Popular Science Monthly/Volume 16/April 1880/Progress and Poverty
By C. M. LUNGREN.
THE most obvious fact in the industrial life of to-day is the enormous increase of productive power over that of any previous period. Steam and electricity have transformed civilization, endowed us with vaster powers, and altered profoundly the conditions of life. Things that could not have been done at all, things that could only have been done slowly and laboriously by unaided human exertion, have been done with swiftness, exactness, and certainty by the agencies created by human thought and skill. Things that were among the undreamed possibilities are now among the commonplaces of our lives. Machinery, dividing labor to an almost infinite degree, has multiplied its effectiveness manifold. The railroad and the telegraph, bringing men into closer and more intimate relations, have incalculably facilitated exchange. As a result of this greatly enhanced power of production, the accumulation of wealth has gone on at an unexampled rate. Enterprises, however great, need no longer fail for lack of the requisite capital. Works can now be undertaken that in a former age would have seemed and would have been utterly chimerical. We no longer feel that it would be useless to invent railroads because of the immense capital needed to build them.
With this increase of wealth and productive power great ameliorations have been expected. It has been the guiding and dominant faith of this era of remarkable material progress that these new agencies would steadily tend to lift all classes to a plane of greater material comfort. With productive power outrunning consuming power, there would be enough for all. Wealth would become equalized, so that each would receive a share of that produced proportional to his contribution to the common stock. The chasm between the very rich and the very poor would be bridged. Human powers, no longer the slaves of material needs, would have room to grow; human life, relieved of want and the fear of want, could expand indefinitely in grace and beauty. With time, however, this faith, if not shattered, has been weakened. Improvement has followed improvement, but it has not become easier to make a living; the difficulty rather increases. Wealth has shown no tendency to become diffused, but rather one to aggregate into comparatively few hands. In spite of all this wonderful advance, wages tend steadily to a minimum; and to the lowest class of society—the class that is just able to live—there is little promise of better things.
With the growth of industrial organization in complexity and variety, the increasing strife between employers and employed, the frequent recurrence of periods of business depression, which exhibit in an exaggerated form simply the ordinary conditions of industrial life, the question of the right relation of labor and capital to each other and to the industrial fabric presses with increasing strength for an answer. Employer and employed alike feel that there must be something amiss in an industrial system in which, with want unsatisfied, labor can find no employment and production no market; in which, with increase of productive power, poverty finds no abatement. And the importance of the question is in proportion to its persistence. Beside it all other questions sink into comparative insignificance. For all other progress is inextricably bound up with that of material welfare. It is idle to expect the growth of better conduct or of higher feelings in the man whom want stares in the face. Purer surroundings, better food, greater comforts, some relief from unremitting toil—these are the essential conditions of an improved life. Why poverty persists is the fundamental social question of our time, and must be of all times, until it receives a complete and satisfactory answer.
A thorough consideration has recently been made of this question, and a remarkable answer returned—an answer that finds the solution of the problem in a direction where most people would least expect to find it. In "Progress and Poverty" Mr. Henry George has made a careful and systematic inquiry into the conditions of the production and distribution of wealth, the relations of labor and capital, and has traced out the action of what he considers the cause of the continued association of poverty with advancing wealth. However unpalatable its conclusions to certain large classes of the community, this book must, from its clearness of statement, ingenuity of argument, its large human sympathy, and the broad and philosophic spirit with which the question is treated, claim the attention of all who realize the paramount importance of the subject and the value of a thoughtful contribution toward its elucidation.
Mr. George holds that the causes which determine the persistence of poverty are a part of those which produce progress, and not extraneous forces which progress tends to overcome. In support of this he points out certain facts which, though frequently noted, have received a different interpretation. "When the conditions," he says, "to which material progress everywhere tends are most fully realized—that is to say, where population is densest, wealth greatest, and the machinery of production and exchange most highly developed—we find the deepest poverty, the sharpest struggle for existence, and the most enforced idleness. It is to the newer countries—that is, to the countries where material progress is yet in its earlier stages—that laborers emigrate in search of higher wages, and capital flows in search of higher interest." It is here that, "though you will find an absence of wealth and all its concomitants, you will find no beggars. There is no luxury, but there is no destitution. No one makes an easy living, nor a very good living; but every one can make a living, and no one able and willing to work is oppressed by the fear of want." Such facts, Mr. George thinks, justify the belief that somewhere in the industrial fabric there must be a fundamental wrong a social maladjustment that with increasing force, as progress proceeds, tends to continue and. deepen poverty.
