and cattle which the land will yield, the tenant will now address
himself to the very grave question of the cost which his manufacturing
industry will entail. Here he will encounter forces which pay small
respect to the beautiful symmetry of hypothetical economic science,
and often influence the amount of rent far more powerfully than the
fertility of the land. Will his farm be amongst the light and sunny
hills of Surrey; or will it be embedded in the stubborn clay of the
Sussex weald? Will he need four horses or two only for each of his
ploughs? The crop may be the same for both, but the cost will be
widely different, and may create much resistance to the landlord's
rent. If he appeals to steam-power for help, he must ask himself how
far off he will be from the coal-field, how near to him will be the
station at which he will buy his coals. So, again, with his manure.
Will the lime and the marl be close to his borders, or must he send
his carts long distances to the pit or the railway? Then comes the
serious question of the place where his buyers dwell; how far he is
from his market; what expense of carriage he will be put to. It may be
his good fortune to be offered a farm in the neighbourhood of London,
or some great manufacturing town. A weighty rent, it is true, may be
demanded of him, even some ten or fifteen pounds an acre; but this
will not extinguish the attractiveness of such a farm. Better markets,
abundant supplies of manure, cultivation by the spade, and high
prices, may possess higher claims in his eyes than a small rent in a
rural region.
But the computing farmer's arithmetic is not yet over; he has very
formidable figures still to face. His land may be burdened with heavy
charges of an exceptional kind. His tithe may be unusually large; his
poor-rate peculiarly severe; and the school-rate may acutely try his
temper and his purse. Worse still, agricultural wages in his locality
may be inordinately high, for wide are the discrepancies between wages
in different parts of England, and the worth of the wage may not be
repaid by labourers demoralized by trade unions. The long arithmetical
array of heavy burdens will be duly noted by the incoming tenant, and
carefully placed to the debit of the debated rent; but one thing he
will not do--he will not search out the position of the farm offered
in the brilliant series of ascending fertility, and comfort himself
with the reflection that economical science furnishes him with the
assurance that a farm standing so high above the margin of cultivation
must necessarily be able to pay the rent attached to that position,
all these exceptional charges of cost of production notwithstanding.
One item of cost still remains, which the intelligent tenant will
investigate before he contracts to take the farm. He will inquire into
the condition of the farm--into the outfit, so to speak, which it will
require for the full performance of the work which it is fitted to
perform. He will endeavour to ascertain the amount of draining which
has been effected, the number and state of the farm-buildings, as
well as the amount of unexhausted improvements of various kinds which
either the landlord or the previous tenant has laid out upon the land.
These constitute no real part of the land's fertility, though they
increase its power to produce: they are fixed capital in the carrying
out of the agricultural business. And here it is important to note
that the tenant will not inquire into the amount of money, as such,
which the landlord has spent upon his land. He will not pay an
additional pound of rent because the landlord can appeal to large
figures denoting the capital he has laid out on his fields. This, by
itself alone, does not concern the tenant; but it does concern him
greatly to learn the actual condition of the farm; and beyond doubt
the landlord will be able to demand increased rent, and the tenant
will be perfectly willing to pay it, to the extent that the outlay on
draining and other improvements has augmented the actual produce
of the farm. The tenant looks solely to the working power of the
agricultural machine and the results which he may obtain from it;
outside of this consideration he takes no account of what outlay the
landlord has incurred, any more than of the price which he has given
for the property. The tenant will be well aware that if that machinery
does not exist, it must be provided by means of an understanding with
the landlord, necessarily involving some cost for himself: if he finds
it on the ground and at work, he will set down in his calculation an
increased estimate of produce without any debit against rent for
cost of construction--he will feel that he is hiring a more powerful
machine.
