Urgent need for industrial reform, fundamental in character but simple in detail and progressive in tendency, is evident from the persistence of involuntary poverty among producers notwithstanding our miraculous industrial progress.
The fact is obvious. General manifestations of poverty are so common that even good men look upon it as a providential provision for enabling the rich to drive camels through needles' eyes by exercising the modern virtue of organized giving. Its acute manifestations in recurring periods of "hard times" are like epidemics of a virulent disease, which excite the most contented to fear that they, even they, may become its victims. Its occasional spasms of violence threaten society with chaos on one hand, and, through panic-stricken efforts at restraint, with despotism on the other. And it persists and deepens despite the continuous increase of wealth-producing power.
That much of our poverty is involuntary may be proved, if proof be necessary, by the magnitude of charitable work which aims to help only the "deserving poor"; and as to undeserving cases—the cases of voluntary poverty—who can say but that they, if not due to birth and training in the environs of degraded poverty, are the despairing culminations of long-continued struggles to maintain respectable independence? How can we know that they are not essentially like the rest involuntary and deserving? It was a profound distinction that a clever writer of fiction made when he wrote of "the hopeful and the hopeless poor." There is, indeed, little difference between voluntary and involuntary poverty, between the "deserving" and the "undeserving" poor, except that the "deserving" still have hope, while from the "undeserving" all hope if they ever knew any has gone.
But it is not alone to objects of charity that the question of poverty calls attention. There is a keener poverty, which pinches and goes hungry, but is beyond the reach of charity because it never complains. And back of all and over all is the fear of poverty, which chills the best instincts of men of every social grade, from recipients of out-door relief who dread the poorhouse, to millionaires who dread the possibility of poverty for their children if not for themselves. Most men would rather die than lose a steady job or accumulated property. Why do they fear if no one need be poor?
It is poverty and fear of poverty that prompt men of honest instincts to steal, to bribe, to take bribes, to oppress, either under color of law or against law, and—what is worse than all because it is not merely a depraved act but a course of conduct that implies a state of depravity—to enlist their talents in hireling work against their convictions. Our civilization cannot long resist such enemies as poverty and fear of poverty breed; to intelligent observers it already seems to yield.
But how is the development of these social enemies to be arrested? Only by tracing involuntary poverty to its cause, and, having found the cause, deliberately removing it.
Poverty of the involuntary kind cannot be traced to its cause, however, without
serious thought; not mere reading and school study and other tutoring, but
thought. To jump at a conclusion is very likely to jump over the
cause, at which no class is more apt than the tutored class. We must
proceed step by step from familiar and indisputable premises.
As a common thing of this kind, the production of which is a familiar process, BREAD is probably the best example for our purpose. Let us, then, carefully trace bread to its source.
To make the results of our inquiry clear to the eye we will construct a chart as we proceed.
The chart should begin, of course, with a classification of Bread with reference to Man, for it is as an object for satisfying the wants of man that we consider bread at all. And then our first inquiry should be: Is Bread a part of the personality of Man, or is it an object external to him?
The answer is so simple that a child could make no mistake. Obviously, Bread is external to Man. It must, therefore, be classified with what for brevity we will call "External Objects," meaning objects that are external to man. And inasmuch as bread is a product—produced, as we have already noted, by a familiar manufacturing process—and must therefore have constituents, we will indicate upon the chart a place for classifying Constituents as well as one for classifying Product.
The chart up to this point of completion is distinguished as Chart A:
Now let the necessary constituents of bread be inserted. Any housewife, any kitchen girl, knows what they are as well as the most expert baker or learned chemist. In Chart B below, which is a continuation of Chart A, they are named in the place reserved for them: A baker, a lot of land, an oven, a fire, flour, yeast, salt and water.
Having noted all the constituents of Bread, let us classify them in respect of their relations to Man, for the satisfaction of whose wants bread is intended.
