tie up, I do not interfere with honourable trusteeships of any kind not
enforceable by law or in equity. Such exist now, and more largely than
is generally supposed. The absolute devises and bequests to friends (not
relatives) are often on private (not expressed) trust to provide for
illegitimate children or numerous other purposes which a man may not
wish to parade to his family.
8. EQUALISING OF TAXATION.
There has been no readjustment of the land tax for very many years. It
is a property rate, and originally was rateably levied at four shillings
in the pound. By the small increase in value of some land, the large
increase in value of other land, since the days of Queen Anne, it has
now become unequal in the highest degree. The farm A, gross rental £100
a year, has a land tax of £5 a year; the suburban estate B, gross rental
£1000 a year, has a land tax of £2:l0s. a year. The land tax assessors
were sworn in annually (twenty years ago, and may be still) to assess
the tax equally, but it was perfectly understood that the tax was to be
collected every year on the old long-standing assessment.
Suppose that the estates A and B above were reassessed, and that the
land tax on A was put 15s. per annum, that on B £6:15s. a year. Land
tax can be redeemed at about thirty years' purchase. The effect of the
readjustment would have been to take about £120 from the owner of B and
give it in a lump sum to the owner of A. It is probable that the present
owners of both A and B (or predecessors under whom they claim) had
purchased the estates A and B after the land tax had become fixed on
them, and the amount of land tax would then have been fully considered
in the price paid.
We see thus that in the case of the land tax, as we saw above of the
tithe, and as is also the case in any tax permanently on, a disturbance
of the existing taxation is inequitable. This point is so much
misunderstood that I will give one more illustration.
I am purchasing an estate, intending to farm it myself. There are 400
acres of land, and I reckon the land worth 30s. an acre. I am willing
to give twenty-five years' purchase. I find the tithe is £100 a year. I
therefore propose to give twenty-five times £500 = £12,500 for the land.
But before the bargain is completed I find that the tithe is £150 a
year. I at once sink my bid to twenty-five times £450 = £11,250, and buy
the estate at that price. The next year some financier "equalises" the
tithe, and my tithe is reduced to £100. Is it not clear that, by the
equalisation, I pocket £1250, and somebody else loses it?
New taxes when imposed should be "equal," as far as can be arranged.
When a legacy duty was imposed, it would have been just to impose a
succession duty also. But, after the legacy duty had been imposed twenty
years with no succession duty, it was similarly inequitable to put on a
succession duty; for quantities of land had been bought in the interval
of twenty years at a slightly higher price than if there had been no
legacy duty, because there was no succession duty.
The proposal for "equalising" taxes is usually put forward in order to
get a somewhat larger gross income from the taxes equalised, or as a
political cry. Nothing can be more absurd than the cry that the land is
over-burdened in comparison with other property. There is no comparison
in the case. Some land being tithe free, some land tax free, some nearly
rate free, those persons who do not trouble themselves to master the
political economy may yet be satisfied that the "burdens" of the land
affect neither the farmer, the labourer, nor the produce of the farm;
the burdens fall _wholly_ on the landlord (a farmer with a lease being,
as above shown, a part landlord). The efforts of some Conservative
orators for the last twenty-five years to prove the contrary are
erroneous in the reasoning; or I should say, much of the "reasoning"
does not hang together at all. Without formally refuting these efforts,
I repeat that they are fully refuted in the result.
It is therefore that I have insisted above that, in order to carry out
the proposed ransom of the land, a new Property Rate, separate from
and in addition to all other taxes, is necessary. Though the manner of
levying a National Property Rate which I have proposed lends itself very
nicely to getting in such an extra tax, it is not at all on that ground
that I have suggested the new manner of levy. The object of the new
manner of levy and the sycophants is to get every piece of land in the
country into the hands of that man who can make most of it; including
herein as an important item the cheap and easy acquisition of land
required for Government, public and commercial (railway, etc.)
enterprises.