The calculating tenant has now formed an estimate of what he may
assume as the amount of produce which he can procure from the farm,
as also of the cost which the obtaining of that produce in the
given locality will entail. He thus reaches the third stage of his
investigation--the price which he may reckon on realizing for the
products he has raised. Here the peculiar nature of the agricultural
business reveals itself. A man who enters upon a new industry, or
erects a new mill, or opens a fresh mine, will not inquire for a
particular price which he may adopt as the basis of his computations.
He will think only of the extent of the demand which exists for
the articles that he intends to manufacture. If it is strong and
increasing, he will feel sure that the consumers will repay the whole
cost of production, interest and capital included, and in addition
the legitimate profit attached to the business. If he hires or buys
machinery, he will pay the price belonging to it in its own market as
a manufactured article, precisely as if he were making purchases in
shops; the seller of a steam-engine will not ask how much profit the
engine will create for the factory. No doubt, if a site must be bought
or hired for the erection of the mill, a higher price for the land
will be encountered, in consequence of the prosperity of trade in the
particular town or district; but the rate of profit will not rise in
the discussion between the landowner and the trader. The price of the
land will be regulated by the force of the existing demand for land,
a demand which, of course, will gather strength from the swelling
profits realized in the trade.
The position of the farmer who is seeking to discover what is the
proper consideration for the hire of a farm is radically different
from that of an ordinary manufacturer. As all land in England can be
said to pay rent, it is clear that its products are sold at such a
profit as enables the tenant to reward his landlord for his loan. The
sale of what he makes is therefore certain, but the price which
it will fetch is anything but certain. His business is subject to
influences which very materially affect the quantity of his products,
and still more the prices which they will command. He is dominated
by the seasons; but it may be argued that their fluctuations may be
guarded against by basing the calculation on their average character.
The statement is well founded, and every sensible farmer will take the
average season as his rule in computing; yet even the average season,
as recent experience has too sadly shown, may sweep over a large cycle
of years with very disturbing results. But there are other and very
formidable difficulties which the farmer is called upon to face. The
price which his produce will command depends on forces of great and
varying power which are entirely beyond his own control, and often
are incapable of being estimated beforehand. He is necessarily met by
foreign competition; and that competition itself is stronger or weaker
according to the commercial position of the countries which bring
it to bear. Further, the state of the home market itself cannot be
prejudged. The produce of English land will certainly be demanded
and sold; but its price is vastly influenced by the prosperity or
adversity of English trade. The rate, for instance, at which meat will
be sold will vary prodigiously according as the multitudes of British
workmen are earning high or low wages. The fortunes of foreign nations
will weigh on the cultivating farmer; they are buyers of English
wares, and their financial condition will act on British manufactures
and recoil, for good or evil, on British agriculture.
The combined action of these manifold and diverse forces generates a
special and very important effect. It imprints on the hire of land
a distinct and unique feature of its own; it imparts its peculiar
characteristic to rent. The position of the farmer is not that of a
man engaged in a business, and buying or hiring a machine which is
required for carrying it on; it is rather the situation of one who is
examining whether he can reasonably enter upon the business at all.
One feeling governs that situation; the tenant must be able to live by
it by means of a natural profit after all expenses have been repaid.
Thus, the payment for the use of the land takes the form of handing
over to the landowner all excess of profit above the fitting reward
for the farmer. This seems manifestly the best method for giving the
required security to the tenant, whilst it provides the lender of
the use of the land a reward just in itself and compatible with the
continuous cultivation of the soil. Such a system is not unacceptable
to the landlord; he cannot hope to maintain a fixed rent which the
returns yielded by the agricultural business do not furnish. To insist
upon such a condition would be simply to compel the farmer to renounce
the farm. And he will not obtain such a rent from any other tenant;
for the one he dismisses has no other motive for leaving except the
fact that the farm will not provide such a rent. On the other hand, if
he is dissatisfied with the rent offered by the tenant, he has in the
competition of tenants desirous of hiring the farm a sure test for
ascertaining whether the offer is just or deficient.