Reference to the same Chart B will show that all these Constituents may be classified either as Man—the baker falling within that category—or as objects external to man, namely, External Objects. This classification is made in Chart C:
There is, however, a still further classification. Though all the Constituents classified in Chart C as External Objects are alike in the one particular that they are external to Man, some of them may nevertheless differ from others in respects which, for clear thinking, must be distinguished. Let us see. Compare the first two External Objects—the lot of land and the oven. A radical difference at once appears. The lot of land is a Natural External Object. The oven is an Artificial External Object. The lot exists independently of man's art; the oven can have no existence whatever, as an oven, but for man's art. When the remaining External Objects are considered, the same difference appears. All of them, Bread included, differ from the lot of land precisely as the oven does; they are artificial. Let us note this difference upon our chart, which now takes the form of Chart D:
Having thus classified or generalized the constituents of bread, it is no longer necessary to name them individually. We may consequently simplify the chart by erasing them, together with the word "bread" itself, retaining only the class names. It will be more appropriate, too, if for the terms "constituents" and "classification," we substitute the term "factors". All this is done in Chart E:
But grave danger of confusion is here disclosed. Artificial External Objects, as will be seen by reference to Chart E, are classified both as the "product" and as a "factor". Yet it cannot be that any factor of a product is exactly the same as the product itself. There must be some difference, and this difference we shall try to discover.
Turn to Chart D, which specifies the artificial constituents of Bread, namely: oven, fire, flour, yeast, salt, water:
How do these artificial factors differ from the artificial product, bread? Simply in this, that the artificial factors are unfinished bread, while the product is finished bread. The difference, then, between Artificial External Objects as a factor, and Artificial External Objects as a final product, is that as a factor they are unfinished, and as a product they are finished.
Let us note the distinction upon Chart F:
The language of the chart may now be supplemented with the technical terms of political economy. When comprehended and used with discrimination, these distinguish the differences we have discovered with equal precision and greater brevity than the more cumbrous terms upon which we have so far relied. See Chart G:
At this point we find all essential differences distinguished. Every factor of industry and every material object of desire that can be imagined falls into one or another of the four classes of the chart. And from mere inspection of the chart we may see, what was promised when we began its construction, that in searching for the source of one of the objects that satisfy human wants we have discovered the source of all. For it is self-evident that the material wants of men are satisfied in no other way than by the consumption of finished artificial objects, technically termed Wealth; and the chart shows that such objects have their source in the combination of the three "factors", namely:
But while these three factors combine to produce all the material objects that tend to satisfy human wants, they do not constitute the ultimate source of those objects. Our analysis is not yet ended; the chart is still incomplete.
Reflection assures us that all artificial objects, finished and unfinished, resolve upon final analysis into two factors: (a) the activities of man, and (b) natural external objects; or, in technical language, all Wealth, finished and unfinished, resolves upon final analysis into Labor and Land. In final analysis, therefore, Capital is eliminated. It expresses nothing which the two remaining factors do not imply; for it is by the conjunction of those two factors that Capital is produced. Unfinished artificial objects and their technical term, Capital, should therefore be erased from the chart. The result appears in Chart H:
Thus all artificial objects external to man (Wealth), are found to have their ultimate source in the conjunction of man's activities (Labor) with natural objects external to man (Land).
Finally, by dropping cumbersome expressions altogether, and using only technical terms, we complete this series of charts with Chart I, which formulates the final analysis of productive industry. This chart may be read as follows: Wealth is produced solely by the application of labor to land.
This, then, is the final analysis of the processes that are primarily
necessary for the abolition of poverty. In the application of Labor, which
includes all human effort, to Land, which includes the whole material
universe outside of man, we find the source of Wealth, which includes
all the artificial things that satisfy want. This is the first great
truth upon which the Single Tax philosophy rests.
The essential difference between primitive and civilized modes of production is not in the accumulation of Capital, which characterizes the latter; it is in the greater scope and minuteness of its division of Labor. Capital is an effect of division of Labor rather than a cause. Division of Labor augments labor power and relieves man from the perpetual pursuit of mere subsistence. It makes civilization possible, by the production and utilization of capital on a large scale.
The productive power of division of Labor may be illustrated by considering it as a means for utilizing differences of soil and climate. If, for example, the soil and the climate of two sections of a country, or of two different countries (for the effects of division of Labor are not dependent upon political geography), differ inversely, one being better adapted to the production of corn than of sugar, and the other on the contrary being better adapted to the production of sugar than of corn, they will yield more wealth in corn and sugar with division of Labor than without it.
Let us imagine a Mainland and an Island, which, as to the adaptability of their soil and climate to the production of corn and sugar, so differ that if the people of each should raise their own corn and their own sugar they would produce, with a given unit of Labor force, only 22 of Wealth—11 in corn and 11 in sugar—as shown below:
Production in that manner would ignore the opportunities afforded by nature to man for utilizing differences of soil and climate. But by such a wise division as Labor would adopt in similar circumstances, if unrestrained, the same unit of Labor force immensely increases the product, as shown below:
Nor is it alone because it utilizes differences of soil and climate that
division of Labor is so effective. Its effectiveness is enhanced in still
higher degree by its lessening of the labor force necessary to accomplish
any industrial result, whether in mining, manufacturing, transporting,
storekeeping, professional employments, agriculture, or the incidental
occupations. Minute division of labor, instead of accounting for poverty,
makes it all the more unaccountable.
