A second effect of this monopoly (as of all monopolies) is to worsen

the quality of the goods sold in an artificially restricted market.

The historian Gibbon noticed this fact more than a century ago, and

said: "_The spirit of monopolists is narrow, lazy and oppressive.

Their work is more costly and less productive than that of independent

artists; and the new improvements so eagerly grasped by the

competition of freedom, are admitted by them with slow and sullen

reluctance._" Alfred Lapoint, United States consul in Peru, warned the

State Department at Washington in 1883 of this poor quality of our

manufactures, which were then trying to find a South American market.

He wrote: "_It is my duty to indicate that great carelessness prevails

with our manufacturers; for instance, I was called upon to purchase in

the United States a steam pump and boiler, which I ordered from one of

the most famed manufacturers, and when it arrived, not alone was the

boiler inadequate for the pump, but actually after two months' work

the upper tube sheet split in three parts, a proof of its bad quality

and construction._" As men are, a natural competition among buyers and

sellers is just as needful to keep up the quality of goods as to keep

down their price. Good quality always costs more of effort and skill

and capital than bad quality: why should producers continue to furnish

good quality to a market from which a free competition in good

qualities is excluded by law? Every tendency of human nature, as well

as every relevant fact in history, attests, that poor wares at high

rates invariably attends upon tariff-monopolies. Shoddy takes the

place of wool. Cheaper crowds out better material. Skilled workmanship

is displaced by unskilled. Processes of manufacture are hastened in

time, and left incomplete to the damage of the goods in order to save

capital. Monopoly is always and everywhere the foe of excellence.

A third effect of tariff-monopoly is to prevent the sale abroad of

domestic goods to the same extent and amount as foreign wares are kept

out by these monopoly-taxes. This vital and fundamental result is

almost always overlooked. If a man or a nation refuse to _buy_ of a

proffered customer, they cannot by any possibility _sell_ to him;

because buying and selling are reciprocal and synchronous; because it

takes two to make a bargain; because material commodities, for the

most part, ultimately, exchange against each other; and because the

only motive a foreigner ever has to bring his goods _hither_, is to

take in exchange for them our domestic goods at a profit, and carry

these _hence_. To forbid entrance to foreign goods is to forbid exit

to domestic goods. Monopoly-tariff-taxes, therefore, so far forth,

destroy the market for home products, without creating or tending to

create, any other market for them. Such taxes, accordingly, cause a

dead loss all around,--to the foreign producer who wants to buy our

products with his own, to the home producer who wants to sell his own

products against those, and even to the government also as a

tax-collector, which can get no revenue on foreign goods excluded by

monopoly-taxes.

There is a final and deeper point of view, from which all such

monopolies are wholly condemnable. _They lessen of necessity,--from

their own nature and inexorable operation_,--THE DIVERSITY OF RELATIVE

ADVANTAGE AS BETWEEN EXCHANGERS, on which diversity, as we have now

seen, the whole fact and gain of exchanges depend. Taxes on raw

materials, for example, whether actually paid on them or used to

enhance the price of other corresponding materials as in the

tariff-taxes, increase the costs of all products into which such taxed

materials enter, and so restrict the market of the home-producer by

lessening his relative advantage as compared with the relative

advantage of the foreigner over him. He cannot sell so well, perhaps

cannot sell at all, his cost-enhanced products. Monopoly-taxes on

industrial processes of any kind, on the means of transportation, have

similar effects on the cost of products; and of course, similar

effects in lessening Diversity, in restricting markets, and in

destroying the life of Trade.

Before quitting this subject, it may be well for us briefly to

classify Monopolies.

(a) Patent Rights. In the great parliamentary Statute of 21 James I,

which declared the exclusive privileges to use any and to sell any

merchandise to be contrary to the ancient and fundamental laws of the

realm, and all grants and dispensations for such monopolies to be of

none effect, two exceptions had been made; the first, in favor of

Patents for fourteen years to the true and first inventors of new

manufactures within the realm; and the second, in favor of the grants

by Act of Parliament to any Company for the enlargement of foreign

Trade, of which the East India Company chartered on the last day of

the last year of the sixteenth century became the most famous and the

longest-lived. Open letters or letters _patent_, as they were called,

giving to inventors exclusive authority to vend for a limited time any

chattel or article of commerce, of which a _model_ could be made

showing the point and application of what was claimed to be _new_; and

Copyrights, which grant an exclusive property also for a limited time

to authors and discoverers of something new and useful, of which a

model cannot be made, or, as it is phrased in the Constitution of the

United States, "_the exclusive right to their respective writings and

discoveries_"; are a part of the results among all English-speaking

peoples of the two exceptions in this famous and beneficent Act of

Parliament.

In the United States a patent lasts for 17 years, and is not reissued

except by a special act of Congress; a copyright lasts for 28 years,

and may be renewed by the author, his widow, or children, for 14 years

longer. In the constitution of the new German Empire of 1871, this

protection of intellectual property (_der Schutz des geistigen

Eigenthums_) is expressly included in the matters which are to be

dealt with by the _Reichstag_ or imperial parliament.

Now while patents and copyrights are a monopoly under the definition,

they are quite distinct in their purpose and spirit from the

monopolies already described. On the whole, Society does well in

trying to protect, by law, inventors and thinkers in the sole use and

benefit of their respective products for a brief and specified time.