It follows, from the preceding analysis, that rent depends on the
prices realized by agricultural produce compared with the cost of
their production, the farming profits included. A high price does
not in every case imply a correspondingly high rent, for the cost of
raising agricultural produce varies immensely in different localities;
still, as a rule, elevated prices will raise up rents with them. The
same truth holds good of every business: it must yield repayment
of all cost of manufacturing, and reward the manufacturer with the
necessary profit, or it will cease to exist. But agricultural price
encounters two serious embarrassments not to be found to an equal
degree in other trades. It is, in the first place, powerfully acted
upon by the vicissitudes of the weather: a bountiful harvest, coming
in contact with great commercial profits, brings a full and often an
augmented price, to the great advantage of the farmer; a poor
harvest, falling on a depressed trade, often fails to reap a price
corresponding with the diminution of the supply. There is but one
remedy wherewith to meet the fluctuations of such a market--a remedy,
unfortunately, too little heeded by most farmers. The great law of the
average harvest must be ever borne in mind, ought ever to govern the
conduct of the intelligent farmer: he is bound, by the very nature
of his business, to reserve the excess of profits of the good year to
balance the deficient return of the failing crop. His rent ought
to be, probably is, founded on this principle; his practice often
exhibits profuse self-indulgence under the temptations of the
prosperous time, in utter thoughtlessness about the future.
We have now reached the full explanation of rent. It is surplus
profit--that is, excess of profit after the repayment of the whole
cost of production, beyond the legitimate profit which belongs to the
tenant as a manufacturer of agricultural produce. The interest which
he would have reaped from placing capital which he has devoted to the
farm in some safe investment, such as consols or railway debentures,
forms necessarily a portion of the cost of production. He would have
realized some 4 per cent. on the investment without risk or effort
of any kind. This interest constitutes no reward for engaging in
agriculture.
It remains now to consider certain important consequences which flow
from this explanation of rent. In the first place, it is evident that
three separate incomes are derived from agriculture, whilst two only
make their appearance in all other industries. In common with
them agriculture furnishes reward or income for two classes of
persons--wages for labourers and profit for the employer. There the
similarity ends. A third income makes its appearance for a third
person--rent for the landlord. This rent is not an ordinary
consideration for hiring some useful machine; if it were a
compensation of this nature, it would necessarily take its place
amongst the items composing the cost of production. It is a part of
the profit won, dependent in no way on the value of the property nor
on the price at which it was bought, but purely and simply on the
degree of the profit realized. It is a part of that profit, estimated
and paid as what remains over--a surplus.
But how comes it to pass that an ordinary manufacture does not yield
or pay any such third income? For a simple and decisive reason. A
Manchester manufacturer cannot permanently earn a higher profit than
belongs to his trade. If we suppose 10 per cent. to be the natural
profit of that trade, and he persistently realizes 18, other mills
will be opened by new men entering into the business, and this process
will be continued till his profits are reduced to their legitimate
level. It is otherwise with farming. If a tenant reaps 10 per cent.
continuously from his farm, when competitors are willing to be content
with 8, the landlord will quickly make the discovery, and will add the
surplus 2 to the rent he requires. He will obtain the income, because
8 per cent. is judged by the farming world to be an adequate reward
for engaging in agriculture, and because no additional land is to be
found for the agricultural business.
2. It is clear that tithes, poor-rates, and other permanent charges,
fall upon the landlord's rent, and not on the farmer's profit.
They diminish rent. This is a point on which much misunderstanding
prevails. A loud outcry is raised amongst tenants at this time of
agricultural suffering against the heavy payments demanded of them
for special taxes imposed upon land; a strong agitation is rising to
obtain their repeal, as being unjustifiable wrongs inflicted on the
most meritorious of industries. It is not perceived that these
charges figured as items in the cost of production when the farmer
was calculating what rent the farm would warrant him to pay: they
diminished the rent at the cost of the landlord. Tithes and rates took
their places in the estimate of the debit side quite as really as
the number of horses, or the quantity of manure, which the farm would
require. We have seen that rent makes its appearance only after every
expense has been provided for, and a legitimate profit secured; then,
and not till then, the calculation of the rent begins. If the farming
world succeeds in removing these burdens, wholly or in part, from
the shoulders of the tenants, there can be no doubt that rents will
proportionately rise. The landlords would argue, with entire justice,
that all other circumstances remaining the same, the collective
farming profit had become larger by the disappearance of these taxes,
and as the tenant was entitled only to his natural rate of profit, the
increase of surplus would legitimately belong to him. If the tenant
repelled such a claim, the landlord would be easily able to obtain the
rent he claimed from competing farmers who would be satisfied with the
natural profit of the business.