But division of labor is dependent upon trade. If trade were wholly stopped there would be no division of labor; if it be interfered with, division of labor is obstructed. In Chart B above, which illustrates the effect of division of labor without trade, the Mainland gets 20 of corn but no sugar, and the Island gets 20 of sugar but no corn. Yet each wants both sugar and corn; and if they freely trade, their wants in these respects will be better satisfied than if each raises its own corn and its own sugar. Compare Chart A with Chart C below:
The comparison illustrates the advantage to each individual, community and country, of division of labor and trade over more primitive modes of production. It is like the advantage of raising weights by means of block and tackle, over doing it by direct application of power.
And what this series of charts illustrates regarding two places and two
forms of wealth, is true in principle of all places and all forms of wealth.
That every one is better served when each does for others what relatively he
does best, in exchange for what relatively they do best, is as true of
communities and nations as it is of individuals. Indeed, it is true of
communities and nations because it is true of individuals; for it is
individuals that trade, and not communities or nations as such.
SECTION 3—The Law of Division of Labor and Trade
Now, what is it that leads men to conform their conduct to the principle illustrated by Chart C? Why do they divide their labor and trade its products? A simple, universal and familiar law of human nature moves them. Whether men be isolated, or be living in primitive communities, or in advanced states of civilization, their demand for consumption determines the direction of Labor in production.
That is the law. Considered in connection with a solitary individual, like Robinson Crusoe upon his island, it is obvious. What he demanded for consumption he was obliged to produce. Even the goods that he collected from stranded ships—desiring to consume them, he was obliged to labor in order to produce them to places of safety. His demand for consumption always determined the direction of his labor in production. And when we remember that what Robinson Crusoe was to his island in the sea, civilized man as a whole is to our island in space, we may readily understand the application of the same simple law to the great body of labor throughout the civilized world. Nevertheless, the complexities of civilized life are so likely to disguise its relations to questions like that of the persistence of poverty, as to make illustration desirable.
Chart A above, classifies about every kind of Wealth that man requires, and also Personal Services which do not crystalize in material products—such services as those of lawyers, barbers, doctors, teachers, actors, household workers, and so on.
The circle of various colors represents the commercial reservoir into which Wealth and Personal Services are poured by Labor, and from which they are drawn for use, each color indicating a particular class.
Let us suppose now that Personal Servants tap the commercial reservoir for food. They do it by applying at retail stores for what will relieve their poverty as to food. Food then flows out to them as indicated by the blue arrow, which we now insert in the chart, thereby advancing the illustration to Chart B, below:
How would the outflow of food affect managers of retail stores? Every merchant's office-boy knows. It would admonish them to order further supplies from wholesalers. Wholesalers would fill those orders, and replenish their stock by ordering from manufacturers. Manufacturers would thereupon send all over the world for materials; would call for new machinery and better machinery; would order new buildings and repair old ones, and would scour the country for workingmen to come into their factories and renew their lowered stocks of goods. Thus all kinds and all grades of labor that could assist in producing food, from farm hands to inventors, from bookkeepers to sailors, would feel the influence of the demand for food in a demand for their labor. What Personal Servants really do in demanding food is to direct the expenditure of labor to the production of food and food-producing implements and materials. Demand for consumption determines the direction of labor in production. We indicate this point upon the chart by running a blue arrow from Food-makers to the food reservoir, as in Chart C:
No complaint may now arise of lack of work in food-producing lines. But work is only a means to an end. It is done for the compensation it yields; and how are Food-makers to be compensated? In services from Personal Servants? Suppose they are not in want of services? But they must be in want of something; if they need nothing they have no poverty to relieve. Let it be clothing that they lack. Then they are compensated for making food by taking clothing from retail stores in exchange for their unpaid claim against Personal Servants. Clothing thereupon flows out of the commercial reservoir to them as food flowed out to Personal Servants; and with similar effect, namely, the setting to work of all clothing-making labor, from sheep-raisers and cotton-growers to sewing-women and salesmen. Demand for consumption has determined the direction of labor in production. The yellow arrows in Chart D, denote this.
