 1. LAND SPECULA TION. 71 In any case the withholding of useful land from employment beneficial to the community, in the interest of private speculation, is a social wrong. The wrong is all the greater because, while suffering the injury and inconvenience caused by the landowners' cupidity, the communities thus denied the use of unemployed land on any save extortionate and impos- sible terms are often increasing the value of that land year by year and month by month. This the owners know ; hence their reluctance to sell at a fair market value. It is a demand of pure justice that unoccupied land shall be taxed upon its selling value. This would drive into the market a great amount of urban land of whose use the local populations have great need. The owners would no longer be able to disregard social interests with impunity, for taxes and loss of interest would between them eat up the value of the land which they allowed to stand waste rather than dispose of it at a reasonable price. Moreover, with the introduc- tion of such a reform the incidence of local taxation would be thrown over a wider area, and would there- fore fall more lightly upon the individual members of a community. Mr. John Morley stated before the Eighty Club on November 19th, 1889, that "in Kensington there is land vacant to the value of £1,700,000, practically not rated at all, while certain fields, with a selling value of 72 THE UNEARNED INCREMENT. £400,000 are rated at £G2 towards the relief of the rates." This anomaly did not escape the notice of the Com- mission on the Housing of the Working Classes, whose report proposes that vacant land shall be fairly rated : — " At present, land available for building in the neighbourhood of our populous centres, though its capital value is very great, is probably producing a small yearly return until it is let for build- in«% 2e/e(7;-«M stated, May 9th. 1885:— "In 1S3.5 [he] suc- ceeded, as Lord Ward, to one of the noblest fortunes in the United Kingdom, of which he has been in possession exactly 50 years. Assuming — and the estimate is a low one — that his inf^ome had averaged £100,000 per annum for half a century, it will be seen that at least five millions sterling must have passed through his hands. In the year when the coal famine was raging with great intensity it was currently reported that the late Lord Dudley was in receipt of an income, derived from his coal and iron mines in Staffordshire, which amounted to not much less than one million of p(umds in that single twelvemonth." ^ Mr. S. Laing in article " Aristocracy or Democracy," in the Contemporary licvieic for April, 18110. * " Progress and Poverty," Book IV., chapter 2. 120 THE UNEARNED INCREMENT. form of royalties, rents, and way-leaves. By levying these tributes they are able to obtain a maximum of gain with absolutely no risk, with no possibility of loss. It is of no consequence to them whether mining is remunerative to the capitalist, so long as a fixed royalty is paid to them upon every ton of minerals produced. Thus when profits and wages fall, owing to the low prices ruling, the landowner's proportionate share in the revenue of a mine actually increases. The gains of the real workers of the mine — the men who provide the money and the labour requisite to its develop- ment — may come and go, but the owner's royalty goes on for ever. The evidence laid before the Royal Com- mission on the Depression in Trade and Industry, whose final report was issued in December, 1886, showed that in the county of Durham there was then a reduced output of coal, and prices had declined ; yet, ** while the workmen obtain lower wages, and the employer little or no profit, the bur-den of royalties is greater." It was also " given in evidence that in the Barrow district the royalties have increased in spite of the decrease in the price of iron. According to Sir I. L. Bell the royalties on a ton of pig iron from ironstone, coal, &c., amount to 3s. Cd. in the Cleveland district, 6s. in Scotland, and 6s. 3d. in Cumberland ; while in Germany the amount would only be ed., in France 8d., and in Belgium Is. 3d. to MINES AND MINERAL ROYALTIES. 121 Is. 4d. It was stated before the Eoyal Commission on Depression in Trade that during the years 1872 to 1875 iron ore on the West Coast of England was leased on royalties as high as 10s. a ton. In Cornwall the mine dues vary from one- fifteenth to one-twenty-fourth of the produce. No wonder that enormous revenues should often be made by English and Scotch land- owners out of the minerals which chance to be found in their estates. The fabulous gains of the Dudley family have been noticed, and similar cases might be named. When, a few years ago, a deputation of Members of Parliament had an interview with the Home Secretary on the question of royalties, Mr. JNIason, who spoke for the Lanarkshire miners, said that in that county "one man received no less than £114,000 per annum in mining rents and royalties, or as much for doing nothing as 1,800 miners would earn in 52 weeks." A Cornish representative also instanced the recent renewal of Dolcoath mine lease for 21 years, in con- sideration of which the landlord had demanded £25,000. As to Cleveland, official returns show that the ironstone output of that district during the years 1849 to 188G (thirty-seven years) was 130,909,940 tons, on which no less than £3,000,000 was paid in royalties. Again, according to the Secretary of the Fife and Clackmannan JNIiners' Association the outjnit 122 THE UNEARNED INCREMENT. of coal in Fife and Clackmannan in 1874 was 1,588,000 tons. This output, calculated at 9d. per ton,' gave the landlords about ^59,000 in that year. The output continued to increase till 1884, when it reached 2,044,000 tons, increasing the revenue of the land- lords to iJ9 1,000 — a clear increase of £32,000 per year going into the pockets of the landlords, who meantime performed no new or more valuable service in return ; and still the average wages of the miners in the two counties were in the latter year only 15s. a week. As it is in the power of the landlords to impose whatever royalties they choose, the fortunes of the mining industry largely depend upon their caprice. Without risking a penny of capital himself, the owner of mineral land may be able to make or mar the adventurers who sink thousands of pounds in the opening up of his mines : whether they obtain a fair return upon their investments or are reduced to ruin depends — apart from the capabilities of the mine — upon the moderation of his demands.^ The capitalists ^ Coal royalties in Enjrland, "Wales, and Scotland vary consider- ably. Thus— Yorkshire, 4d. tu Dd. per ton ; Lancashire, fid. to Is. ; Durham and Northumberlard, 4d. to lOd.; Staffordshire, Midlands, tjd. to 8d. ; Wales, 6d. to Is. ; Scotland, 4|d.to Is. 4d. On the whole rents, way-leaves and royalties are estimated to be equivalent to an average tax of 8d. per ton on all the coal produced. ^ In an article on " The Discovery of Coal near Dover," published in the Contemporary Rcvieto for April, 1890, Professor Eoyd Dawkius says : — " The discovery of these hidden coalhelds is a question of national importance well worthy of the attention of MINES AND MINERAL ROYALTIES. 123 are helpless, and not only they, but the miners and associated workpeople whose employment and wages de- pend upon a mine's successful and profitable working.^ It may be said that while a landowner certainly has the power of abusing his privileged position to the injury of both capitalist and labourer, the power is only nominal and is never used ; and, therefore, that the dangers just indicated are perfectly imaginary. Unfor- tunately, however, the contrary is the case, as the history of probably every mining district in England proves. Here is testimony upon the point, taken at random : — " In 1885 a company in West Cumberland had eiglit blast furnaces, four of which were idle, not because the firm had no work, but simply owing to the high royalty demanded by the landowner. The company applied, but unsuccessfully, for a reduction ; and, in order to fulfil their contracts with t!ie Indian Government, the firm had to import iron from Belgium, -while at the same time half their furnaces, and consequently half their •workmen, were idle. A blast furnace turns out about 600 tons of pig iron per week, and upon these GOO tons the royalties amounted to £202, while the wages paid to everyone engaged in producing these 600 tons, from manager downwards, amounted to only £95. Failing to obtain a reduction in the royalty demanded, the Parliament. It is closely connected with the question of royalties, •which is now being considered by a Eoyal Commission. As the law stands at present, if the search for coal bd successful, the neighbouring landowners, who may or may nut have c(mtributed to the experiment, are masters of the situation, because they can charge what royalties they like." ^ The number of workpeople employed in and at mines in the United Kingdom is estimated at GUO,000, and tu these Ct/nic another SOO.OOO fur iron and steel works. 