One exception, however, must be allowed to this conclusion--the case,
namely, of a tenant who, upon a long lease, had contracted to pay a
definite rent for many years. Such a tenant has taken upon himself the
chances of the cost of production during a lengthened period, it
may be nineteen or twenty-one years, being larger or smaller. If it
diminishes during the interval, he gains: if it increases, he loses.
Practically he has insured the landlord's rent, during the continuance
of the lease, against diminution. For all increase or diminution of
rates he fares as if he were the landlord.
3. A third very important deduction follows from the nature of the
process which determines rent. Rent does not increase the price of
agricultural produce; it does not make bread dearer. Rent is the
consequence, not the creator, of price. Here the difference between
agriculture and manufacturing trades is vital. The hire or purchase
of machinery forms necessarily a part of the cost of manufacturing the
goods: it must be paid for by the price realized, or the goods will
not be made. On the other hand, the consideration to be given for the
use of the land does not enter into the tenant's estimate of his cost
of production. He does not direct his inquiry to the right rent till
after he has ascertained what the farm will produce, the cost of
obtaining it, and the price it will fetch. He then discovers what the
profit will be: from it he takes his own necessary share; what is over
he hands to the landlord as rent. He does not, like the manufacturer,
insist upon a price which must be obtained, for otherwise he would not
be able to pay for the use of the machine he borrows; he simply takes
the price which he finds in the market, makes himself reasonably sure
of the profit which rewards him, and the landlord must take the chance
of what rent will remain over, whether large or small. Rent exists
because a selling price is found which yields a surplus, an excess
of profit beyond what the tenant requires. If price gives no surplus
profit, the landlord will get no rent, and he must farm the land
himself, or sell it to a farmer.
But there is a peculiarity in the agricultural market which exercises
a very powerful influence in raising rents. Most manufactured articles
can be dispensed with, or their consumption greatly lessened, if
their cost of production is largely increased, or the means of buying
diminished. It is otherwise with food: it must be had, must be bought,
if any means of purchasing it exist. The effect of this force on a
country situated like England is very marked. England cannot supply
food for more than half of her population; the other half must be
procured from abroad. Now, the principle which governs the price of
indispensable food is the law, that the price paid for the dearest
article--say, a loaf of bread--which must and will be bought, will
impose itself on all like articles which are actually purchased. When
the loaf made in England was cheaper than any imported from abroad,
then the price of the English loaf rose to the price of the dearest
foreign loaves which were sold and purchased in the English markets.
This extra-addition of price was a pure surplus of profit received by
the English grower of wheat; the cost of production was not changed,
nor his requirement of profit for himself augmented. The gain he thus
realized, being absolutely surplus profit, passed to the landowner.
The need of foreign corn raised his rent. But the picture has a
reverse side. It may well happen that the foreign corn landed in
England will be saleable at a lower price than the English. If the
supply can be furnished in sufficient quantity to provide bread enough
for all England, the English corn in that case must inevitably sink to
the level of the foreign--its price will fall, the profit realized
on its sale may indefinitely sink, and a great reduction of rents
throughout England may well be the inevitable consequence. The
only weapon wherewith to fight off the disaster would be such a
modification of British agriculture as would lead to the cultivation
of other crops than wheat.