The poverty of Food-makers as to clothing is thus removed. They are working all they care to at food making, their own chosen employment, and they are paid in clothing, their own chosen compensation. So long as Personal Servants withdraw food and Clothing-makers supply clothing, Food-makers cannot be poor. Business will be brisk with them, labor will be in demand and wages will be high. That all the other workers may enjoy the same prosperity we shall see in a moment.
Clothing-makers pour clothing into the commercial reservoir because they wish to take something out, and know that in this way they can get a larger quantity and better quality of what they require than if they undertake to make it themselves. They are skilled in making clothing; they are not skilled in other ways. Accordingly they utilize the claim against Personal Servants, which has now passed to their credit in exchange for clothing, by drawing from the commercial reservoir the particular commodity they desire. Suppose it to be shelter. They proceed as Personal Servants and Food-makers have already done, and so set Shelter-makers at work. Shelter-makers in turn utilize the claim against Personal Servants which has now been credited to them, by taking luxuries out of the reservoir. This sets Luxury-makers at work. Luxury-makers then pass the claim over in exchange for services, and Personal Servants redeem it by rendering such services as Luxury-makers demand. Everybody is now paid for his own products with the products of others. Through similar demands for more or better food, more or better clothing, more or better shelter, more or better luxuries, more or better personal services, the interchanges may be perpetuated indefinitely; and these demands will be made until all wants are satisfied—until involuntary poverty is abolished.
Let the illustration be now advanced to show the perpetual flow of trade which this action and reaction of demand and supply maintain, and we have Chart E:
Thus each class of workers by its demands for consumption determines the direction of the labor of some other class. And in more minute and final analysis every person by his own demands for consumption determines the direction of his own labor in production as truly as Crusoe determined his. The demands of Personal Servants for food, of Food-makers for clothing, of Clothing-makers for shelter, of Shelter-makers for luxuries, and of Luxury-makers for services, by enabling all to procure what they require in exchange for what is demanded of them, influence each as to the kind of employment to adopt.
Let us now complete the illustration. When we began it we noted a distinction between Personal Servants, who render mere intangible services, and the other classes, who produce tangible wealth. But essentially there is no difference. By referring to the chart and observing the course of the arrows, Food-makers are seen working for Personal Servants precisely as Personal Servants work for Luxury-makers. It is enough therefore to distinguish the different kinds of labor, as shown in Chart F:
For simplicity, the workers have been divided into great classes, and each
class has been supposed to serve only one other class. But the actual currents
of trade are infinitely complex. It would be impossible to follow them in
detail, or to illustrate their particular movements in any simple way. And it
is unnecessary. The principle illustrated by charts C and D, is the essential
principle of all division of labor and trade, however minute the details and
intricate the movements; and any person of ordinary intelligence who wishes to
understand will need only to grasp the essential principle as illustrated by
the charts to be able to apply it to the complex experiences of every-day
industrial life. All legitimate trade is the interchange of Labor for
SECTION 4—Dependence of Labor upon Land
We have now seen that division of labor and trade, the distinguishing characteristics of civilization, not only increase labor power, but grow out of a law of human nature which tends, by maintaining a perpetual revolution of the circle of trade, to cause opportunities for mutual employment to correspond to desire for wealth. Surely there could be no lack of employment if the circle flowed freely in accordance with the principle here illustrated; work would abound until want was satisfied. There must therefore be some obstruction.
That indirect taxes hamper trade, we have already seen, but the obstruction must be more fundamental.
As we learned at the outset, all the material wants of men are satisfied solely by Labor from Land. Even personal services cannot be rendered without the use of appropriate land. Let us then introduce into the illustration, in addition to the different classes of Labor, the corresponding classes of Land-owning interests, indicating them by black balls as in Chart G. Every class of labor now has its own parasite.
The arrows which run from one kind of Labor to another, indicating an outflow of service, are respectively offset by arrows that indicate a corresponding inflow of service; but the arrows that flow from the various classes of Labor to the various Land-owning interests are offset by nothing to indicate a corresponding return.
What possible return could those interests make? They do not produce the land which they charge laborers for using; nature provides that. They do not give value to it; Labor as a whole does that. They do not protect the community through the police, the courts, or the army, nor assist it through schools and post offices; organized society does that to the extent to which it is done, and the Land-owning interests contribute nothing toward it other than a part of what they exact from Labor. As between Labor interests and Land-owning interests the arrows can be made to run in only one direction.