124 THE UNEARNED INCREMENT. company purchased land in America, transferred their works, and are now numbered amongst our foreign competitors."^ And again, in an address delivered in Glasgow in 1885, Mr. Forsyth, president of the Scottish Land Restoration League, said : — " Out of eighty blast furnaces in Cumberland forty are at this moment standing idle, and the others are but partially employed. There are many causes which might have the effect of keeping these forty blast furnaces idle. They might be idle for want of capital ; they might be idle for want of men willing to work; but the Cumberland furnaces are put out, not because of any lack of capital, for only within the last week or two a company of employers there were willing to sink £20,000 in raising iron ore, and were only prevented from doing so by the landlord's idtimatnm that he would not reduce his royalty of 2s. 6d. per ton on the ore Avhich might be raised. The company found that with this charge they could not raise ore as cheaply as it could be imported from Spain, and they therefore abandoned their project. Neither can it be that there are not men able and willing to work, for an ironmaster in Cumberland writes saying that there are thousands of men unemployed who would be gla I to find work of any kind in order to save their wives and children from starvation." In a pamphlet by Mr. C. M. Percy, Wigan, " Mine Rents and INIineral Royalties," mention is made of a case in which — " In 18G9 a lease was granted for a term extending until 1894, at a fixed certain minimum royalty which had to be paid whether any coal was wanted or not, and if any more coal was got than 'Mr. R. ^I'Ghee, in an addrpss to the Govan (Gla^^ffow) Lihernl Association (quoted iu the " Financial Reform Almauack" fur 1890). MINES AND MINERAL ROYALTIES. 125 the minimum grant represented, all that additional quantity paid additional royalty. The tenant expended £50,000, and in 1875 asked the consent of the landlord to tlie transfer of his lease. The landlord demanded a fine amounting- to ten years' rent, and ultimately accepted a fine equal to five years' rent. In 1877 the lease -was again transferred, and the landlord made a farther demand of a fine amounting to five years' rent, and ultimately accepted a fine equal to three years' rent." Again, in the same work, as to Cornwall : — " Leases are granted usually for twenty-one years. There are heavy fixed rates and dues on the output, paid in many cases not from profits but from actual calls on shareholders, the mines themselves being worked at a loss. Enormous charges are made for surface damage to land, as much as £100 per acre of land whose annual value is £1. At the expiration of the lease the entire plant becomes the property of the landlord. . . The tenant gets nothing for ' unexhausted improvements ' which his money has made." Not only is the mining monopoly at present possessed by the landowners a public danger, whether regarded from the standpoint of the capitalist vvho floats or the labourer who works mines, but the effect of this mono- poly, involving as it does the levying of an inordinate tribute upon industrial enterprise, is to make minerals and their products cost far more to the consumer than should be the case. I lay no stress whatever upon the obstacle thus placed in the way of the export of minerals, regarding it as an advantage rather than otherwise that the natural wealth of the country stored in mines — and especially coal — should be con- 126 ^ THE UNEARNED INCREMENT. served for home use, instead of being sent abroad, often at absolutely insignificant profit to the producer. ' Much injustice is, however, suffered by home con- sumers, who have a right to the fullest possible benefit from the minerals with which the country is blessed. This they can only have when the principle for which I am contending is applied to mineral- containing land, equally with the land which is built upon and the land which is merely cultivated. Future increase of value to land from the development of existing mines or the discovery of new ones should not be appropriated by the owners of the soil, since that increase is due to no merit or service or exertion on their part, but to the bountifulness of the Creator who bestowed upon us the minerals and to the society whose needs give them value.^ ^ The coal supplies of Great Britain are being depleted to the extent of millions of tons yearly for the benetit of foreign countries, for it is well known that the gain on export is very small. The coal output of the United Kingdom for the years 1880-4 amounted to 782 million tons, and we exported during those years about lUO million tons at an average price of 9s. per ton. Our coal- fields are limited in extent, yet of vast importance for our future industrial prosperity. Why should we thus drain them so cheaply ? ^ In Austria the landlords have no exclusive claim to the minerals beneath the surface. " Anybody who takes out a search licence is entitled to search for minerals on anybody's property. The proprietor has, of course, to be indemnified; but, if he be un- reasonable in his demands, the searcher can obtain a compulsory lease, or sale at a valuation price, of the ground which he requires for sinking a pit or borehole." "Writing in September, 1890, a Times correspondent in Vienna says : — " This system has done wonders in Austria, and one may safely say that without it the Austrian mining industry would never have attracted so much foreign capital and attained to its present flourishing state." CHAPTER X. HALF-REMEDIES. IF it be granted that the community can properly claim that social value in land which has been created by causes operating independently of the owners, the more serious question arises : How shall the claim be made good ? There are those who regard this j)i"actical phase of the subject as in reality very unpractical. Even so clear-sighted a man as Mr. John Bright once declared' Mill's proposal that the State should appropriate a portion of the unearned increment to be " so absolutely impracticable " as to be unworthy of discussion. But are the difficulties in the way so very great as to be insuperable ? Here it is desirable to refer to two plans which have been recommended as offering at least a tentative solution of the problem. One is the purchase by towns of the fee-simple of their districts. By this arrangement the land upon which a town is built would belong to the local community as a whole, the ^ January, 1S81. 127 123 THE UNEARNED INCREMENT. buildings alone to the inhabitants or other individual owners, and all future increased value would be a common possession.' This proposal, which has many supporters, especially amongst those who aim at the nationalisation of the land— to which goal it is a half- way house— has attained greater prominence in England since Mr. E. D. Gray, M.P., developed it in a memorandum appended to the first report of the Commission on the Housing of the Working Classes. " The only thorough remedy," wrote Mr.Gray, " is to enable the local authority in every town (agricultural land must be con- sidered separately) to acquire the fee-simple of the entire of its district compulsorily, and for this purpose the district should bo so enlarged as to inchule the probable growth of the town for a considerable period. This proposition may appear extravagant, but in principle it is a mere extension of the provisions of Sir Kichard Cross's Acts. Tho.se Acts enable a sanitary authority to purchase an 'area' compulsorily, and to take premises not in themselves in an unsanitary condition, if requisite to make tho ^ scheme ' complete. The principle of taking property compul- sorily for the benefit of the working classes, even when the individual owner has been guilty of no default, is thus fully recognised. If it is just thus to take one man's property, it is just to take many men's property under the same conditions if ^Overthirty years a?o Professor F.W.Newman, inhis "Lectures on Political Economy " (published 1857) said :— " In the centre of a trading- town ... we cannot murmur against the existence of ground-rent, however high, but only at the scandal of its having been wantonly granted away to private persons, mstead of reserving it by law as a town property. When the use of the land is mani- festly essential to the' life of the community, it is an obvious maxim of political justice that the rent should be limited by law. . . The land on which a town is built ought never to be held in masses by a small number of persons." HALF-REMEDIES. 