His inquiry, in which he has taken nothing for granted, but has examined anew all the doctrines of our current political economy, has led him to the conclusion that the primary cause of the low returns to labor and capital is to be found in the private ownership of the land of the earth, which is by right the common heritage of all. He rejects the common notion that there is an antagonism between labor and capital, and holds, on the contrary, that they are both robbed of their full earnings by the landholder. Labor can only produce wealth by having access to the materials it is to fashion, all of which are drawn from the earth, and by having such opportunities to occupy the land as its needs require. Whoever, then, can claim a right to the land can name the conditions upon which these materials can be obtained and this occupation allowed. Whoever commands the land commands the fruits of labor spent upon the land. Before labor can exert itself it must ask permission, and the price of this permission is the tax that, acting with accelerating power as civilization goes on, denies to labor and capital their rightful share in the wealth they have produced.
In claiming that private property in land is a wrong, Mr. George is not alone. He has with him the best thought of all times. Nearly every economist and social thinker of eminence who has made an investigation into the basis of property has found no warrant for the private ownership of land. They have all seen that a natural agent, which is necessary to human existence, and which can neither be increased nor decreased by human exertion, can by no process whatever become the rightful property of one man or any number of men, save all men. And most have seen that to finally settle on an equitable basis this question of the ownership of land will be, as Mr. Spencer says, "one of the most intricate problems society will one day have to solve." But though the inequity of private property in land has been so generally seen, and though it has also been seen that grave practical injury must result from such a wrong, no one, so far as I know, has before attempted to follow out the effects of this wrong in all the ramifications of industrial society. To understand in any way adequately Mr. George's position, the arguments which support his conclusions, and the facts which he has brought to bear upon the question, a study of his book is necessary; but some idea may be gained of the character of his inquiry, though none of his interesting and graphic treatment, by such an outline as can be here given.
Land and labor are the two factors from whose union springs all wealth. Land is the storehouse of all materials, and the place on which all labor must be exerted. Labor is the force which unceasingly shapes these materials into forms suited to human use. Between these two factors all the wealth created must be divided. Labor may, however, be separated into two forms, past and present, or capital and labor. The division of wealth, then, is between land, capital, and labor. The respective shares of these factors are rent, interest, and wages.
Before proceeding it will be necessary to determine the meaning Mr. George attaches to some economic terms used. In an economic sense labor is all human exertion in the production of wealth. Wages is the return made to this exertion. The payment received by the hired laborer, the clerk, or the professional man, the game of the hunter or the gold of the gold-digger, are equally wages. The kind of work done, or whether the work is done for one's self or for some one else, does not affect the character of the compensation. Whatever is recompense for exertion is wages. As to the meaning of capital, economists are not so well agreed, Mr. George defines it as "that part of wealth used to obtain more wealth"—the part in the hands of the producer to be devoted to productive uses. The term "wealth" Mr. George confines to those things whose destruction would decrease and whose increase would augment the aggregate possessions of a community. Bonds, mortgages, etc., when they are between the members of a community, are not, in this sense, wealth. By land is to be understood all natural capabilities, which are a gift to man. It includes fertile fields, ore-deposits, water-powers, the air, the sea, etc. Rent is the compensation received by the owner of any of these natural capabilities for their use. In ordinary speech the term is used to express the return for the use of some of the products of labor and capital, such as houses, improvements made on land, machinery, etc., but as used in economics it excludes the return made for any of these things. Return for the use of such things is properly interest on capital; return for the use of those things freely given by Nature to man is alone rent.
"The cause," says Mr. George, "which produces poverty in the midst of advancing wealth is evidently the cause which exhibits itself in the tendency, everywhere recognized, of wages to a minimum." The inquiry can therefore be put in the form, "Why, in spite of increase in productive power, do wages tend to a minimum, which will give but a bare living?" The answer given to this question by economic science has been the wage-fund theory. This theory holds that wages are determined by the ratio of the number of laborers to the capital devoted to their employment. As capital is the result of saving, industry can proceed no faster than this saving is effected. The wage-fund remaining the same, any increase in the number of laborers means a decrease in the share of each, and the reverse. The increase in the number of laborers constantly tends to overtake and surpass the increase in capital, and hence wages steadily tend to the minimum upon which laborers will consent to live and reproduce. The theory in this form is now pretty generally abandoned, but, as it is still held that wages are advanced out of capital, Mr. George considers that the abandonment is more nominal than real. On the contrary, he holds that wages are never advanced out of capital, but are drawn from the product of the labor for which they are paid. Labor creates wealth, and it is not until this wealth is created that labor receives its wages. The stock of capital on hand is never diminished by having to be paid for labor, but labor, as it goes along, creates the stock from which it is paid. Of the facts out of agreement with the wage-fund theory one of the most obvious is, that wages and interest do not vary inversely. By the theory, wages should be high where capital is abundant, and low where capital is scarce. The very reverse, says Mr. George, is true. Wages and interest rise and fall together. Labor moves for higher wages where capital flows for higher interest. Wages are high in new countries where capital is scarce, and low in old ones where it is abundant. This fact is generally noted by economists, but it is explained by them as due to the relatively greater production of wealth in new than in old countries. This, Mr. George holds, is demonstrably untrue.
