X.: the nationalization of the land.

493. The Law of Rent Re-stated.—We have seen what is the nature of Rent. It represents the surplus of the produce over the cost of cultivation on the poorest lands actually contributing to the supply of the market at the time.

We saw (par. 262–4) that, conceding the private ownership of land, rent is merely a question between landlord and tenant; that so far as economic forces are concerned, rent must remain in the hands of the landlord; that, setting violence aside, it can only come into the hands of the tenant by gift from the landlord; that, were it, by virtue of the landlord's generosity, to reach the tenant, it would, so far as economic forces are concerned, go no further. It could only be carried to the agricultural laborer or to the consumer of agricultural produce, by another gift or series of gifts.

494. The Equities of Rent, as between Landlord and Tenant.—So much for the economics of rent; let us look a moment at the equities of it.

Certainly, as between the landlord and the tenant, the latter can set up no claim to any portion of rent. This is shown in the following way: It is, as we have seen, of the very essence of rent that it represents, and is measured by, the surplus of produce over the cost of cultivation on the poorest (or most distant) lands under cultivation for the supply of the same market. Now, these poorest or most distant lands have occupiers who must be presumed to be industrially, and, if you please, morally, just as meritorious as those who cultivate the better lands or the lands nearer the market. The several classes of tenants are only put on an equality when rent is exacted according to the Ricardian formula. It would clearly be inequitable that one body of occupiers should receive back, in the price of their products, only the actual cost of cultivation, while another should receive large sums in addition to this, as would be the case were rents to be remitted.

495. As between Landlord and the Agricultural Laborer.—In the same way it may be shown that the agricultural laborers on lands which bear a rent have no claim, in equity, to any portion of that rent. Why should they receive any more for their services than the laborers who cultivate the no-rent lands?

Clearly, then, as against either the tenant or the agricultural laborer, the landlord has an easy case. He can prove that neither of the two has any claim whatever to any part of what he receives as rent.

496. As between the Landlord and the Community at Large.—But suppose the issue to be raised between the landlord and the whole community, can the acquisition by individuals of the surplus of the produce above the cost of cultivation on the poorest soils, be so successfully defended on grounds either of political equity or of political expediency?

As this question has within the past few years become a “burning” question, I think it but right to present the argument of those who urge that “the unearned increment of land” should go to the State and not to individuals. This argument can not be better presented than in the language of John Stuart Mill, who, in his later days, became President of the English Land Tenure Reform Association, whose professed object was to agitate this question.

497. Mr. Mill's Argument.—“Suppose,” says Mr. Mill, “that there is a kind of income which constantly tends to increase without any exertion or sacrifice on the part of the owners, these owners constituting a class in the community whom the natural course of things progressively enriches, consistently with complete passiveness on their own part. In such a case there would be no violation of the principles on which private property is founded, if the State should appropriate this increase of wealth, or any part of it, as it arises. This would not properly be taking any thing from any body; it would merely be applying an accession of wealth, created by circumstances, to the benefit of society, instead of allowing it to become an unearned appendage to the riches of a particular class.

“Now this is actually the case with rent. The ordinary progress of a society which increases in wealth, is at all times tending to augment the income of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were, in their sleep, without working, risking or economizing.”

In the paper from which the foregoing paragraphs are extracted, Mr. Mill expressly excepted the present value of the land in possession of individuals at the time the system of the public acquisition of the increment of the land should go into effect. Such an act should, in his view, have reference only to future increase.