129 the public interest reqviires it. It is now simply proposed to make the ' area ' extend to the whole ' district,' for in no other way can the ' scheme ' be made really complete and of permanent benefit. The community, represented by the local authority, would then have the benefit of such future increase in the value of the land of the town as was due to its increased prosperity^ caused either by the industry and enterprise of the community, or to circumstances equally beyond its control, and that of the original fee-simple holders of the land. Such a change, while inflicting no injustice upon any individual, provided a fair pur- chase price were paid, would, in consequence of the future enhanced value of the land, eventually not only do away with the necessity of local taxation in towns, but yield a constantly increasing surplus applicable to the benefit of the entire com- munity The local authority would let the land at its disposal on conditions favourable to the development and protection of building enterprise by giving full security to those who invested their money or their labour thereon, while the profit and future ' unearned increment ' would go to the com- munity." While this plan has nowhere in England been adopted in its entirety, there are nevertheless many towns whose corporations own considerable areas which they lease to advantage for building purposes, thus securing on reversion the increase of value. To such towns the report of the Committee on Town Holdings alludes : — " It appears to be sometimes urged that any large increase of land-values during the currency of building leases is not in fact an unearned increment, but is due to the general industry and prosperity of the community. The fallacy of this argument as used for the purpose of justifying the expropriation of the free- holders by the lessees lies in confounding together the lessees and the community. As has been already stated, the evidence I3Q THE UNEARNED INCREMENT. stows that the lessees are not the community, but only a very small fraction of it. And there is neither reason nor justice in assigning to a small section that which is due to the exertions of the general body. The distinction is clearly shown in cases where the Corporation of a town, as at Waterford, Dublin,* Liverpool, Birmingham, or Nottingham, hold, as trustees for the community, land which they let upon building-lease. By such a process the increase of laud-values, which is due, not to the building that has taken place, but to the localised industry and general prosperity of the whole body of citizens, seems, according to the evidence, to be most satisfactorily secured for the general benefit of those to whom it is due." This plan is not peculiar to English social reformers. It forms a part of the programme to which many of the leading State Socialists of G-ermany have com- mitted themselves. Professor Wagner, of Berlin, advocated it years ago in his earlier "works on political economy."^ He, in fact, asks for the entire abolition of private property in residential land. In towns there should be collective possession of both land and houses, the communities buying the former and building the latter. It is worthy of note, too, that twenty years ago a similar scheme was advocated by the more mode- rate section of the Social-Democratic party in Grermany. A useful object-lesson may, indeed, be taken from that ^ In the year 1881 an amount of property belonging' to the Dublin Corporation fell out of lease — the lease having been made in 1682— and the result was that a largely increased rental fell to the city, the leap being from £3(3 4s. to £2,000. ^ See the Grundlegimg to his '' Lehrhuch der poUtischen Oekono7nie " (Leipzig, 1876), chapter v., sec. 354 et seg. HALF-REMEDIES. 131 country. When Prussia annexed Hanover, after the war of 18G6, she still retained the " domains " in fiscal hands. These lands were revalued, and as a result rents, which had hitherto been far too low, were advanced from 40 to 120 per cent., the State thus deriving the benefit. A significant move in the same direction was (theo- retically) made by our own House of Commons when, on May 6th last, it adopted, by 175 votes against 159, the following resolution : — ■ "That in the opinion of this House a measure is urgently needed enabling Town Councils and County Councils in England to acquire by agreement or compulsorily, on fair terms and by simple and inexpensive machinery, such laud within or adjoining their several districts as may in their judgment be needed for the requirements of the inhabitants." Yet, however admirable this proposal in its intention, and however beneficial to the extent of its application, it cannot be denied that it is after all an imperfect and incomplete plan. The unearned increment problem would be solved so far as the towns were concerned, but agricultural land — in fact, all non-residential land — and mines would be untouched. At the best, therefore, there could be no finality about such a measure. Society would still suffer injusticCj the same in character if not equal in extent. ', Again, great interest has of late been aroused in England in what is known as the " Betterment " prin- k2 132 THE UNEARNED INCREMENT. ciple. We have already seen how the public improve- ments carried on in towns frequently increase the value of the property they adjoin to an enormous degree. The advocates of the betterment principle would allow the owners of such property to retain the increment so created, though they would take away its unearned character by throwing a portion of the cost of an improvement uj)on the persons financially bene- fited. The betterment tax, as Mr. John Eaei shows, has been known in America for nearly two centuries. He tells us : — " The power to impose such an assessment was given to a Highway Board in the county of Ulster, in the colony of New York, in the year 1691, for the purpose of making public roads, and the same power was again given the same year to the Cor- poration of the city of New York for the construction of the public streets. These Acts were still in force in 1773, when Von Schaack published his collection of statutes, and their better- ment clauses were re-affinned in 1787, when the old colonial statutes were revised for the new State constitution under the Republic. As the city grew, fresh Improvement Acts were required, and the same provision of a betterment tax for the partial or total payment of the expense incurred by the improve- ments was contained in the successive Acts of 1793, 1 795, 1796, 1801, and 1813. The betterment tax therefore originated in the very infancy of New York, and has continued ever since one of the orchnary ways and means of meeting the cost of city im- provements. It was a common custom there even before it was sanctioned by any statute. \Yhcn the city fathers dug a new ^ Article in the Contemjiorary Review for May, ISQO, on " The Betterment Tax in America." HALF-REMEDIES. 133 well they always laid half the expense on the city generally, and the other half on the owners of the property nearest to the well. That was done in the case of public wells in Broadway, Pearl Street, and other parts in 1676." Though the betterment principle set root in New- York State so long ago, its introduction into the other States of the North American Union is of much more recent date ; in fact, belonging to the last half-century. Thus the principle has only been in operation in Boston since 186G, having been introduced in the city's Improvement Act of that year, yet by its instrumen- tality many public improvements, costing large sums of money, have been carried out at moderate cost to the ratepayers. So accustomed now are the communi- ties of the States to this tax that " for the last ten years there seems almost an entire absence of litiga- tion' against this form of impost;" and, in the words of a judge of the Supreme Court of Missouri, "it is now as firmly established as any other doctrine of American law." 1 A case is related where, owing to the operation of the better- ment principlp, a New York landowner, part of whose land was taken for pnhlic improvements, was called on to pay a sum oi money into the bargain on account of the increased value given to the rest of his estate. " He Hew to law but was told that he could claim no damnges for sustaining a benefit. 