The wage-fund theory also teaches that labor engaged in production is maintained out of present capital—that is, that present labor is subsisted on the product of past labor. This, Mr. George holds, is as baseless as the doctrine that wages are paid out of capital. He maintains that it is not at all necessary that there should have been a previous production of wealth sufficient to maintain the laborer. "It is only necessary," he says, "that there should be, somewhere within the circle of exchange, a contemporaneous production of sufficient subsistence for the laborer, and a willingness to exchange this subsistence for the thing on which labor is being bestowed." A government, when undertaking a work of years, does not collect a stock sufficient to support the laborers until the completion of the work, but it appropriates the subsistence necessary from present and future production, taking it in the form of taxation. No part of the world really lives on past production—that is, out of the savings of past labor. The whole world really lives from hand to mouth. Let the entire production of any great city be stopped for a day, and it would become evident how entirely men are dependent upon present production. The worker, therefore, on any prolonged enterprise does not draw his subsistence from past labor. He simply draws from the present amount of wealth a certain part in one form after he has added to present wealth a certain amount in another form. "The series of exchanges which unite production and consumption may be likened," says Mr. George, "to a curved pipe filled with water. If a quantity of water is poured in at one end, a like quantity is released at the other. It is not identically the same water, but is its equivalent. And so they who do the work of production put in as they take out—they receive in subsistence and wages but the produce of their labor."
Capital, then, neither pays the wages of labor nor subsists laborers in production, yet it has a function in production. This function is, holds Mr. George, to assist labor by providing it with better tools; by enabling labor to avail itself of the reproductive force of nature, as to get corn by sowing it, etc.; by allowing the greater division of labor, and thus vastly increasing its efficiency; and by holding and distributing the results of labor through exchange. To make exchange perfect there must constantly be great stores of goods in warehouses, ships, and railroad trains—goods held to supply the market, and goods on their way to market. To make labor effective, there must be many and various tools, factories, engines—all sorts of machinery. These tools and these goods in the hands of the producer are capital. Capital may limit the form and productiveness of industry by not supplying these tools or not rendering it this service in exchange, but to do this i« a vastly different thing from limiting the exertion of labor, which is what the current doctrine teaches.
The wage-fund theory of the relations of capital and labor thus proves upon analysis to be untenable. The theory is and has always been weak. It has gained its ascendancy and almost universal acceptance, not from its own strength, Mr. George thinks, but from other considerations. Behind this theory stands another theory, that offers an explanation of continued poverty, and that fits into the other so as to lend it support in all directions. This theory is the Malthusian doctrine of population. This doctrine is, that population tends to increase faster than the means of obtaining food. Population presses with greater and greater force against the limit of subsistence. The limit is not a fixed but an elastic one, and the pressure exhibits itself in an increasing difficulty in procuring a living, and in that degree of want that will always keep population within the bounds of subsistence. How this and the wage-fund theory mutually support each other is evident. "According to the current doctrine of wages," says Mr. George, "wages fall as increase in the number of laborers necessitates a more minute division of capital; according to the Malthusian theory, poverty appears as increase in population necessitates the more minute division of subsistence. It requires but the identification of capital with subsistence and number of laborers with population to make the two propositions as identical formally as they are substantially." Mr. George does not deny that the capacity of the earth to support life is limited, and that there are, therefore, bounds to the population that can exist, but he does deny that there is any tendency of population to outrun subsistence, or that there has ever been any historic instance of a people unable to continue from such a cause.