In any great reform of our whole system of taxation a disturbance of
existing interests must take place. Though I would not disturb existing
interests for the sake of mere equalisation or official beauty of work,
I would not let the fear of disturbing private interests stand in the
way of any real or important reform. The introduction of Universal
Free Trade and the abolition of all duties would be accompanied by a
disturbance; but, as far as I can see, no one would lose, while many
would gain enormously.
On the same ground of equality of new taxation I should propose to
replace the amount now levied in duties mainly by an income tax. That
is a perfectly level tax; the idea that temporary incomes ought to pay a
lower rate is fallacious. We are all agreed to tax the poor at a _lower_
rate; we have now a section of advanced Radicals proposing to tax the
rich at a higher rate. One present candidate for Parliament is even
willing to tax people of £100,000 a year and upwards at nineteen
shillings in the pound. This of course, or anything approaching it, is
unpractical. But I have suggested above, as a rough plan in accordance
with the existing one, eight-pence a week on incomes of £1 a week,
twelvepence a week on incomes of £2 a week, sixteen-pence a week on
incomes of £3 a week and upwards. The question may very fairly be
raised, Why stop this process at £3? why not continue the series and
develop it into a mathematical law? This might be done more easily with
a sixpenny income tax than a heavy one. To tax earnings and savings
(that is an income tax) instead of expenditure can only be carried a
certain way; if the tax is large enough to diminish saving and promote
living up to one's income, and at the same time to send capital abroad,
its effects would be serious. For a particular and noble purpose I have
suggested sixteen-pence in the pound (which we bore without serious
inconvenience in the Russian war); I should imagine twenty to
twenty-four pence in the pound about the maximum that could be imposed
for any purpose--such as the prevention of hostile invasion. It must
be noted that more than the maximum bearable cannot be put on large
incomes, £100,000 a year, etc., any more than on small ones. Indeed it
is rather the contrary; for persons with large incomes are usually the
very people who already invest largely abroad, and who could (and would)
transfer their capital rapidly out of the country if they were subjected
to anything like confiscation.
Instead therefore of proceeding _upwards_ in our income tax
sliding-scale we must proceed downwards. Taking sixteen-pence in the
pound as the maximum rate we can impose on the big fish, the problem
will be, What is the highest income to which you will allow any
remission from the maximum rate? I think those having above £150 a
year possess more than the necessaries for healthful existence; looking
therefore to the equity and productiveness of the tax, I suggested
remission to those earning less than £3 a week.
9. WEALTH OF THE NATION.
The Wealth of Nations is a well-considered title. The economists
anterior to Adam Smith conceived England as surrounded by a barrier
impassable to property and money except by trade. In trade there was
an exchange apparently on equal terms; but the old economists saw a
difference in nature between imports and exports; when wool was sold
to Flanders gold was received, and remained somewhere in the nation;
it formed the national purchasing power, and could hire mercenaries or
otherwise command foreign labour and productions. Inversely, when we
imported wine or tea, we had to part with a portion of our national
purchasing power, while the wine and tea went down our throats, leaving
nothing in its place. It appeared clear that for any increase in
national wealth the value of the exports must exceed that of the
imports. Every well-prepared boy can now show in ten minutes' scribbling
in a Government examination the ridiculous folly of the old economists;
but several of them were experienced London merchants, and perhaps were
not the complete idiots they are now triumphantly shown to be. If they
had been asked whether wool was a part of the national wealth they
might have returned an answer that their modern detractors are not quite
prepared for.
Adam Smith and his followers, and still more closely Ricardo, divided
their Political Economy into two parts: in the first they consider the
wealth of the nation without the "complication" of foreign trade, _i.e._
they, in fact, contemplate no money or goods as going out or coming
in whatever. They then in separate chapters, forming a big appendix,
consider the effects of Foreign Trade as a series of exchanges. They
do not discuss even the payment of a lump sum of gold to a victorious
nation. Senior, in his _Handbook of Political Economy_, has considered,
first, the economy of the world conceived as a solitary, island of
small size in a world-covered sea; secondly, he treats foreign trade
by conceiving two such islands. There is no better way of treating
Political Economy than this; and it is well for the beginner to conceive
the solitary island with fifty (or a limited number of) families only
on it, and work through the ordinary theorems (with figures) in this
restricted case. Whatever is true of the fifty families in a small
island must be true for 5,000,000 families in a big island.