'The owner ot property taken,' s^aid the Chancellor, 'is entitled to a full com- pensation for tlie damage he sustained thereby, but if the taking of his property for a public improvement is a benefit rather than an injury to him, he certainly has no equitable claim of damages.' And the ChaucelU)r's view was confirmed on appeal by a unani- mous judgment in the Court for Cerrection of Errors." (Related by Mr. J. ilae in the Contemporary Jievieiv for May, 1890.) t34 THE UNEARNED INCREMENT. In England no general law specifically incorporating the betterment principle has ever existed. Here the strange anomaly still exists that while local authorities may be compelled to pay compensation for injury caused to the property of individuals by reason of the measures they adopt in the public interest — as in the erection of public buildings, as schools, the diversion of a road, or the like — they cannot claim indemnity from the persons whose property their expenditure on improvements may benefit.^ Partial acknowledgment of this principle was, however, secured earlier in England than in America. ^ Thus, before the County of London Sheriff's Court on January 3rd, 18130, a licensed victualler and leasehold occupier of a public house in Clerkenwell Road "claimed compensation from the Loudon County Council for injury to his interest in the premises in question, consequent upon diversion of traffic and trade caused by the Council's improvements in connection with the construction of the new road known as Rosebery Avenue. The amount entered in the formal claim was £3,000." The claim was non-suited, as it was found that damage had not been sustained, but the Council's ■counsel admitted that " if there had been deterioration in the value of the property in consequence of the action of the County Council a legal claim for compensation could have been sustained." Mr. Charles Harrison, in a letter to the Times, January 8th, 1890, mentions the following case, in which the owner of a public- house near Old Putney Bridge obtained damages: "The Metro- politan Board of Works built a new bridge [to replace the old Putney Bridge] a short distance up the river, but executed no new works in the main street in which the public-house was situated. The Board made a new thoroughfare joining the old main-street ; the traffic which formerly went along the main street past the public-house subsequently passed along the new thoroughfare and so over the new bridge. The publican claimed and obtained from the jury £1,031 compensation solely on account of the diversion of traffio-" HALF-REMEDIES. \r^ jj The first English law in which the principle is asserted is the Sewers Act of 1427 (6 Henry VI.), amended in 1531 by Act of 23 Henry VIIL, the Statute of Sewers now in force. By these laws Commissioners of Sewers were appointed and the works executed under their direction were charged upon the lands directly benefited.' Then, again, in the Act of 19 Charles II., c. 2, for the rebuilding of the City of London after the Great Fire of 1CG6, the principle is clearly laid down.2 Coming to quite recent times the Artisans' Dwellings Acts of 1879 and 1882^ recognise the justice of the ^ The preamble of the earlier statute states that " considering the great damage and losses which now late be happened by the great inundation of waters in divers parts of the reahu, and that much greater damage is very like to ensue if remedy be not speedily provided," " several Commissions of Sewers shall be made to divers persons by the Chancellor ot England for the time being, to be sent into all parts of the realm where shall be needful." ^ After making provision for the enlargement and widening of various old streets and passages, the Act proceeds (section 24) : — " And forasmuch as the houses now remaining and to be rebuilt will receive more or less advantage in the value of their rents by the libertj* of air and free recourse of trade, and other conveniences by such regulation and enlargement, it is also enacted by the authority aforesaid that, in case of refusal or incapacity as afore- said of the owners or others interested of or in the said houses to agree and compound with the said Lord Mayor, Aldermen, and Oommons for the same : Thereupon a jury shall and may be impanelled in manner and form aforesaid, to judge and assess upon the owners and others interested of and in such houses, such com- petent sum and sums of money with respect to their several interests, in consideration of such improvement and melioration, as in reason and good conscience shall tliink tit. . . And the money so raised shall be wholly employed towards payment and satisfac- tion of such houses and ground as shall be converted into streets, passages, markets, and other public places aforesaid." ^ Before this, various attempts were made to resuscitate the betterment principle. A quarter of a century ago (in 18GG) tho 136 THE UNEARNED INCREMENT. principle. In the former measure it is provided that in the fixing of the compensation payable to an owner on account of the demolition of his property, regard shall be had to any additional value thus given to the adjoining property of the same owner. The Act of 1882 goes further, for it provides that where an obstructive building' is taken for the purpose of im- proving the adjacent property, the improvement given to that property may be charged upon it in the form of a rate in aid.2 The betterment provisions of these two Select Committee on Metropolitan Government recommended the levy of a tax on owners in aid ot the cost of permanent improve- ments made in London. The same principle underlay the proposal of the Select Committee upon Local Taxation, which, under the presidency of Mr. Goschen, recommended in 1870 that occupiers should be entitled to throw part of the rates upon the landlords by deducting it from the rent. ^ In the Housing of the "Working Classes (Amendment) Bill of 1890 an " obstructive building" is defined as "a building so situate that by reason of its proximity to or contact with othtr buildings it (among other things) prevents proper measures from being carried into effect for remedying the evils complained of in respect of such other buildings" (the "evils complained of" including nuisances injurious to health). ^ The exact wording of section 8 of this Act is as follows: — "Where, in the opinion of the arbitrator, the demolition of an ohstrnctive building adds to the value of such other buildings as are in that behalt mentioned in this section, the arbitrator shall apportion so much of the compensation to be paid for the demoli- tion of the obstructive building as may be equal to the increase in the value of the other buildings amongst such other buildings respectively, and the amount apportioned to each such other building in respect of its increase in value by reason of the demoli- tion of such obstructive building shall be deemed to be private improvement expenses," &c. These "private improvement expenses" fall largely upon the occupier. Sir Hugh Owen, Permanent Secretary of the Local Government Board, stated before the Commission on the Housing of the \Vorking Classes : — '* A private improvement rate is borne to HALF-REMEDIES. 137 measures were rendered necessary by the difficulty which always accompanied the removal of old property by improving communities owing to the extortionate compensation demanded and secured by adjacent landowners. The report of the Commission on the Housing of the Working Classes says : — " The evidence has shown that there have been striking instances of compensation which has been paid in cases where persons have received payment for actual advantage which has accrued to their property from the demolitions or alterations ; for example, where a portion of property is taken in order to widen a street. It was stated by Mr. Chamberlain that enormous compensations have been paid to landowners in such cases. Six feet, for instance, has been taken off their frontage, and instead effacing, as they have hitherto done, a mean court or a wretched side street, they find themselves on a great thoroughfare, and the remaining part of their property is worth twice or three times as much as the whole of it was worth before ; and yet, althougli nothing is taken from them by way of contribution, they may have secured enormous compensation." During the last few months the subject has been much discussed in and out of Parliament by reason of the promotion by the London County Council of a Bill — unfortunately wrecked — containing clauses intended to legalise the betterment tax in respect of the con- templated widening of the Strand.' Section 28 of the Strand Improvement Bill said : — some extent by the occupier of the premises, and I hardly think it quite fair that the occupier should be called upon to pay. in addition to his rent, for the improvement of the owner's property." ^ "As a practical proof of Strand ' betterment' it may be men- tioned that a public-house in that thoroughfare, which three years 138 THE UNEARNED INCREMENT. ^^' ■ ' . , ^ " And whereas the improvement, heing effected out of public funds belonging to or charged upon the ratepayers of the county of London, will or may increase in value lands or property fronting on or in the neighbourhood of the improvement, but not acquired for the purpose thereof, and it is reasonable that pro- vision should be made under which such increased value should be reserved wholly or in part for the ratepayers at whose expendi- ture it has been produced, therefore : (1) There shall be a rent charge, to be called the Strand Improvement Eent Charge, which shall be fixed, ascertained, charged, and payable in manner herein- after described ; but the total of the Strand Improvement Rent Charge shall not be of any amount which, when capitalised on such basis as the Standing Arbitrator may deem reasonable, would in his opinion exceed one half of the cost of the improve- ment," &c. Yet here, again, while the aim of the friends of the betterment principle is laudable, and while that principle is perfectly just and equitable, the same objection holds good as in the case of purchasing the fee-simple of towns ; we have not here a complete solution of the unearned increment problem.