Essays in Economics   by   Leon Maclaren


Secondary Claims in the Distribution of Wealth

Rent and wages are the primary divisions of wealth. By the nature of production, all wealth comes first into the hands of the labourer who makes it, or the tenant in occupation of the land on which it is made. If a man goes fishing, the fish he catches are his wages. If the water to which he has access provides better fishing than that to be had free in the community, the advantage he obtains, or the rent he receives, will bite on his line and swim into his net.

In the first instance, the whole product of industry will pass into the hands of the tenants in occupation of the land and the men working upon it. This product will be divided between them in rent and wages in accordance with the natural law of wages. All other claimants, such as the moneylender and the tax collector, will need to have recourse to the tenants and labourers to obtain their share. Their wealth will not come into their hands from the nature of things; their claims will be secondary. If the industry of the labourers on the land has not yielded sufficient in rent or wages to meet their claim, they can only have recourse to the store of wealth in the possession of the debtors. If that is insufficient they will have to go without. If the tenants or the labourers evade payment, the result will be the same.

The productivity of industry will vary from time to time. These variations will be reproduced in wages and rent. In the sense in which the term is being used here, rent is not the fixed periodic payment made by a tenant to a landlord, but is the advantage which accrues in the first place to the tenants in occupation. If any payment is made to a landlord it may be more or less than the actual rent. Should it be consistently more, then, in the ordinary case, either the landlord will have to accept a lower payment, or the tenant will have to quit. If it is less, the tenant will retain part of the rent.

It is interesting to observe that the legislative attempts to restrict rent cannot touch rent in the sense in which the term is used in this enquiry. All they can achieve is restriction of the claim by a landlord on a tenant. The rent which the tenant receives will rise or fall irrespective of this limitation.

In so far as such legislation succeeds in limiting a landlord's claim upon his tenant, to that extent it leaves the rent in the hands of the tenant in occupation. Thus the Rent Restriction Acts in England have restricted landlords' claims on tenants of many unfurnished dwelling-houses to the amount payable by the tenants in occupation in September, 1939. Those dwelling houses which happen to incorporate a shop tenanted together with the living accommodation are subject to control. The rents, in fact, being produced by those shops have, in many cases, greatly increased since the limitation took effect. As a result these tenancies change hands at astonishing prices which represent in major part the advantage accruing to the tenant from the limitation on the landlord's claim. The restriction of landlords' claims against agricultural tenants by the Agricultural Act of 1948 will have the same effect. None of these provisions will, however, increase the wages of employees in shops or on farms: wages will continue to be governed by the natural law of wages.

The payment to the landlord is, therefore, not a primary division of wealth. It does not come into his hands in the act of production, but is a claim by him on his tenants. It is a secondary avenue in the distribution of wealth. Apart from legislative restriction, these landlords' claims will bear a relation to the rent produced on the land. They cannot continue for long to be more than the rent; normally they will be less. The question is: How much less?

The power which enables the landlord to exact payment is his control of land. Unless the payment is made the tenant will not gain access to the land, or having gained it, will quickly lose it. Indeed, the legal limitations on rent are effective only when the landlord is prevented from retaking possession of his land except in closely defined circumstances. Where all land is enclosed, this payment will tend to be the most the tenant is willing to pay, leaving him with the least he is willing to accept. To ascertain what this most is, consideration must be given to the structure of industry and the other claims on tenants in occupation. In short, the secondary claim exercised by landlords is necessarily affected by the other secondary claims on rent such as taxation, interest, monopoly charges and the rest.

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