Suppose, then, that as productive methods improve, the exactions of the Land-owning interests so expand—so enlarge the drain from labor—as to make it increasingly difficult for any class of workers to obtain the Land they need in order to satisfy the demands made upon them for the kind of Wealth they produce or service they render. Would it then be much of a problem to determine the cause of poverty, or to explain hard times? Assuredly not. It would be plain that poverty and hard times are due to obstacles placed by Land-owning interests in the way of Labor's access to Land.
We thus see that in the civilized state as well as in the primitive, the
fundamental cause of poverty is divorce of Labor from Land. But the manner
in which that divorce is accomplished in civilized conditions remains to be
This chart reminds us that Labor (human exertion), by application to Land (natural materials and forces external to man), produces Wealth (the generic term for all those things that tend to satisfy the material wants of man), and so tends to abolish poverty. No man's poverty can be abolished in any other way, unless it be by gifts, or vulgar robbery, or legalized spoils.
The illustration shows also that Wealth distributes ultimately into Wages
(a fund made up of the aggregate of the earnings of individual
laborers), which corresponds to Labor; and Rent (a fund made up of the
aggregate premiums for specially desirable locations), which corresponds
SECTION 1—Explanation of Wages and Rent
It is differences in the desirableness of land that divide Wealth into the two funds—Wages and Rent.
Labor naturally applies itself to that land from which, considering all the existing and known circumstances, most Wealth can be produced with least expenditure of labor force. Such land is the best. So long as the best land exceeds demand for it, laborers are upon an equality of opportunity, and the entire product goes to each of them as Wages in proportion to the labor force they respectively expend. But when the supply of the best land falls below demand for it, some laborers must resort to land where, with an equal expenditure of labor force, they produce less wealth than those who use the best land. The laborers thus excluded from the best land naturally offer a premium for it, or what is the same thing, offer to work for its owners for what they might obtain by working for themselves upon the poorer land. Thus we have the differentiation of Rent from Wages. Rent goes to land-owners as such, irrespective of whether they labor or not; Wages go to laborers as such, irrespective of whether they own land or not.
To illustrate: On Chart A above, are four numbered spaces, representing land which varies in productiveness to a given expenditure of labor force, from 4 down to 1. There is also an open space at the right, representing land that is yet so poor as to yield nothing to the given expenditure of labor force.
For simplicity, let the market be equally convenient to each space. Let it be assumed also that one space is as accessible to Labor as another, and that the differences in their productiveness are known. Now to which space would Labor first resort? Obviously to that which would yield most Wealth to the given expenditure of Labor force—the space to the extreme left.
Suppose, then, that Labor appropriates only as much of the best space as is required for use—say half of it. We may note the fact with red color, as in Chart B, above. Here we see that Wages are 4 and Rent 0. The laborers, as such, take the entire product, dividing it among themselves in proportion to their services. There is no Rent, because other laborers find equally good opportunities to produce in the unmonopolized (uncolored) part of the same space; the supply of the best land exceeds the demand for it, and of course none of it commands a premium.
But if demand for land should continue until the best space was monopolized, and some laborers were forced to resort to the next, the best space would then command a premium; Rent would rise and Wages would fall. Even though but few laborers were actually forced to the poorer space, they would be perpetual competitors for the advantages of the better space. The effect may be illustrated by indicating with red, the overflow of Labor from the first into the second space, as shown in Chart C:
This illustrates the elementary principle of Distribution, that Wages fall and Rent rises as demand for land forces labor to land of lower productiveness. The principle may be more impressively illustrated by supposing that demand for spaces in the chart advances so far as to include all the closed spaces, except part of the poorest productive one. See Chart D:
We now find that all Wages have fallen to the level of Wages on the poorest land that yields anything to the given unit of Labor force; while the Rent of all but that has risen, at the expense of Wages, in proportion to its superior productiveness.
Reflection will convince us that this must be so. Wages for a given
expenditure of Labor force are no more anywhere, for any great length of
time, other conditions being the same, than the like expenditure of Labor
force will produce from the best land to be had for nothing. Rent takes up
SECTION 2—Normal Effect of Social Progress upon Wages and Rent
In the above charts, the effect of social growth is ignored. We now illustrate that effect.