^ The ago was bought for £9,200, has just changed hands for £16,300 ! — and of course during the period in question very large annual profits were made." — Daily Telegraph, April, 1890. ^ It is important to notice the opinions which have been expressed on this subject by leading Liberal statesmen. The views of Mr. Gladstone have already been referred to. Mr. J. Morley has spoken still more decisively. Addressing the members of the Eighty Club on November li)th, 1889, he spoke of " the monstrous iniquity that landlords whose property is enhanced in value, owing to expenditure to which they do not contribute, are allowed to pocket the enhancement of value," adding : — "It may last till 1899, but I do not think it will, but whether it does or not let us make up our minds what we are to tell to our constituents and to the audiences that we address in the country. Let us tell them that those who derive most of the permanent benefit of the en- HALF-REMEDIES. I39 plan of levying improvement contributions on landlords only applies to one kind of increment, or, to speak witli greater accuracy, to only one species of one genus. There is, as we saw at the outset, an urban increment (that created in the town) ; and there is a rural incre- ment, in the production of which different causes operate. Moreover, taking the social value of town land, there is that value which is attributable directly to public improvements — and these only were con- templated by the London County Council — and there is the value which is due to the general progress of society, and it is in respect to this that the inadequacy of the betterment principle becomes especially ap- parent. hanced vahie are those who contribute least to the expenditure that produced that enhancement. Let us go to those men and say- to them, ' You shall not go on pocketing this increased value. You shall not go on taking permanent advantage and paying none of the costs. You shall bear a fair and a good share of the expendi- ture wliich produced that advantage.' Surely this is all plain common-sense and justice. We need not go into the metaphysics of land nationalisation, nor into absolute ethics or relative ethics. The plain common-sense of Englishmen will tell them that this is a system which ought now, without delay, to be peremptorily .brought to an end." CHAFTEK XI. ROOT AND BRAXCn. THERE can be no doubt that taxation is the most effectual means of getting at unearned incre- ment — of " tapping " it for the benefit of society. By this plan it will be possible to gather the whole of the increment into the social net, thus allowing the com- munity — represented by the State, the County Council, the municipality, the urban authority, or whatever organ may be considered the best for the purpose — for the future to keep its own. It may be said that property owners do already pay both higher taxes and higher rates because of the growing value of their possessions. But it is not enough merely to return to society in this way a low rate of interest on the value which it has created. Society has a right t:^ the entire capital worth. To take an example : The value of a given quantity of land is to day £100 ; a later valuation shows it to be worth £120. This increase is demon- strably not due to any labour, any exertions, any expenditure of capital on the owner's part, but to purely 140 ROOT AND BRANCH. 141 social causes. The increment of £20 should not, then, be appropriated by the landlord, who has not done anything to create it, but by the community. Surely no real injustice would be inflicted upon a man by with- holding from him something which he never possessed. This unearned increment never was his ; how, there- fore, could he be said to suffer injustice if society, with- out touching the orginal £100, kept all value exceeding that amount. On this subject Mill (after premising that " there are cases in which exceptions may be made to " the prin- ciple of equality of taxation " consistently with that equal justice which is the groundwork of the rule ") says forcibly : — " Suppose that there is a kiud of income which constantly tends to increase, without any exertion or sacrifice on the part of the owners : those owners constituting a class in the com- munity whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case it would be no violation of the principles on which private property is grounded, if the State sliould appropriate this increase of wealth, or part of it, as it arises. This would not properly be taking anything from anybody ; it would merely be aj^plying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it t^ become an unearned appendage to the riches of a particular class." ^ Here it will be interesting to inquire liow far Mill is really prepared to go. After asking what claim the "^ "Principles of Political Economy," Book V., chap, ii., sec. 5. THE UNEARNED INCREMENT. landlords have, " on the general principle of social justice," to the increase of riches which is caused by society's progress, he proceeds : — " In what would they have been wronged if society had from the beginning reserved the right of taxing the spontaneous increase of rent to the highest amount required by financial exigencies ? I admit that it would be unjust to come upon each individual estate, and lay hold of the increase which might be found to have taken place in its rental ; because there would be no means of distinguishing between an increase owing to the general circumstances of society, and one which was the effect of skill and expenditure on the part of the proprietor. The only admissible mode of proceeding would be by a general measure. The first step should be a valuation of all the land in the country. The present value of all land should be exempt from the tax ; but after an interval had elapsed, during which society had increased in population and capital, a rough estimate might be made of the spontaneous increase which had accrued to rent since the valuation was made. Of this the average price of produce would be some criterion ; if that had risen it would be certain that rent had increased, and even in a greater ratio than the rise of price. On this and other data an approximate estimate might be made how much value had been added to the land of the country by natural causes ; and in the laying on a general land tax, which for fear of miscalculation should be con- siderably within the amount thus indicated, there would be an assurance of not touching any increase of income which might be the result of capital expended or industry exerted by the proprietor. . . From the present date or any subsequent time at which the Legislature may think fit to assert the principle, I see no objection to declaring that the future increment of rent should be liable to special taxation ; in doing which all injustice to the landlords would be obviated if the present market-price of their laud were secured to them ; since that includes the present value of all future expectations. With reference to such a tax, ROOT AND BRANCH. 