In support of this view Mr. George reviews the condition of China, India, and Ireland, to find that in none of them population has yet pressed upon the means of subsistence so as to decrease the relative production of food, or to increase poverty, vice, misery, and crime. The lower animals, indeed, may press against the limits of subsistence. They can only take such food as can be found. With man the case is widely different. By breeding he can take advantage of the greater rate of reproduction of the lower animals and of the reproductive rate of plants. His powers of producing food may be indefinitely expanded, while his rate of reproduction is in the course of civilization not increasing. Historically the doctrine is not found to be true, and it is not consonant with many of the facts of observation. The essence of the doctrine of Malthus is, that the power of producing wealth does not keep pace with population—that in a dense population the power of producing wealth is proportionately less than in a sparse one. It may be objected that "the power of producing wealth" should read "the power of producing food." But, so long as the whole earth can supply enough food for the whole of its inhabitants, the power of producing wealth in any community is equivalent to the power of producing food, because, in consequence of a multitude of exchanges, wealth commands food. That a dense population produces less wealth per member than a sparse one is glaringly at variance with the facts. It is in the very densest population that this power increases enormously in proportion to the number of people. It is to effect this result that all the labor-saving machines exist and all the appliances of exchange have been called into being.
The Malthusian doctrine of population and the wage-fund theory of the relations of labor and capital being disproved, the ground is cleared for a consideration of what their true relations are.
As before stated, all wealth produced must be divided between three things—land, labor, and capital. The shares of these factors in production must stand in some relation with each other, such that two of them being given the other is determined, or that, one being given, the joint share of the other two is determined. In current economic doctrine there is no correlation between the laws determining the shares of these factors, and the nomenclature does not clearly or correctly express the shares into which wealth is divided. It is common for economists to speak of the division into rent, wages, and profits.
Rent clearly expresses the return made to landholders for the use of the land, and wages the return made for exertion of whatever kind; but profits does not express the return made for the use of capital. It includes, as well, that return made for labor in guiding and directing a business, commonly spoken of as the "wages of superintendence," and also the return for risk of capital. Wages of superintendence properly belong under wages, and, considering the entire field of industry, risk is eliminated. There is then left interest, which expresses all and no more that is properly the return made for the use of capital. The division of the produce is, therefore, into rent, wages, and interest. The laws of each of these will be found to correlate, and this interdependence is presumptive of their truth.
What, then, is the law of wages? In a primitive state of society, or in any of those simple occupations where a man works for himself, without calling in the use of capital, the whole result of his labor constitutes his return—his wages. The man who picks berries, hunts, or fishes, evidently has the berries picked, the game obtained, and the fish caught as the reward of his exertion. The wages of any number of laborers would be the whole amount produced, and the share of each would be proportional to the amount his labor contributed to the general stock of produce. But labor can not proceed very far before tools become necessary. Instead of all the labor being devoted to the things that are desired for consumption, part of the labor must be devoted to making tools that will facilitate the production of the things desired. These tools are capital, and the whole produce now obtained by the joint action of labor and capital will not go to labor alone, but will be divided between the two. Mr. George holds that interest is due simply to the value that the vital or reproductive forces of nature give to the element of time, the return for capital in any form being averaged with the return to capital in those forms in which these forces come into play. The constant tendency is to an equation between interest and wages, so that the return to capital and labor will be the same for the same work done. Labor and capital, therefore, would divide up between them the entire produce resulting from their union, each having a share proportionate to its contribution to the whole. But they are not permitted to make such division. A third party claims a share—the landholder.
If one man owned all the land that was open to capital and labor, he would have absolute control over the produce of these agents. He could take, if his authority were respected, any part of it, or all of it, as he was inclined. In actual industrial society, however, land is in too many hands to enable the owners to get whatever share of the produce they please. Competition determines the rate at which different lands will rent. The law, which in a condition of free competition determines this share of the landholder, is known as the law of rent. Though not first stated, it was first prominently brought forward by Ricardo. As formulated by him, it has been accepted by every economist of position since his time, and is one of the few doctrines of current economics that in the conflict of opinion have remained unshaken. Mr. George regards it as axiomatic, the terms having only to be correctly apprehended in order to meet with acceptance. This law is that the rent of land is determined by the excess of produce over that amount which the same application of labor and capital will obtain from the least productive land in use. The returns to capital and labor do not depend solely upon the amount and effectiveness of each, but they also depend upon the productiveness of the land upon which they are applied. When lands of different degrees of productiveness are open to them, they will apply themselves to the most productive, and their return will be the entire produce resulting. As land less and less productive remains open to them, the amount that they can produce on it decreases. Hence, on account of the competition for the more productive lands, land-owners are able to appropriate to themselves all of the produce obtained above that which the same labor and capital can obtain from the least productive land in use—the most productive free to them. The law, of course, applies to all lands used for any purpose whatever, though in the current statement of it too exclusive attention is generally paid to its relation to agriculture.