In another place, while expressing a general respect for the rights of property, Mr. Mill proceeds:

“Some people ask, But why single out the land? Does not all property rise in value with the increase of prosperity? I answer, No. All other property fluctuates in value, now up, now down. I defy any one to show any kind of property, not partaking of the soil, and sufficiently important to be worth considering, which tends steadily upward, without any thing being done by the owners to give it increased value. So far from it, that the other of the two kinds of property that yield income, namely, capital, instead of increasing, actually diminishes in value as society advances. The poorer the country, or the further back we go in history, the higher we find the interest of money to be. Land alone—using land as a general term for the whole material of the earth—has the privilege of steadily rising in value from natural causes; and the reason is that land is strictly limited in quantity; the supply does not increase to meet the constant increase of demand …

“Well would it have been if this diversion of the public wealth had been foreseen and guarded against long ago; let us at least prevent any more gigantic fortunes from being built up in a similar manner. The Association claims for the State the right to impose special taxation upon the land, equivalent to its special advantage.”

“Those countries are fortunate,” remarks Mr. Mill, “or would be fortunate, if decently governed, in which, as in a great part of the East, the land has not been allowed to become the permanent property of individuals, and the State consequently is the sole landlord. So far as the public expenditure is covered by the proceeds of the land, those countries are untaxed, for it is the same thing as being untaxed to pay to the State only what would have to be paid to private landlords if the land were appropriated.

“The principle that the land belongs to the Sovereign, and that the expenses of government should be defrayed by it, is recognized in the theory of our own ancient institutions. The nearest thing to an absolute proprietor whom our laws know of, is the freeholder, who is a tenant of the Crown, bound originally to personal service, in the field or at the plow, and when that obligation was remitted, subject to a land tax intended to be equivalent to it.”

498. The Feudal Burdens of Land in England.—In the paragraph last quoted, Mr. Mill contemplates the feudal obligations of the tenant by military and other service as approximately the equivalent of an annual rent, which would be made, rudely indeed, to increase with the increasing value of land due to the growth of population and the progress of trade and manufactures. The chief of these obligations, as formulated by law and custom in England, are thus stated by Sir Edward S. Creasy, in his work on “The English Constitution.”

The king, as feudal lord of his barons, and other military tenants, had a right to exact from them military service, or a pecuniary payment in lieu thereof; and it seems to have been optional with the king to claim the money, whether the vassal wished to serve in person or not, and even to exact both money and personal service. This war tax is called escuage or scutage, and the constant wars and troubles of the times always furnished a ready pretext for demanding it. Other exactions of money payments, under the name of aids, were continually practiced. Besides these, the heir, on succeeding to his estate, was required to pay a sum of money to the lord, under the title of a “relief.” If the heir was a minor, the lord took possession of the land, as guardian, and used or abused it as he pleased, till the heir obtained his majority. Even then the heir was obliged to pay a fine on suing out his livery, that is, on obtaining the delivery of the land from his guardian to him. The lord also had the right of nominating and tendering a wife to his male ward, or a husband to his female ward. And if the ward declined to marry the person so selected, the ward forfeited to the lord such a sum of money as the alliance was considered worth. The lord was entitled to a fine upon alienation: that is, if the tenant disposed of the land, or any part of it, to any third party. If the tenant died without heirs the land reverted to the lord. This was termed escheat (par. 573), and, as the right of devising real property did not exist in England after the Conquest, till Henry VIII's time, escheats were numerous. The lord also claimed to take back the land whenever the tenant committed any of a numerous list of crimes or acts of feudal misconduct. Such criminality or misconduct on the tenant's part was held to work a forfeiture.

499. Composition for the Feudal Burdens Upon Land.—On the restoration of Charles II., the land-owning class secured their release from the strictly feudal burdens, the consideration received by the Crown being solely an excise upon beer; and thus the vast possibilities of revenue to be derived from the composition of the feudal obligations of the landowning class were sacrificed. In the revolution of 1688, however, there was, as Mr. Mill notes, a reaction against this sacrifice of the rights of the public revenue. Indeed, the revolution of 1688 was, in Mr. Mill's view, “a revolution made by the towns against the country gentlemen. One of the fruits of it was a tax on the land of four shillings in the pound, which, at that time, may have been an equivalent for the burdens which had been taken off the landlords.”