143 perhaps a safer criterion than either a rise of rents or a rise of the price of corn would be a general rise in the price of land. It would be easy to keep the tax within the amount which would reduce the market-value of land below the original valuation ; and up to that point, Avhatever the amount of the tax might be, no injustice would be done to the proprietors." ^ The two principal objections to jNIill's proposal of a general uniform land tax are, (1) that it would only afford society partial relief and protection for the future, and (2) that the incidence of this tax would be very unequal. The first of these objections needs no further amplification. As to the second, it must be evident that if land of all kinds, and in all parts of the country, were to be placed in one category, neither society as a whole nor individual landowners would be certain of receiving justice. In a country in which, as in England, agriculture is divided between the two great branches of corn-growing and grazing, it is quite possible that there may be considerable variation in the relative values of land applied to such different purposes. It is a fact that, during the agricultural crisis of the past few years, Southern farmers touched a far lower level of depression than farmers in many parts of the North ; and even amongst corn growers as a class, and graziers as a class, there was much variety of circumstances and fortune. Again, agricultural land differs considerably in value and ^ *' Principles of Political Economy," Book V., chap., ii. sec. 5. 144 THE UNEARNED INCRMENT. in augmentation of value according to location. The land adjacent to towns increases in value more rapidly than that which lies where population is sparse. What, then, would be the effect of the impo- sition of a uniform land tax by reason of a " general rise in the price of land ? " The landowners of indus- trial districts would feel it no hardship to pay the tribute levied on the increment which had accrued to them, but others might find the burden unjust, because disj)roportionate to the increased value of their lands. The only way of avoiding this inequality is to " come upon each individual estate," and this plan Mill does not recommend. But the greatest objection to be raised against Mill's proposal of a uniform increment tax arises out of the utterly different position of urban and agricultural land. Where agricultural land may, in a given period, increase in value one per cent., the land upon which towns are built may — and, probably, often does — in- crease a hundred per cent. Indeed, speaking generally, urban land is perpetually increasing in value, but this cannot be said of agricultural land. While the cloud of depression was hanging heaviest over the farming industry of England, and holdings might be bought at figures lower than for many years, land in our large towns continued without cessation to rise in value. It follows, therefore, that a tax fairly representing ROOT AND BRANCH. 45 society's claim on the increment which had accrued to agricultural land might be an utterly and absurdly inadequate proportion of the increment created in towns. It seems to me that the most effective and the only equitable solution of the difficulty would be found if the plan to which Mill objects were adopted, and we " came upon each individual estate [urban and rural alike] and laid hold of the increase which might be found to have taken place in its rental." INIill's argu- ment against this plan is that "there would be no means of distinguishing, in individual cases, between an increase owing solely to the general circumstances of society, and one which was the effect of skill and expenditure on the part of the proprietor." In reply it may be admitted that all expenditure which tended to the permanent improvement of land ought to be regarded as a set-off against the increase in its capital value, and to this extent society should have no claim upon the increment caused. For example, if a landlord -went to expense in improving an agricultural holding, by draining the land and placing buildings upon it, there should be no claim upon the increment found on re-valuation to have been created, so long as that incre- ment was not out of proportion to the additional investment of capital in the land. If, on the other hand, that increment were, for evident reasons, so large L 146 -- THE UNEARNED INCREMENT. as to be disproportionate to the capital expended in the permanent improvement of the holding, the excess of increment due to causes acting independently of the owner should go to society.' It seems probable that the question would best be settled in conjunction with the re-adjustment of the land tax. This tax, as is well known, is now very insignificant in its return, and very irregular and unjust in its incidence.^ The last statute which ^ The views here expounded receive partial aceeptance from M. Emile de Laveleye, who, writina: on the increase in land-values in Belf?ium since 1^30 {vide the Cobden Club's " Systems of Land Tenure in various Couatries," edition 1881, p. 467), says :— "Part of this proj^rtssive increase in rent may be traced to improvements made by the farmer in the cultivation of the soil. By raisin? the rent the landlord lays hold for himself of this advance in the value of the land produced by those who cultivate it. The increase of the revenue tiie landlord derives from his land is not the result of improvements executed by himself, and the fact adverted to is a general one, which may be met with everywhere. In whatever cases landlords have actually made improvements, they have got the interest of the outlay in the shape of an additional augmenta- tion of their revenue. For these reasons (he adds) I think that the increase of rent, being due to the progress of society at large, and not to the exertions of the landowners, ought not in justice to benefit the latter alone. It would be but fair to divide this benefit." ^ " In most countries of Europe the right to take by taxation, as exigency might require, an indefinite portion of the rent of land has never been allowed to slumber. In several parts of the Continent the land tax forms a large proportion of the public revenues, and has always been confessedly liable to he raised or lowered icitliouf reference to other taxes. . . . In England the land tax has not varied since the early part of the last century." (Mill's "Principles of Political Economy," Book V., chap, ii., sec. 5.) " In most countries a tax on the rent of land forms a notable item in the revenue receipts. In the United Kingdom it is included in the income tax, the so-called land tax being a rent issuing from ROOT AND BRANCH. 147 regulated the tax was passed in 1798. The Act im- posed a fixed tax, payable by each parish in perpetuity, subject to the option of redemption.' The rate was 4s. in the pound, and the tax tlien yielded about two million pounds. Eedemptions have reduced the yield to about a million pounds, a sum which is very un- equally raised. As the quotas payable by the parishes were made invariable, strange anomalies have arisen. Where population has greatly increased, and the value of land has proportionately risen, the rate per pound has fallen to a totally inadequate sum. No parish now pays the full original rate of 4s. in the pound, but there are many parishes which pay only Id. in the the land, invariable, redeemable, and wholly disproportionate to the present value of the property from which it is derived." (Protessor Thorold Rogers, "Political Economy," chap, xxii.) Mr. Goschen said in his report to the House of Commons on Local Taxation, August 10th, 1870 : — " The amount i^aid by land alone towards imperial taxation in England is hve and a-half per cent. ; in Holland nine per cent. ; in Austria seventeen and a-half per cent. ; in France eighteen and a-half per cent. ; in Ikdgium twenty and a-half per cent. ; and in Hungary thirty-two and a- half per cent. AYhat do these facts prove ? They prove that, as regards imperial taxation, land in this country is in an infinitely belter position than land in any other European State." ^ The effect of Pitt's Land Tax lledemption Act— which was but a money-making exi^edient — was to perpetuate the land tax at its then heit;ht._ The valuation was that of 1692, made under William III., in accordance with a statute providing " that an aid be granted to His Majesty of 4s. in the pound on the true yearly value of real property and on all salaries," &c. The assessment on the land realised £2,037,627, and in 1C'J7 Parliament fixed two millions as the future limit of the laud tax. Pitt's Act made this levy perpetual. L2 148 - THE UNEARNED INCREMENT. pound, and the rate of some is as low as a hundredth of a penny. This tax should, as a preliminary step towards its complete re-adjustment, be redeemed on easy terms. When it had been swept away the deck would be clear for the introduction of a new and rational land tax. A general valuation would be necessary for the purpose, and this made, an equitable tax should be imposed — so much in the pound, applying to urban and rural land equally. For the future, however, there should be valuations at definite intervals — say, every five years for town