The relations of the shares of the three factors in production may be shown more clearly in the form of an equation: Produce rent wages interest, or produce—rent wages interest. How rent affects industry is now evident. The laws of both interest and wages appear as corollaries of this law of rent. For this law states that, no matter what the productive power of labor and capital, these two agents can only receive in wages and interest that part of the produce that they could have obtained on land free to them. The reward of labor and capital does not depend upon what they have produced, but upon what is left after rent is taken out. "The moment," says Mr. George, "this simple relation is recognized, a flood of light streams in upon what was before inexplicable, and seemingly discordant facts range themselves under an obvious law. The increase of rent which goes on in progressive countries is at once seen to be the key which explains why wages and interest fail to increase with increase of productive power. . . . When production increases, as it is increasing in all progressive countries, wages and interest will be affected, not by the increase, but by the manner in which rent is affected. If the value of land increases proportionally, all the increased production will be swallowed up by rent, and wages and interest remain as before. If the value of land increases in greater ratio than productive power, rent will swallow up even more than the increase; and, while the produce of labor and capital will be much larger, wages and interest will fall. It is only when the value of land fails to increase as rapidly as productive power that wages and interest can increase with the increase in productive power."
The conclusion reached by Mr. George as to the laws which govern the distribution of wealth may now be stated in such form as to show their relation to each other, and to contrast them with the laws as taught by current economics. According to Mr. George—
"Rent depends on the margin of cultivation, rising as it falls, and falling as it rises.
"Wages depend on the margin of cultivation, falling as it falls, and rising as it rises.
"Interest (its ratio with wages being fixed by the net power of increase which attaches to capital) depends on the margin of cultivation, falling as it falls, and rising as it rises."
As taught by the economists, rent is the same.
"Wages depend upon the ratio between the number of laborers and the amount of capital devoted to their employment.
"Interest depends upon the equation between the supply of and demand for capital; or, as is stated of profits, upon wages (or the cost of labor) rising as wages fall, and falling as wages rise." The wide difference between the two sets of laws thus contrasted is evident. In the laws as generally taught there is no mutual relation by which they are all bound in a single whole. As stated by Mr. George, on the contrary, they all correlate with each other, and form a complete whole.
The conclusions embodied in these laws are: That, where land is free, labor when unassisted by capital will take the whole produce; that where it is assisted by capital it will take the whole, less the amount necessary to induce the storing up of labor as capital; where part of the land is appropriated, labor and capital will receive what is left of the produce after the deduction of rent, or what they could have produced on land free to them; when all land is appropriated, the return to labor and capital can be forced to the limit on which these factors will consent to reproduce. This being the relation between the three factors in production, it remains only to see the manner in which increase in population and improvement of the arts affect rent, to understand the full effect of the force that presses so continuously upon industry.
While Mr. George allows the effect that increasing population would have in increasing rent by lowering the margin of cultivation, he yet thinks that this is not the main way in which it affects rent. As population increases in any community, certain land—land at the center of trade and production—acquires new powers, an increased productiveness. Labor spent on this land can produce results not only vastly greater than it could on land beyond the boundaries of this population, but results that it could not produce at all beyond those boundaries. As the village grows into the city, the nearness of men to each other, the division of labor that becomes possible, the greater economies that follow in consequence, the immense facilities of exchange, increase the effectiveness of labor exerted in the center of population enormously. Here is the market to buy and sell; here the services of the professional man, the tradesman, of any and everybody, become of much greater value to them than they could possibly be elsewhere. Instead of a few men working over a piece of ground, here are multitudes of men to the acre, on floors one above another, producing vastly more than the same number could over a wider area. All these advantages adhere to the land—to this particular land in the center of industry, and these advantages have to be paid for. By the law of rent, all the produce resulting from this increased effectiveness of labor and ease of exchange—that is, more than what the same labor and capital could procure on land free to them—goes to the landholder. Population, then, as it becomes dense, enormously increases rent.