Social growth increases the productive power of Labor. Let us suppose, then, that the given expenditure of Labor force as applied to the first closed space in the charts, is increased by social growth to 100; as applied to the second, to 50; as applied to the third, to 10; as applied to the fourth, to 3; and as applied to the open space, to 1. If there were no increased demand for land, the effect on Wages and Rent would then be as shown on Chart E:
The productiveness of the poorest land in demand having risen from 1 (Chart D) to 3 (Chart E), Wages on all the land in use rise accordingly from 1 to 3. They cannot be less anywhere than at the place of least productiveness. By the same economic law, Rent remains at zero for the fourth space in the chart, that of the least productiveness, and rises in the other spaces respectively from 1, 2 and 3 to 7, 47 and 97. A little study of the charts will show why.
The lesson to be learned is that Wages as well as Rent tend to rise with increased productive power; but as a quantity and not as a proportion. As a proportion of product, not only does Rent tend to rise with increased productive power, but Wages tend to fall.
We may see and understand this phenomenon if we observe that increase in the
productive power of Labor, like increase in the number of laborers (which is
indeed much the same thing in economic principle and effect), tends to
increase demand for land. The fact, both as to numbers and power, as well as
effect, is indicated on Charts D and E as compared with Chart C; and this is
a fact which observation of business life will show.
SECTION 3—Significance of the Upward Tendency of Rent
Now, what is the meaning of the tendency of Rent to rise with social progress, while Wages tend proportionally to fall? Does it not plainly indicate that if Rent be treated as public revenue, advances in productive power will tend, through orderly and natural growth, to the realization of the best industrial ideals? Is it not likewise a plain warning that if Rent be treated as private capital, improvements in productive power will tend to make slaves of the many and masters of a few?
Does it not mean that common ownership of Rent is in harmony with natural social law, and that its private appropriation is disorderly and destructive? Caused and increased by social growth, the benefits of which should be common, and attaching to land, which should be a common inheritance, Rent emphatically asserts itself as a natural fund for public expenses.
If there be at all such a thing as design in the universe, then has it been
designed that Rent, the earnings of individuals jointly as a social whole,
shall be taken for the support of the community, and that Wages, the
earnings of individuals as individuals, shall be left to each individual
earner in proportion to the value of his service.
SECTION 4—The Effect of Confiscating Rent to Private Use
By giving Rent to individuals, society ignores this just law. It thereby creates social disorder. Upon society, then, and not upon a Providence which has provided bountifully, nor upon the disinherited poor, rests responsibility for poverty in civilized conditions.
Let us trace the connection and try to make it clear by means of the charts, beginning again with the white spaces on Chart A. As before, the first-comers take possession of the best land. Their doing so is shown in Chart B:
There is no Rent here; the whole product goes to Wages. This effect has been already explained, and it is obvious from inspection of the chart itself. But the first-comers—instead of leaving for others space they do not themselves need for use, as in Charts B, C, D and E—now appropriate the whole of the best space, using only part, but claiming ownership of the rest. By distinguishing the used part with red color, and that which is appropriated without use with blue, we have Chart F:
But what motive is there for appropriating more of the best space than is used? Simply that the appropriators may secure the pecuniary benefit of future demand for the best land. What will enable them to secure that? Our legal system of land monopoly, which confiscates Rent from the community that earns it, and gives it to land-owners who, as land-owners, earn nothing.
Observe the effect now upon Rent and Wages.
When other men come, instead of finding half of the best land still common and free, as in Chart B, they find all of it owned. They are therefore obliged to go upon poorer land or else to buy or rent from owners of the best. How much will they pay for the best? Not more than 1 if they want it for use and not to hold for a higher price in the future; for that represents the full difference between its productiveness and the productiveness of the next best. But if the first-comers, reasoning that the next best land will soon be scarce and theirs will then rise in value, refuse to sell or to rent at that valuation, the new-comers must resort to land of the second grade, though the best be as yet only partly used. Consequently land of the first grade commands Rent before it otherwise would.
As the seller's price under these circumstances is arbitrary, it cannot be stated in the charts; but the non-speculative buyer's price is limited by the superiority of the best land over that which he can get for nothing. The charts may be made to show this, as in Chart G:
The inevitable effect is to make Rent at the expense of Wages. As that effect is illustrated by the chart, Rent rises from 0 (Chart F) to 1 (Chart G), and Wages fall from 4 to 3.