The facilities of modern communications have caused most countries to
differ in their circumstances materially from the conditions assumed by
Adam Smith and his successors as axioms. In the case of England,
owing to its numerous wealthy colonies, gigantic foreign trade, and
consequently world-over-spread capital, the circumstances are so
completely altered that many results of the grammar of Political Economy
no longer apply even in the rough to England. If Adam Smith had been
asked what would happen to England if the imports for one year exceeded
the exports by £150,000,000 sterling, he would have given the same
answer as his predecessors, who reckoned wealth in gold and silver, or
more probably he would have declined answer, pronouncing such a state
of things an impossible conception. It is now as difficult to treat
politico-economically the wealth of the nation as the wealth of
Warwickshire--a difficulty that Adam Smith would have shrunk from.
It is true that every abstract proposition concerning rent, capital,
and wages now (and always) holds true for the whole world; but, so
conceived, the propositions give no practical result. These things do
not lesson the value of the science of Political Economy, Mr. Ranken
or Dr. Pole would estimate very highly the value of a knowledge of
elementary mechanics to the humblest engineer, though such elementary
mechanics might not extend to the consideration of friction, etc., and
might not be applicable to any bridge or steam-engine.
Of this £150,000,000 that is now annually remitted to England, not
in the way of exchange, some small portion is transferred by wealthy
Australians returning to settle in England for purchase of houses, etc.,
in England; but by far the greater portion is the interest of capital
owned by men resident in England, but invested abroad: it may be shortly
termed tribute. This is mainly invested in the Colonies and India; New
Zealand and Australia taking large shares. There is also much English
capital invested in Continental railways, etc.; but it is noteworthy
how capital (as well as commerce) follows the flag. The English capital
invested in the United States is absolutely large, but relatively (to
that invested in Canada, etc.) very small. It is certain that if the
United States were under Queen Victoria the amount of English capital
invested there would be far greater than at present.
As far as England is concerned this £150,000,000 a year is a tribute
paid her by the rest of the world. New Zealand or South Australia may
take up a million sterling in London (because they get the loan placed
there at 5 or 6 per cent, while the local rate of interest in Australia
is far higher) in order to make a railway which perhaps pays the local
Government as much as the interest of the money they give to England.
Still, the capital being once fixed in Australia while (by hypothesis)
the stock is held in England, the result is equivalent to a tribute.
All Liberal stump-orators now agree in telling the agricultural
population that their improved position is due to Free Trade (in wheat),
and that therefore they should vote for the Liberals. Nothing is done
more confidently in politics and history than the settling the causes of
events, or predicting what would have been the course of events had
some result been different, as, for instance, had the separation of the
United States from England not occurred. The truth is that in politics
causes are many; they act and react on each other in their operations;
and to say exactly how much is due to one cause, or how much that cause
acting alone would have effected, is impossible. To get some judgment
how much of the present prosperity of the agricultural labourers
(admitted on all sides as compared with their position in 1846) is
due to free importation of wheat alone, let us (merely as a scientific
artifice) imagine that a regular sliding-scale duty on wheat were put
on now, bringing wheat to 48s. a quarter permanently. What would be the
effect on the agricultural population? We may suppose that the produce
of the duty, were it five or eight millions, or any other sum, was
employed in remitting the duties on tea or other productions generally
consumed by agricultural labourers. The placing of wheat at 48s. a
quarter permanently would at once recall a good deal of capital to the
land, it would carry out further the margin of cultivation, and at the
same time cause a higher farming of that within the non-existing margin;
in both ways it would raise the demand for agricultural labour, and
would raise wages.