And the increase of improvements in the arts affects rent in the same way. All labor-saving machines can affect production in one of two ways. Production may remain the same, and a certain amount of labor be set free, or the same amount of labor may be used, and production be increased. In an active civilization like ours, the main effect will be in the latter way. For, by the conditions of industry, labor can not take advantage of its increased effectiveness by resting, but must press for employment, and hence the effect of labor-saving devices will be to increase the wealth produced. But to the production of wealth land is necessary, hence the demand for land must constantly increase, steadily forcing down the margin of cultivation. Thus, without any augmentation of the population, rent is advanced.
In the speculative rise in the value of land, there is a further force acting in the same direction as these others. In every growing community there is a confidence that land will increase in value, which leads to the holding of land for such increase. This speculative rise in the value of land shows itself in higher rents.
In this speculative increase of land-values, Mr. George finds the primary cause of those periodic depressions of industry which we term "hard times." The essential feature of such a period is the circumstance of numbers of men, able and willing to work, seeking employment vainly; great masses of capital lying idle; quantities of goods in warehouses and stores unsalable. It is not that productive power has been too active; it is not that consumption has been too great. The over-production and over-consumption theories have never been satisfactory. Economists have seen that, as the very object of industry is to produce wealth, there can never be too much wealth, and men generally have seen that the desire for consumption is not lessened. They have all felt that the difficulty lay rather with a choking of exchange. There has been a hitch somewhere by which production and consumption could not meet and satisfy each other. Looked at closely, an industrial crisis always reveals the fact that there has somewhere been a check to production. These producers stopping, their demand for the things they consume ceases, and the check is thus rapidly propagated throughout the entire industrial organization, cessation of demand resulting in cessation of supply, and this in turn manifesting itself in a new cessation of demand. It is not necessary that production be really less, but only less relatively. In an advancing community, the failure of production to increase proportionally would have the same effect as decreasing production in a stationary one. How, then, is this check in production brought about? If we trace it from one point to another, we shall ultimately find it in some obstacle which checks the expenditure of labor on land. The speculative advance in rent crowds down wages and interest to the point at which they will no longer consent to reproduce, production ceases, and the effects of this stoppage are propagated throughout the entire framework of industry. Deduction from the law of rent shows that unchecked rise in rent must show itself in an industrial crisis, and the facts, he holds, abundantly support the deduction. Production may be likened to a steam-engine and rent to its governor. A lightened load, an increased pressure, and the engine bounds forward with accelerating speed. But the power that drives the engine drives also the governor; the force that has doubled the speed is the force that must ultimately check it—the governor, overtaking the engine, throttles the power that gives it action. And so in endless repetition.
Here, then, is the explanation of the facts that mystify and perplex whoever considers them. Here, then, in the relation of rent to wages and interest is the primary cause of the failure of invention and discovery to benefit the workingman. Wages and interest steadily tend to a minimum, but the incontestable fact in material progress is the rise in land-values. The great machinery of modern industry does not benefit labor and capital, because it does benefit the landholder. So long as men can control the land which all must use, they can command all the fruits of labor above what is necessary to a bare living.
"Everywhere, in all times, among all peoples," says Mr. George, "the possession of land is the base of aristocracy, the foundation of great fortunes, the source of power. As said the Brahmans ages ago—'To whomsoever the soil at any time belongs, to him belong the fruits of it. White parasols and elephants made with pride are the flowers of a grant of land.'"
Mr. George does not think that he can be said to have advanced any theory, but that he has only pointed out the most obvious relations. Taking the accepted law of rent, he has only insisted that, where the whole produce is between three factors, the law that determines the share of one must necessarily give the share of the other two. He has only pointed out that, if rent takes all above a certain amount, wages and interest can't have more than this amount.
The fact that the laws of wages, interest, and rent must be mutually dependent, Mr. George thinks so evident, that he marvels that so many acute thinkers could have failed to grasp the proper relations. He is even tempted to believe that some have seen, but, seeing also the enormous consequences, have turned away, remembering that "a great truth to an age which has rejected and trampled on it is not a word of peace, but a sword!"
In finding the cause of the persistence of poverty in the continuous advance of rent, the remedy is at the same time found, and Mr. George does not hesitate to apply it. He would make land common property. He reviews all the remedies proposed and finds none save this sufficient. No alleviation would follow from a decrease of the expenses of government, as this would be equivalent to an increased production, of which the landholder would take all the gain. Education and habits of industry can increase the laborer's share in production to only a very limited extent. Such qualities are like speed in a horse—it is only available in so far as it exceeds that of its competitors. Better material condition, it is true, is usually associated with the possession of such qualities, but the condition is the cause of them and not they of the condition. Little, likewise, can be expected of combinations of workmen. They can, indeed, increase their wages by such means, and not at the expense of each other or of capital as is commonly supposed, but at the expense of rent; but they can do so in so small a degree that the effect is relatively unimportant. In any contest between employers and employed it is not a struggle between labor and capital, but between labor and the owners of land, and it must always be an unequal one. Such a contest is, moreover, a destructive one—a war which, like any other, lessens wealth. And the organization for such a war, as for any other, must be tyrannical. Contests of this sort are, therefore, destructive of the very things sought to be gained by them—"wealth and freedom."