Here it seems desirable to notice briefly some remarks addressed by
Professor Thorold Rogers to the _Daily News_, of October 30th, 1879;
for though they are in the main true, they might easily give rise to
mischievous misconception. He writes--"There is no doubt that rent is
wealth to the recipient, and a means of profit to those who trade with
the recipient; but except in so far as it represents the advantageous
outlay of capital, it is no more national wealth than the public funds
are." Surely this is to ignore the fact that the sources from
which rent and the dividends on the public funds are derived differ
radically in nature. The dividends on consols are the fruit of taxes
levied on the whole people of England, and distributed as such to
national creditors, which they may consume as they please. Rent is
part of a profit earned by an industry useful to the country. A tax
and a profit are not necessarily the same thing. No doubt a profit
swollen by a monopoly price is equivalent to a tax: and a rent derived
from "the price of the produce of land, raised by excessive demand and
stinted supply," would be a forced contribution from consumers. But
is all rent the child of monopoly? May it not well happen, does it
not constantly happen, that rents are high by the side of cheap
corn, because the agricultural business is largely productive through
efforts made by landlords in improving the powers of the soil? Are
they to be limited down in their reward to the pure interest which
they could have obtained for their capital from investments in bonds
and debentures? Is not part of the profit realized legitimately due
to them, as profit accomplished by a commercial enterprise? If the
returns on improvements made by landowners on their estates were
limited to the interest which they could have obtained from consols,
would not the motive for making such improvements be sadly wanting?
It would sound strange in great manufacturing towns to be told that
flowing profits are no increase of the public wealth, that they are
taxes resembling the public funds, and must be swept away down to the
lowest sum compatible with the existence of the industry.
And what must be said of the ugly word, monopoly, which is so freely
flung against the owners of rent? There is a sound of unfairness in
it; of unearned gains won without effort from the fortunes of others.
How is such a reproach to be repelled? To parry the blow does not
seem to be so difficult. There is, indeed, a kind of monopoly which
is susceptible of no defence, a monopoly of manufacture conferred on
a favoured few, by the arbitrary decree of the law, founded on no
superior claim of merit or capacity, and resulting in inflated prices
and inferiority of service rendered. Such were the monopolies whose
abolition an indignant public opinion extorted from Queen Elizabeth.
But a superior advantage of production or sale attached by nature
to particular individuals or societies belongs to a wholly different
class. Life is full of such monopolies. They are inherent and
indestructible. The vineyards of France possess a monopoly of
incomparable wine which will for all time earn amazing profits paid by
voluntary buyers. England enjoys a like monopoly in the juxtaposition
of her coal and iron, which have created a trade that no other nation
can rival. The eloquent barrister, the acute physician, the brilliant
artist, the quick-eyed inventor of machines, the soul-stirring singer,
all are endowed with a personal monopoly resulting in great wealth.
Are the men and nations who reap the splendid fruit of such a
superiority to be stigmatized as despoilers of their fellow-citizens?
Is rent, the offspring of a like advantage, to be painted as a tribute
exacted from fellow-countrymen compelled to buy food?
But it will be said, change the tenure of the land, and the wrong
will disappear. But what system will clear away superior produce and
increased price? Certainly not a universal peasant-proprietor class.
Such peasants would still possess the command of higher prices
conferred by fertility and situation, and by means of such prices they
would gather up swollen profits which would in reality be rent. Then
let the land be owned by the whole community in common possession,
exclaim French Socialists, and let its fruits be distributed in equal
shares to every inhabitant. But even in such an extreme case it would
be impossible to efface monopoly. The able-bodied man who received the
same share of produce as the weak dwarf, the clever artisan who was
unable to earn a special reward for his fructifying intelligence,
would inevitably reap a diminution of labour and time. His higher
faculties would earn a monopoly benefit in leisure.
The conclusion to be drawn is evident. Nature has scattered monopolies
broadcast, higher profits, over the world. She has ordained that they
shall ever exist. It is futile to stigmatize rent as an exceptional
offender against equality.