land, and at longer periods for agricultural land — in order to learn the increase in value, if any. After the first re-valuation and after every succeeding valuation a special tax should be levied upon that increase in the rental which could be shown to bo due to social causes. The amount of the original valuation, together with any increase attributable to the owner's expenditure or exertions, would only bo subject to the general land tax, but the amount beyond that, as it represented society's contribution to the value of the land, should belong to the community. Whether unearned increment socially appropriated should go to the State or to the local communities is a secondary question, though much may be said in favour of each local government district retaining the whole of the additional value which its population may ROOT AND BRANCH. I49 have given to the land it uses. The freeholder or leaseholder, as the ease might be, should pay over the increment to society in the form of taxation. For various reasons it would not be desirable to require the payment of its capital value in a lump sum. In the first place, such a plan would often entail hardship, as it would compel many owners to borrow or sell part of their property in order to liquidate their indebtedness. But a more serious, and indeed fatal, objection lies in the fact that owners are often, by agreements of various kinds, precluded from present participation in the increasing value of their land. On the one hand it would not be just to expect a landlord so circumstanced to pay down the capital value of an increment of which he does not enjoy the benefit ; but on the other hand it would be equally unfair to ask a temporary bene- ficiary to do this, as his interest in it would often be of short duration. It would not, howevei', be inequit- able to impose such an annual tax as would absorb the whole of the increased rental falling to the landlord in consequence of the increment socially created. This tax would represent the landowner's payment to society in consideration of its proprietary interest in the land. To show how this plan would work in two directions — applied to town and also agricultural land. (1.) Let us, first, for the sake of argument, suppose the present value of an urban property to be £1,000, 50 7^ HE UNEARNED INCREMENT. yielding a rental of £50. The landlord would pay upon the value of the land (apart from buildings) the initial and uniform land tax to be fixed. After a certain number of years a re-valuation is made, and it is found that the property is worth £1,200, and that the rental is £60. In the absence of expenditure by the landlord for the improvement of the property the spontaneous increase will be more than £200 (£10 rental), since the buildings will have depreciated in value.^ When the actual value of the land alone had been determined, the increment would be recovered in the form of a special tax, to be modined or increased according as the next revision showed a diminution or a further growth in the value of the land. The depre- ciation of a building could not, of course, be allowed to prejudice society's claim to all the increment it might give to the land upon which that building stands, since in fixing the rent upon any structure a landlord has regard to its probable duration, and the tenant pays every year at once interest and depreciation. (2.) In the case of purely agricultural land, the mode of procedure would be much simpler. Until a re-valuation took place the landlords would pay the uniform tax. Suppose during the interval an estate increased in ^ So the report of the Committee on Town Holding's says :— " The decrease during the term of a 99 years' lease uf the value of a house seems as a rule to be accompanied by a corresponding increase in the value of the land on which it stands." ROOT AND BRANCH. ^ 151 value to the same extent as in the first illustration, from £1,000 to £1,200, and the rental from £50 to £60. Due allowance would be made for the quota attributable to the landlord's expenditure, and the remainder of the increment (if any) would be claim- able in the way of special taxation. But should society claim a share in any increment which evidently exists, even though not expressed in the form of increased rent ? In order to err on the side of leniency it should not. So long as agricultural land did not return a higher rent owing to the tenant's exertions or social causes, society would be suffering no injury, and it would therefore be equitable to allow the initial tax to remain unincreased. In this respect, how- ever, land built upon and land not so employed stand upon a different footing. Land is not subject to dilapi- dation and eventual decay as buildings are, and, as has been shown, a rise in the value and rent of a house-site is perfectly compatible with the absence of any increase in the value and rent of house and site together. It follows as a matter of course, however, that on property changing hands either the increased social value which has accrued since the original valuation would be claimed in a lump sum by the community, or the property would be sold subject to a special tax large enough to absorb the return claimable upon that increased value. In other words, the owner would only r52 THE UNEARNED INCREMENT. receive the prime value jilua such value as had been caused by his own improvements. Should land be unused, not because the owner refused to let or sell on favourable terms, but from the absence of tenant or purchaser, some degree of relief from taxation might be considered equitable. There would no longer, however, be any inducement to with- hold land from use because of the expectation of increasing value — a practice at present common in large towns, and one encouraged by existing rating law in England — for marketable land would invariably be returning rent. If it did not, society would be effectively protected by the local taxation of such land upon its full value. But, it may be asked, if the maximum value (to the landlord) of land be fixed, as it practically would by this arrangement, should not that maximum be secured to the owner ? If we determine that social causes shall not henceforth create for the landlords a higher value than their land at present possesses, is it not fair to guarantee them at least the existing value ? If they may not gain in the future, should they not be protected against eventual loss ? At present they take the good with the bad. If land-values increase at one time, they may fall at another ; yet the owners do not permanently suffer, for a turn of fortune brings them recompense for their losses. Is not that plan, it may ROOT AND BRANCH. 153 be argued, inequitable which exposes the landlords to risk, while not affording them an opportunity of re- couping themselves for the sacrifices which the vicissi- tudes of industry and trade and other causes may sooner or later entail ? As society is to benefit by all future increment, should not a minimum value be secured to all land ? Those who pursue this line of argument overlook the vital fxct that land entirely owes its value to human labour, in one form or other, and to the presence of population. Society originally gave value to the soil by dwelling upon it and by cul- tivating it ; and even now, human need and use is the greatest factor in the value of land. Value may, therefore, be said to exist by the sufferance of society. There cannot be such a thing as a vested interest in the value of land. Did individuals or communities not require, for their own convenience, the land upon which they dwell and labour, it would not be worth more to the owners than such value as might represent the satisfaction of their own needs, desires, and pur- poses. To ask that a certain value may be assured to the landlords is to recognise an absolute obligation on the part of society as a whole to use, and pay for the use of, those portions of the earth's surface which certain of its members have been pleased to claim as their own. No such obligation exists. It may be said that such a system of taxation as is 154 THE UNEARNED INCREMENT. here advocated is complicated and would involve great difficulties. Granted ; but the issues at stake are infinitely greater than any difficulties which might have to be faced. The machinery necessary, too, would be costly. True, but the proceeds of taxation would be enormous, and would afford society incalcul- able relief. Neither difficulty nor cost can be held to be a valid objection. Such fiscal institutions as the income tax, customs and excise, and local assessment were probably regarded as impracticable at one time or another, yet in spite of their intricate character they are found, after experiment, to be eminently workable. Surely the genius and sagacity which have caused our present fiscal machinery to move with at least tolerable smoothness would not find in the imposition of this new tax an insuperable problem. But with this as with all far-going reforms the difficulty lies more in the will than the way. Let public opinion call for the social appropriation of the unearned increment, and politicians and parties will vie for the credit of demon- strating that such appropriation is possible. It is not too much to claim for this question the foremost place in the programme of urgent land-law reforms. Other phases of the land problem may, indeed, for evident reasons, be given a preferential position by those leaders of thought who believe that in dealing with the problem the reforming legislator ROOT AND BRANCH. 