The hopes of those who see in coöperation the instrument of industrial regeneration seem to Mr. George doomed to perpetual disappointment so long as land remains appropriated. If cooperation has any power at all, it is one analogous to an improved instrument of production, which can increase the amount produced, but can not augment the laborer's share in this amount. Governmental direction and interference can only, in the present state of industry, be mischievous and inefficient.
The remedy most counted on, by those who have seen, in a vague way, that there is some connection between industrial distress and land tenure, is the dividing the land up into small holdings. Mr. George thinks this both impracticable and undesirable, as well as inefficient. Land can not be so divided, and even if it could, it is against those tendencies that are born of and grow with civilization. Machinery applied to agriculture makes cultivation on a large scale more economical than on a small one, and such holdings would interfere with the most advantageous occupancy of the land. The plan, however, has the cardinal objection that, unless every member of a community was a holder of land of equal productiveness, it would not abolish rent, and would therefore have no tendency toward an equitable division of the produce. There therefore remains only the plan of giving to every one equal rights to the whole land—the plan of making land common property.
Mr. George dismisses the claim of the landowners to compensation. If they were paid the market price for the land, industry would not be relieved, as the tax would remain in the form of interest on the purchase-money. Such an arrangement would, of course, prevent the further tax upon industry caused by the future increase of rent, but still the main burden would remain. Injustice, Mr. George thinks, has and can have no vested rights. If it be a wrong to deprive the landowners of their land without compensation, it is a greater wrong to take from industry to pay them for a value that industry has alone created. It is a conflict of claims, and the lesser claim must be the one disregarded. He points out that, tried by the common law, which through all the ages has been built up and elaborated by the dominant class, the landholders, they would not only get no recompense for their land, but none for their improvements; and, further, that they would be called to account for the returns received during the time the land was held. Mr. George is, however, satisfied to waive this, and be content with the resumption of the land by society.
In carrying out his project of making land common property, Mr. George would disturb as little as possible existing industrial, social, and political organization. He does not think that it is either necessary or desirable to effect his purpose directly. It can be done better and with less shock to accustomed feelings and habits, and with greater economy of means, indirectly. His plan is very simple. He would place all taxes upon land. He would leave the titles to land in the hands of individuals to buy and sell, to let and hold the same as now, but while leaving the shell he would take the kernel, by confiscating rent, We now take some rent in taxation; he would take it all. This would pay all government expenses, and would increase rapidly enough to meet them as they increase, and to perhaps leave a surplus. Such an arrangement would result in an enormous simplification of government. It would take no more labor to collect land-taxes then than now, while all the cumbrous institutions now in use—custom-houses, internal revenue service, etc.—with their vast and demoralizing influence on political life and their prodigal waste, would be abolished. Land can not be bid; its rent at any time is readily ascertainable, so that the Government would get a considerably larger percentage of taxation than now.
Mr. George tests his proposition by the accepted canons of taxation, and finds that the tax on land is the only tax which can not be distributed—which those taxed can not throw off on to others. It is, therefore, the only tax which does not bear upon production. This also follows from the law of rent, as the relation between the most productive and least productive land in use is not altered by such a tax, and therefore the share of labor and capital can not be affected by it. Under such tenure of land the burden of taxation will be raised from production, and, while it still pays rent, though a greatly reduced one, this goes to the state, to be used for the benefit of those who have created the fund.
Under such an arrangement, land would be improved as fast as there was a demand for it. No one, as now, could afford to hold land unless he proposed to use it. There would be no prospect of parting with it at a future time for more than now, while the holder would have to pay an increasing rent without any advantage accruing to him. This tax, therefore, would have the effect of forcing improvement instead of acting, as present taxation does, as a fine upon improvement. Nor need any fears be entertained that such a holding of land would deter men from improving it because they did not own it. Ownership is not necessary, as is shown by the many costly buildings in every city built upon leased land. All that is necessary is that there be security for the improvement.