On the whole, I incline to think that a sliding-scale duty on wheat
up to 48s. a quarter would not perceptibly alter the position of the
agricultural labourer, or might possibly improve it: it would lower the
wages and diminish the profits of capital in other trades. This is not
(as before explained) a fair way of arguing the question; because it
is impossible to calculate the indirect effects of Free Trade in wheat,
which ultimately came round to benefit the agricultural labourer.
But considering how the efficiency of the agricultural labourer has been
improved by improved machines since 1846, it is hardly possible to doubt
that the agricultural labourer is much more indebted to the engineers
than to the Corn Law League for his improved position. Under "machines"
too may be included railway communications: also let us not forget
how much the agricultural labourer owes, not only to drills and
mowing-machines, but to boot-sewing machines, improved tea-ships, etc.
If we look to the general increase of wealth in England since 1846, the
first thing that strikes us is the increase in the tribute, which is
about thrice what it was. This increase is largely imperial, i.e. due to
colonisation, annexation, etc. But here again we must not overlook
the reaction of causes on each other: our Free Trade in corn, our
improvements in machinery and ships, have so largely contributed to
spread our empire that it becomes impossible to disentangle the separate
work, or indeed to speak of any one cause as a simple element: the
causes all act together.
England is the most comfortable country in the world for a rich man to
live in, and consequently rich men congregate there; or, if they
travel, keep a headquarters there. In this way we have congregated a
disproportionate population in England. It may be argued that it would
be a healthier economic state if the exports and imports balanced, and
if the population of England was no larger than the country itself could
grow wheat for, _at a price not exceeding 40s. a quarter_. However that
may be, the important point for the working men of England to mark
is, that every loss of rich men resident, every loss of tribute,
every reduction of the wage-fund, every pressure on the population to
emigrate, everything that leads in the direction of a self-supporting
England, means immediate pressure on the poor, with reduction of wages.
That is the only way emigration could be by natural law enforced. It is
the poor, the labouring population, who are so hugely interested in the
empire. Of all the follies taught to the labouring man the most foolish
is the doctrine that the empire abroad is maintained to provide incomes
for the rich, at the cost of the taxes paid for wars by the poor. It
matters comparatively little to the rich whether they live at Florence
or Dresden four or eight months in the year, whether the population of
England is to be maintained stationary, to increase at its present rate
of increase, or to be squeezed down to half its present number: but it
matters vitally to the poor. Whether, ultimately, after our empire is
gone and the population of England is stationary at fifteen millions
say, the poor in England would be better off than now is a very
difficult question, concerning which doctors differ; but it is
absolutely certain that during the Banting process, in the reduction of
the population down to that fifteen millions by a process of starvation
and emigration, continued for two generations of men, the poor would
have to go through experiences altogether novel. It is a thing that
would revolutionise England; and in spite of the superior education
of our labourers might lead to a break up of society. Starvation and
bankruptcy make any and every man a Radical if not a Communist.
To keep the poor comfortable for the present and for many years
immediately in front of us, we require a continual increase in the
wealth laid out in England annually in the purchase of labour. The
growth of the empire, the profitable investment of capital in foreign
countries (whereof the interest is paid and consumed in England), is one
great resource: the profitable investment of capital in England itself
is the other great, probably safer, resource. To effect this we require
every acre of land to fall into the hand of the man (or company) who can
make most of it: we require a Universal Free Trade that shall render
our hold on the commerce of the world secure until all nations adopt
Universal Free Trade (when we shall gain so much in other ways that we
shall be able to afford to share our monopoly with others); we require
the removal of all restraints on railways, tramways, electric lights,
etc., that hamper or prevent the employment of capital in England (in
other words, that send English capital abroad). Finally, underlying the
whole, and as the prime cause that shall induce capitalists to employ
their capital in England rather than to send it abroad, we require the
labour of every working man to be in the highest degree efficient: this
retards the fall of the natural rate of profits to a minimum, and the
attainment of the stationary state. Whatever ideal beauty has been
discovered in the stationary state by J. S. Mill, it is pretty clear
that England is not approaching it. It is as difficult for us to stand
still as it is impossible to go back; and our only (third) course open
(for the present and for many years to come) is to progress.