Owing to the success of the appropriators of the best land in securing more than their fellows for the same expenditure of labor force, a rush is then made for unappropriated land—not so much to use it as to enable the appropriators to put Rent into their own pockets when further demand for land makes even the poorer land valuable. We may suppose, for illustration, that all the remainder of the second space of Chart G, and the whole of the third, are thus appropriated. The effect is noted in Chart H:
At this point Rent does not increase nor Wages fall. The reason is that there is no increased demand for land for use. The holding of inferior land for higher prices, when demand for use is at a standstill, is like owning lots in the moon—interesting but not profitable. But let more land be needed for use, and the element of profit enters in. The new demand for land must be supplied from the open space which yields but 1 to the given labor force, or else from the better grades which are monopolized. That is, producers must go to the frontier for free land, being able there to produce only 1 to the unit of labor force; or become tenants of the owners of the better grades, paying in annual rent the difference between the productiveness of the better land and that of the free land at the frontier; or buy the better land at a premium price; or hire out on wages for piecework or on some form of time wages. The effect would be the same in any case. No producer could get more for the given expenditure of labor force than he could get where land was free. As illustrated by the charts this would be only 1. If he got more, it would not be as producer from or on the land; it would be as monopolizer of the land. The surplus of his production would go to land-owners (to himself if he owned the land, to others if he did not) either directly on Rent account or indirectly through lowered Wages, as illustrated by Chart I:
The figure 1 as an item of Rent in parentheses on this chart indicates potential Rent. Producers would give that much for the privilege of using the space, but owners hold out for better terms; therefore neither Rent nor Wages is actually produced, though both might be. The figure 1 as an item of Wages in parentheses on the same chart, indicates potential Wages—the increase of the Wages fund that would result if the land were used, other things being the same.
Notwithstanding that but little space is in productive use on Chart I (indicated with red), the Wages fund is lowered to the same point by the mere monopoly of space (indicated with blue), that it would be at if all the space above the poorest were fully used. It thereby appears that under a system which confiscates Rent from the public for private uses, ownership of land for speculative purposes causes Wages to fall to the minimum long before they would if land were owned only for use.
In illustrating this effect we have again ignored the element of social growth. Let us now assume as before (Chart E), that social growth has increased the productive power of the given expenditure of labor force to 100 when applied to the best land, to 50 when applied to the next best, to 10 when applied to the next, to 3 when applied to the next, and to 1 when applied to the poorest.
Labor would not be benefited now—as it was when with the same chart we illustrated the effect of appropriation of land only for use. Although much less land is actually used (Chart J), Wages are only 1 in Chart J, whereas they were 3 in Chart E; yet the only difference between these two charts is that all the monopolized land in Chart E is fully used, and much of it in Chart J is held out of use. The prizes which expectations of future social growth dangle before the cupidity of men as rewards of land monopoly, raise demand for land so as to make it more than ever difficult to get any without a great price, in comparison with its productiveness.
Turn again to those two charts and study them. The fourth grade land (capable of yielding 3 to a given expenditure of labor force) is monopolized in expectation of future use; and "surplus labor" is consequently crowded out to the open space that originally yielded nothing (Charts F, G, H and I), but which in consequence of increased labor power now yields 1 (Chart J)—as much as the poorest closed space originally yielded to the given expenditure of labor force. Wages are therefore reduced, according to the economic law already explained, to the present productiveness of the open space, as in Chart J.
If we assume that 1 for the given expenditure of labor force is the least that Labor can live upon, the downward movement of Wages will be here held in equilibrium. This is sometimes alluded to as "the iron law of Wages." They cannot fall below 1, for that would reduce labor power by starvation; but neither can they rise above 1, no matter how great the increase of productive power, so long as monopolization of unused land is permitted and pays.
Some producers would continually be pushed back to land which increased productive power would have brought up in productiveness from 0 to 1, and by perpetual "jug-handled" competition for work, they would so regulate the labor market that the given expenditure of labor force, however much it produced, could nowhere secure more than 1 in Wages —the productiveness, that is, of the grade of land to be had for nothing. This tendency would persist until some labor was driven to land which, despite the increase in productive power of labor, would not yield the accustomed living without still further increase of productive power. Competition for work would then compel all laborers to increase their expenditure of labor force, and to do it over and over again as progress went on and lower and lower grades of land were monopolized, until human endurance could go no further. Either that, or they would be obliged to adapt themselves to a lower scale of living. In fact, they do both.
The incidental disturbances of general readjustment are what we call "hard times." These culminate in a collapse of speculative land values, which lets unused land into the market at lower prices, and by reducing Rent revives industry. Thus increase of labor force, a lowering of the standards of living, and depression of Rent, co-operate to bring on what we call "good times." But no sooner do "good times" return than renewed demands for land set in, Rent rises again, Wages fall again, and "hard times" duly reappear. The end of every period of "hard times" finds Rent higher and Wages lower, as a proportion of product even if not as a quantity, than at the end of the previous period.