Mr. George holds that, though the proposal to place all taxes on land is, at first sight, to increase the burdens of the farmer, it is not in reality so. At present he is taxed on all his improvements, houses, barns, fences, stock, and crops, while, through the action of the tariff, he pays enormous taxes on everything he consumes. Under the arrangement proposed all these taxes would be removed, and there would remain only the tax on the bare land. As speculative land-values would be abolished, and large tracts of land now held thrown open to improvement, the value of his land would decrease, with the result that, in sparsely settled districts, he would have little or no taxes to pay. The tendency of this measure would be to distribute population more equitably—to take from the overcrowded city and add to the thinly settled country. With the continued application of machinery to agriculture, farming life would tend to assume the form of the village community, whence the great gain to the farmer in the increased advantage of social intercourse. He would lose little or nothing in a pecuniary way, and gain much in an improved social life. And so with the owners of homesteads, and all land-owners whose interests as such do not greatly predominate over their interests as laborers and capitalists.
Of the effect of his remedy upon the material, social, and moral welfare of society Mr, George is very hopeful. Under its action he sees production bounding forward with giant strides; the great agencies, which man has called into being to help him subdue the earth, no longer of doubtful good. By the power of these "slaves of the lamp of knowledge" he sees wealth increased on every hand, and distributed to each according to his labor. He sees these great forces elevating society from its very foundations. Each would have enough and to spare. Men would no longer seek vainly for the opportunities to labor. Competition would no longer be one-sided. "Into the labor market would have entered the greatest of all competitors for the employment of labor, a competitor whose demand can not be satisfied until want is satisfied—the demand of labor itself." All raised above want and the fear of want, human life would expand in new directions and under the impulse of new ideals. The worship of wealth is but the expression of the fear of want. All men struggle to place themselves above want and the possibility of it. What men struggle for they admire, and to win the admiration and approbation of their fellows, if not the strongest, is at least one of the strongest, passions of human nature. With the passing away of this fear of want, however, will come a declining admiration of wealth, self-seeking diminish, seeking the good of others increase. And there need be no fear that, with declining need to devote his powers to getting subsistence, man will stagnate. "Man is the unsatisfied animal." For him are all the powers of the heavens and the earth. Beyond material needs there are spiritual needs.
That love of knowledge which has given us our sciences, of the beautiful which has given us our art and literature, will in the future as in the past appeal to and excite our highest powers. Whatever may have been the need of the stimulus given by the fear of want, it no longer exists. Humanity now needs but to be assured of the fruits of its labor to go upon the heights. It needs but this to realize the dream born of material progress—to make for itself the golden age:
"Youth no longer stunted and starved; age no longer harried by avarice; the child at play with the tiger; the man with the muck-rake drinking in the glory of the stars! Foul things fled, fierce things tame, discord turned to harmony! For how could there be greed where all had enough? How could the vice, the crime, the ignorance, the brutality, that spring from poverty and the fear of poverty, exist where poverty had vanished? Who should crouch where all were freemen; who oppress where all were peers?"
Such the promise Mr. George holds out to society if it but consent to "render unto Cæsar the things that are Cæsar's"—to give to labor and capital their reward. If it consent not, he raises his voice to warn it that it must crush the worm that is gnawing at its vitals, if it be not destroyed. If labor get not its reward, the gulf between the rich and poor must widen as material progress goes on; the mass of ignorance, of brutality, of recklessness, the number of those who are in our civilization but not of it, must increase and threaten its existence. The barbarians who will destroy our civilization come not from without but from within. "In the shadow of college and library and museum are gathering the more hideous Huns and fiercer Vandals of whom Macaulay prophesied."
Mr. George closes his book with a theory of progress in which heredity counts but little, and conditions much; whose law is association in equality. Men advance as they come in closer contact, and as the conditions of each are more nearly equal; and fail to do so or decline as these requirements are not met. Civilizations rise and fall, stop or turn back, or are transformed in obedience to this law.
I am not here concerned with criticising Mr. George's work, with pointing out the extravagance of his expectations; the fact that human nature is not nearly as easily modified as he assumes; that poverty is but one of the factors in the production of vice, misery, and crime; that far-reaching biological and psychological laws are not so readily set aside as he seems to think. These things do not affect the essential doctrine of his book—that, by the law of rent, rent must have a determining influence in the distribution of wealth. My purpose is served if I have succeeded in drawing attention to what seems to me one of the most important contributions yet made to economic literature.