In 1692, accordingly, the lands of England were valued for the purposes of the land tax.

This land tax was to be a tax, not upon the community, not upon raw produce, not upon commercial agencies and manufacturing operations, but solely a tax upon landlords, in reduction of their rents: a resumption by the State, for its own benefit and for the corresponding relief of other classes, of a portion of the rents arising from the increase of population and the progress of trade and manufactures.

The following is Mr. Ricardo's statement of the incidence of a land tax:

“A land tax, levied in proportion to the rent of land, and varying with every variation of rents, is, in effect, a tax on rent, and, as such a tax will not apply to that land which yields no rent, nor to the produce of that capital which is employed on the land with a view to profit merely and which never pays rent, it will not, in any way, affect the price of raw produce, but will fall wholly on the landlords.”

But if the revolution of 1688 was, indeed, as Mr. Mill conceives it, a revolt of the towns against the country gentlemen, the force of that movement was soon exhausted. The landowners resumed control of English legislation; the valuation of 1692 has remained to this day as the basis of the land tax, while the rate of that tax was in 1798 made permanent at 4 shillings in the pound on the valuation of that date. It was by this series of acts that the right of the State to participate in the increase of the rental value of the lands of the kingdom was relinquished, in consideration of an annual payment, forever, of about £2,000,000.

500. Mr. Cobden's Denunciation.—It was to this relinquishment of the rights of the revenue by parliaments composed of country gentlemen, for the benefit of landlords, at the expense of the general community, that Richard Cobden alluded in his somewhat threatening speech of December 17, 1845.

“I warn ministers and I warn landowners and the aristocracy of this country against forcing upon the attention of the middle and industrious classes the subject of taxation.

“If they make it understood by the people of this country how the landowners here one hundred and fifty years ago deprived the sovereign of his feudal rights over them; how the aristocracy retained their feudal rights over the minor copyholders: how they made a bargain with the king to give him four shillings in the pound upon their landed rentals, as a quit charge for having dispensed with these rights of feudal service from them; if the country understand, as well as I think I understand, how afterwards this landed aristocracy passed a law to make the valuation of their rental final, the bargain originally being that they should pay four shillings in the pound of the yearly rateable value of their rental, as it was worth to let for, and then stopped the progress of the rent by a law making the valuation final; that the land has gone on increasing ten-fold in many parts of Scotland, and five-fold in many parts of England, while the land tax has remained the same as it was one hundred and fifty years ago; … if they force these things to be understood, they will be making as rueful a bargain as they have already made by resisting the abolition of the Corn Law.”

501. Mr. Mill's Land-Tenure Reform Agitation.—What Mr. Cobden thus threatened in 1845, Mr. Mill undertook about 1870: an agitation of the whole question of taxation, and an active inquiry into the right of the landlord class to receive the progressive increase of rents.

The following is an extract from the programme of the Land-Tenure Reform Association, of which Mr. Mill was President:

“(IV.) To claim for the benefit of the State, the Interception by Taxation of the Future Unearned Increase of the Rent of Land (so far as the same can be ascertained), or a great part of that increase, which is continually taking place without any effort or outlay by the proprietors, merely through the growth of population and wealth; reserving to owners the option of relinquishing their property to the State, at the market value which it may have acquired at the time when this principle may be adopted by the Legislature.”

502. What Shall be Said of the Equity of this Proposal?—In their appeal alike to history and to political equity, I can not see that the Land-Tenure Reformers, under Mr. Mill's leadership, were wrong. That (1), by the original Teutonic constitutions the land belonged to the tribe or the community, and not to individuals, and was generally cultivated and enjoyed in common or by rotation of tenure, that (2), even when permanence of individual possession was established and titles were created, the occupation of land was charged with duties to the State, both of fiscal contribution and of personal service, which were onerous, and which tended to increase as the needs of the State increased and as the rental value of the land increased; that (3), in Europe, generally, when the occupiers of land were released from these duties to the State, it was upon a consideration wholly inadequate or upon no consideration at all; while that release was conceded by the landowning class, as the ruling class, to themselves as parties in interest, in a way which in this age would be regarded as corrupt; and that (4), the unqualified ownership of land, thus established, enables the land-owning class to reap an unearned benefit, at the expense of the community: these propositions seem to me indisputable.