This result is produced by the disorderly system under which society diverts Rent from common to individual uses. That maladjustment is the fundamental cause of poverty. And progress, so long as the maladjustment continues, instead of tending to remove poverty as naturally progress should, actually generates and intensifies it. Poverty persists with increase of productive power because land values, when Rent is privately appropriated, tend to even further increase.
There can be but one outcome: for individuals, suffering and degradation; for
society, lawlessness and destruction or decay.
SECTION 5—Effect of Retaining Rent for Common Use
If society retained Rent for common purposes, all incentive to hold land for any other object than immediate use would disappear. The effect may be illustrated by a comparison of Chart J with Chart K:
There is but one difference between those two charts. In Chart J, Rent is confiscated to private use; whereas in Chart K, Rent is retained for common use. All the labor force indicated with red in Chart J, does not more than utilize the space to the left and part of the adjoining space on Chart K. This would elevate Wages to what could be produced with the given labor force from the poorer of the two spaces. Thus, in the figures of the charts, Wages would rise from 1 (Chart J) to 50 (Chart K); and increase of Rent would not enrich landowners at the expense of other classes, but would enrich the whole community.
As illustrated by those two charts, so would it be in fact—let the degree be
less or more—in the actual individual and social life of mankind.
SECTION 6—Land Value Taxation Tends to Retain Rent for Common Use
To take up Rent for common use it is not necessary to abolish land-titles, nor
to let land out to the highest bidder, nor to invent some new mechanism of
taxation, nor in any other way formally to change existing modes of owning
land, or existing processes for collecting public revenues. "Great changes can
be best brought about under old forms." Let land be held nominally as it
is now. Let taxes be collected by the same processes as now. But abolish all
taxes except those that fall upon actual and potential Rent, that is to say,
upon land values. Nothing else is necessary. Nor is anything further necessary
except to increase land value taxes as Rent increases. If all revenue taxes
were centralized upon land values (even within the limitations of the narrowest
needs of government economically administered) it is doubtful if land-owners
could any longer confiscate enough Rent to make speculation in land monopoly
very profitable. Though some surplus were still absorbed by them, the getting
of Wealth by producing it would be so much more easy than by confiscating Rent
to private use, to say nothing of its being so much more respectable, that
speculation in land values would lose much of its attractiveness. At any rate
the question of surplus—Rent in excess of the necessities of government
economically administered—may be readily decided when the Single Tax
principle, that Rent justly belongs to the community and Wages to the
individual, shall have been recognized by society to the extent of the
Single Tax Limited—to the extent, that is, of the adoption of
exclusive land value taxation.
SECTION 7—A Reminder
It is assumed, of course, that the reader of this Chapter understands that Land does not mean agricultural land alone; that Rent does not mean payments by tenants to owners for occupancy of buildings or other use of these or other improvements; that Wealth does not mean stocks and bonds or land; and that Wages does not mean alone the payments that an employer makes to hired workmen.
Lest there be some such misapprehension, however, frequent recurrence to the above charts, may be advisable.
"Wealth" is the technical term for labor products. "Labor" is the technical
term for human effort of an industrial character. "Land" is the technical term
for the natural resources of men that are external to themselves. "Wages" is
the technical term for that share in the aggregate of current production
(currently produced Wealth) which remains after the deduction of enough of the
whole to equalize advantages of location. The technical term for this
advantage-equalizing share of current production is "Rent."
Many events subsequent to his writing have gone to prove that Henry George was right. Each new phase of the social problem makes it still more clear that the disorderly development of our civilization is explained fundamentally, not by pressure of population, nor by the relations of employers and employed, nor by scarcity of money, nor by the drinking habits of the poor, nor by individual differences in ability to produce wealth, nor by an incompetent or malevolent Creator. It is explained, as he has said, by "inequality in the ownership of land." And each new phase makes it equally clear that the remedy for poverty is not to be found in famine and disease and war; nor in strikes, which are akin to war; nor in suppression of strikes by force; nor in coinage of money; nor in liquor prohibition or high license; nor in technical education; nor in anything else, however excellent for its own purpose, short of approximate equality in the ownership of land. Remove all those evils, and land monopoly would be so much the stronger.
Equality as to the use of Mother Earth, that and that alone secures to every one an equal opportunity to participate in production and full ownership by each producer of his own share. This is justice, this is order. Unless our civilization have it for a foundation, new forms of slavery will assuredly lead on into new forms of barbarism.