155 will, in the future as in the past, be able to work with his hands in kid gloves. But sooner or later the ques- tion will have to be faced boldly, and it is very desirable that people should begin at once seriously to recognise its significance. There are few social questions the study of which does not bring us ultimately to the land, and generally that destination is reached very soon. Whatever class of people the reformers of to-day may seek to benefit and to elevate — be it the rack- rented and sweated toiler of the city, the husbandman who looks longingly back upon the better days of yore, or the agricultural labourer who weighs the possibilities of a manhood to which, from no fault of his own, he has so lately and so slowly attained — the final criix., the last and highest stone of stumbling, is the land. Let us not deceive ourselves. Free land, the disinte- gration of latifundia, allotments, peasant proprie- tary, leasehold enfranchisement are all desirable and excellent so far as they go. But they will not settle the land question. So long as society is punished for its progress, so long as the fair fruits of civilisation, of enlightenment, of public enterprise, and individual exertion are appropriated by the landowners, it cannot be said that the gravity and deep significance of this question are comprehended. All the reforms enume- rated are intended to benefit that part of the com- munity which is directly associated with the land, and 156 THE UNEARNED INCREMENT. they would only benefit society in so far as every improvement in the welfare of the individual improves the welfare of the whole. But the diversion of the unearned increment into public channels would be a measure of social benefit, for instead of being monopolised by the few who do not create it, it would be shared by the many who do. Such a distribution of the growing wealth of the com- munity would not only be an act of social justice ; it would be productive of manifold positive blessings. Everywhere in town and country the pressure of taxa- tion would be relieved. Industry and commerce would be emancipated from many harassing fetters. Honest enterprise vrould be encouraged. Men and women, born into a world already appropriated, destined here to live, would be able to breathe more freely. Society would henceforth labour to benefit, instead of to injure itself. In the factory, in the workshop, and by the plough, the busy sons of toil would labour more gladly, knowing that the wealth which they produced would fall in larger measure to themselves and to their children, affording comfort, leisure, and enjoyment now unknown. There would, in fine, be laid the foundations of a new and a higher social life, whose crowning characteristic and whose glory would be greater prosperity and happi- ness — greater and also truer, because more general. PRINTED BY ClliS. STBAKER AND SOXS, BISHOPSGATE AVE.XUE, LOXDOX, E.C. INDEX. Agricultukm, IlolJinss Acts, Arnold, Mr. A., 5 America, laud si^eculation in, 68-67 Artisans' Dwellings Act^, 80,102 Austria, mineral rif^lits in, 126 Bell, Sir I. L., on mineral royalties, 120 Brocirick, Hon. G. C, 5, 56 Broadhurst, M.P., Mr. H., 50, 51, 112 Berlin, value of land in, 19, 20, 67, 68, 95 Bright. Mr. John, 113, 127 Betterment principle, the, 131- 139 Caihxes, Professor J. E., 9 Chamberlain, Mr. J., 102 Compensation due to temnts lor improvements, 4o-4s, 112, 116 Collings, M.P.. Mr. .!., 81 Cumpton, Earl, 87, 91 Depression in Trade and In- dustry, Iloyal Commission on, 60, 120, i21 Derby's property at Bury, the Earl oi, 83, 81, 94, 95 Engel, Dr., 68, 81 rA"\vCETT, Professor, 4, 7 Eee-simple, purchase of urban, 127-129 Georoe, Mr. Henry, 9, 58, 64, 70, Id, Hi) Gladstone, Mr., 138 Goschen, Mr., 5, 36, 147 Gray, M.P., Mr. E. D., 128 11 IIallam on land- values, testi- mony of, 2 Housiuw of the Working: Classes, Commission on the, 72, 80, 84, «6, yi, 98, 91), 105, 137 Ilill, Miss Octavia, 81 Irish Land Acts, 113-116 Land in the Middle Ages, value of, 2, 3 Land in modern times, value of, 8-10 Land in towns, value of, C, 7, 18-39, 55.61 Land in London, value of, 6, 7, 15, 19 „ Berlin, 19, 20, 67, 68 Birmingham, 33-35 Dublin, 130 liurnley, 2 „ lUiry, 14, 39 ,, Germany, 5, 19, 20, 131 ,, France, 5 ,, Flanders, 5 ,, Belgium, 5 ,, San Francisco, 10, 58, 59, 70 „ New York, 10 ,, United States, 7, 19, 58, 59, 65-67, 70, 119 ,, Ilalifa.x, 33 Latimer, Hugh, on sixteenth century land- values, 7, 8 Land, price of, ell'ect on wages of labour, 8-10 Land speculation, 30, 62-78 ,, monopoly, the, 53-61, 70 ,, dearness of, and poverty, 9, 10, 61 Land and overcrowding, 79-106 Local Taxation, Select Com- mittee on, 36 Laveleye, M. E. de, 5, 146 Leasehold system, evils of, 42- 52, 82, 84 INDEX. Leasehold enfranchisement, 112 Life-leases, 49-52 Landowners in the United Ivinordom, number of, 53, 51 Land Tax, the, 146 Mill, John Stuart, 37, G5, 109, 127, 141-14G Mines and mineral royalties, 117-126 Monopoly, the land, 14, 53-61, 70 Morley, Mr. John, 71, 111, 138 NEWMAif, Professor F. W., 128 O'CoxxoR, M.P., Mr. A., 9, 60 Overcrowding in large towns, 79-106 Overcrowding and morality, 98- 100 Pepys' Diary, 32 Playfair, Sir Lyon, G Population, ett'ect of on land- value and rent, 8, 22-24 Poverty and the land, 10 Public improvements, effect of on land-value, 24-39, 86, 103 Private gain at public cost, 22- 52 Penalties of social progress, 1-10 Eack-hentixg in towns, 20, 21, 40-52, 69, 70, 81-103 Rae, Mr. John, 132, 133 Eeap without sowing, how the landlords. 11-21 Eents in towns, high, 19-21, 40- 52, 67-70, 81-103 Rogers, Professor Thorold, 2, 3, 7, 25, 57, 69, 102, 103, 109, 147 Eent screw, the, 40-52, 81-103, 114, 115 Eailwiys, landowners and the, o, 55, 5'J Railways and land-values, 57-9 Rent and wages. of workpeople, 88-93 Salisbfry, LorrI, 105 Saunders, Mr. "W., esti.-nate of London land-values, 15, 37 Smith, Adam, 37, 38 Social progress and land-values, 1-21 Strand Improvement Bill, the, 30, 137-139 Speculation in land, 62.78, 103 Speculative building, 82-84 Taxation of ground values, 35- 39, 71, 152 Taxation of unearned incre- ment, 140-156 Town Holdings, evidence of Committee on, 18, 19, 23, 43- 48, 62, 83, 112. 129, 150 Tenants, exploitation of, by landlords, 40-52 Unearned Increment, ex- amples of, 6, 7, 14-24, 30-39, 119 Unearned Increment, how formed, 11-39 Unearned Increment, in towns, 13-52 Unearned Increment.in country, 11-14 Unearned Increment should go to society, 105-116, 140-156_ United States, land-values in the, 7, 19, 58, 59, 65-67, 70, 119 Young, Arth., on land-values, 3 Wagner, Professor A., 30, 43, 44. 130 Wallace. Dr. A. R., 19, 63, 65 Webb, Mr. S., 15-18 Wages and rents of working people, 88-93 ~ WORKS BY WILLIAM HARBUTT DAWSON, ,-$- a QERMAN SOCIALISM & FERDINAND ^^ LASSALLE : a Biosjrapliical History of German Socialistic Movements during this Century." With, portrait of Lassalle. By William Hakbutt Dawson. Cloth, 300 pp. Price 4s. 6d. Contents: — Chapter 1, Historical Basis of the German Socialistic Movement ; 2, Early Socialistic and Communistic Theories ; 3, Karl Kodbertus and the Watjes Principle ; 4, Karl Marx and Surplus Value ; 5. Ferdinand Lassalle ; 6, Organisation of the Working Classes ; 7, The Productive Association ; 8, Failure of Lassalle's Agitation ; !>, Lassalle's Death ; 10, Characteristics of Lassalle: the Man and the Agitator; 11, Lassalle's Socialism; 12, Development of Socinl-Deraocracy ; 13, The International Association ; 14, The Era of Repression ; 15, Present Aspect of the Socialist Movement. Index. OPINIONS OP THE PRESS. 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Economic Foundations of Society. A. Loria. SWAN SONNENSCHEIN & CO., Lm., LONDON. NEW YORK: CHARLES SCRIBNER'S SONS. UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below Form L-9-15m-2,'36 A I y UMIVEKSITY of CALIFORNIA AT LOS ANGELES j 595 The unearned -^2\r inc reined , 1890 HD 595 D52u 1890 UC SOUTHERN REGIONAL LIBRARY FACILITY 000 584 130