503. What of its Expediency?—As a measure of political expediency, however, the scheme of the assumption by the State of the increment of land, appears to me fatally defective.

In the first place, it must be observed that a large part, at best, of the possible mischief has already been done, beyond repair, in the surrender of the rights of the community to individuals. As that surrender is now generations, even centuries old, and as much of the land has changed owners, sometimes over and over again in the interval, many of the present possessors having paid the full price of to-day, in good faith, under existing arrangements which were fully sanctioned by law, it would be simple robbery for the State to reassert its interest in the land without fully indemnifying owners. This the English Land-Tenure Reform Association, in their programme already quoted, fully acknowledged. They proposed to “reserve to owners the option of relinquishing their property to the State at the market value which it may have acquired at the time when this principle may be adopted by the Legislature.”

It is only, then, to the future increase in the value of land that this scheme would apply. Such a limitation of its scope would not only greatly reduce the importance of the benefit to be derived by the State in every community, but would deprive it of all significance in many communities where land has doubtless already reached its maximum value.

But, secondly, government could, by the confession of the Association, not realize through this scheme all that is left after the foregoing deduction has been made. Inasmuch as the State is bound to be very careful and solicitous not to do injustice, the appraisement of the present rental value, or capital value of estates, in the administration of such a scheme, must be very conservative. This, again, is admitted by Mr. Mill. “It is not necessary,” he says, “to enforce the rights of the State to the utmost farthing. A large margin should be allowed for possible miscalculation.” Yet such an allowance would diminish, by just so much, the inducement to the State to assert its interest in the lands now held by individuals.

504. How About Depreciating Property?—Thirdly, it is clear, that the State, if it will claim the benefit of all increase in the value of lands resulting from the growth of demand, due to general causes affecting the increase of the community in numbers or productive power, is bound in equity, to make good all losses arising from the decrease in the value of lands which results from the decline of demand due to general causes acting in the opposite direction. If the so-called proprietor of land is not to be allowed to reap any gain not brought about by his own exertions, he must, in simple fairness, be protected against losses which no vigilance or effort of his could have averted. “Heads I win: tails you lose,” is not a game at which the State can, in fairness or decency, play with its citizens.

The range of this consideration is not a narrow one. In almost every community, even the most flourishing, the phenomenon of declining values is seen side by side with that of rising values. Notwithstanding the large increase during the past twenty years in the aggregate value of real estate in the city of Boston, for instance, there are extensive sections where houses will not bring any thing near their price at the beginning of this period. Now if, in 1867, the principle of collecting for public uses all excess of rents above those prevailing at that date, or, at the option of the owner, paying the capital value of the property and assuming the ownership, had been adopted by competent authority in and for the city of Boston, the city would now be paying to thousands of property holders considerable annuities, representing deficiencies in rental value which have occurred since 1867, or else it would, which is more probable, have come into possession of street on street of houses and stores whose owners preferred to surrender their property at their capital value in 1867.

505. Fourthly:—Practical objections might be multiplied; but it will be sufficient to refer to the official jobbery, trickery, and corruption which would be involved in the management by the state of all the landed property of the country, either in an attempt to administer it productively, or in the occasional re-valuation and re-leasing of it in parcels to suit the occasions of individuals. To my view, the condition of things that would result would be simply intolerable. When we contemplate the history of even petty transactions of a like character, on the part of our national government, or of the several state governments, it seems impossible to believe that any inducement should ever draw the American people, traditionally jealous of the enlargement of governmental powers, on to the adoption of such a measure.