There are large difficulties in the way of reaching this end

practically, as is proven by the endless and expensive lawsuits in

such cases, but the postulate on which it is attempted is sound,

namely, that otherwise citizens would have less motive to think and to

invent; since in that case only the public-spirited and the rich could

or would devote themselves to an important branch of the public

progress. A patent or copyright is merely a return service which

Society renders for a service received. It violates no man's right of

property, as an ordinary monopoly does, but on the other hand is a

provision to protect for a time a new right of property created by the

thought and efforts of a deserving class of men. The phrase,

"intellectual property," used above in translating from the German, is

not well chosen, since we have amply learned that anything is property

that can be bought and sold, that simple rights of many kinds are

constantly on sale in the market, and consequently that patents and

copyrights are at once proper and property because they are a

technical return-service for other services ready to be rendered to

the community.

(b) Revenue Rights. Once at a court ball, Napoleon the First noticed a

lady very richly dressed and wearing splendid diamonds, and on asking

for her name, ascertained that she was the wife of a tobacco

manufacturer of Paris; whereupon it occurred immediately to the quick

mind of the French ruler, that the State might just as well have those

great profits as an individual; and the sale of tobacco in all its

forms became accordingly a State monopoly in the interest of taxation,

and so it has continued to this day, and yields now about 400,000,000

francs a year. Other nations have adopted to some small extent this

mode of indirect taxation of their people. By legally cutting off the

competition of all private dealers in the taxed article, and by

preventing to the utmost of their power its being smuggled into the

country, Governments are enabled to sell the article at a price

enhanced artificially by the monopoly; but all that the people are

made to pay _extra_ under the monopoly, saving the costs of

maintaining it, goes directly into the treasury of the State; and, so

far forth, becomes an unobjectionable mode of taxation. Under all

forms of taxation, the aim should clearly be, that the Treasury

receive all that the People are made to pay, except the cost of an

economical collection.

(c) Tariff Monopolies. The United States has never undertaken, like

France and Germany, to vend directly and exclusively an article taxed

by themselves for the sole purpose of revenue; but unfortunately they

have undertaken and still maintain (1890) monopolies a thousand times

more unjust and objectionable than any such revenue-monopoly can be;

they have laid distinct tariff-taxes upon thousands of foreign

articles, not with the design of getting revenue from them, but with

an avowed and realized design of _preventing_ revenue by means of

these taxes, since they have made the taxes so high and onerous as to

be in many cases absolutely prohibitory of the entry of the goods, and

in all cases more or less prohibitory of such entry. Revenue can only

be gotten on goods that come in, while the very intent and result of

these taxes is to shut the foreign goods out on which they are levied,

so as to give certain domestic producers (who have themselves secured

this legislation) the monopoly of the home market in these goods.

This is the very core of public wrong-doing. This is the worst form of

monopoly that ever existed in a civilized country. Queen Elizabeth's

monopolies, which so roused the ire of the Parliament of 1601, were

nothing in enormity as compared with these tariff-taxes. Civilization

long ago sloughed off such direct grants of personal privilege as were

forbidden forever by the Act of 1624, and accordingly there is no need

of mentioning these in the present classification. Tariff-taxes for

other ends than pure revenue are the worst monopolies in existence,

because (1) they compel the people to pay under ostensible taxes many

times more than the Treasury gets from them in actual revenue; (2)

they are wholly deceptive in their terms, and their operation is

clothed in disguises difficult to strip off; (3) they are always put

on at the instance and under the pressure of the man (or men) who

expects thereby to raise the price of his own wares at the expense of

his countrymen; (4) they create under legal forms however

unconstitutional privileged classes in the community; (5) their first

effect is invariably to make the rich richer and the poor poorer; (6)

their ultimate effect is to impoverish the privileged classes

themselves by taking away from them the natural spur of competition

and self-dependence, in consequence of which their own goods become

poor, and their zeal flags, and they come to lean still more heavily

on monopoly-supports; (7) they destroy the market for domestic goods

to precisely the same extent as they cut off the market for foreign

goods, and (8) their whole retinue of evils is wrapped up in the great

fact, that the _Diversity of Relative Advantage_ is thereby diminished

both as among domestic producers of commodities and as between foreign

and domestic producers.

The expression, "natural monopoly," is sometimes used of those, who,

under freedom, and using to the utmost their natural gifts and

acquired skill, have distanced all local competitors, and may be said

to control the market in their own interest, furnishing the best goods

at the cheapest rates. This is in no proper sense of the term a

"monopoly." Production has no complaint to make of any such

pre-eminence in excellence and opportunity. It harms nobody and

benefits everybody. Exchange rejoices over every man and woman and

child, who so puts his head and heart and hand into his own peculiar

product as to outstrip all others in that one line in point of ease

and excellence, and so be able to offer a service at once better and

cheaper than any one else can offer it then and there; and when all

men and women and children, so far as they are employed commercially,

come to possess a "natural monopoly" each in his own specialty, then

Exchanges become as profitable and progressive as possible then and

there, because the ever-blessed diversity of relative advantage has

its utmost limit.

4. We come now to consider the natural LIMITS, if any such there be,

to the Production of material commodities. This point has been much

discussed. For example, Dr. Chalmers, a Scotch clergyman of great

intelligence, profoundly moved by the condition of the poor in

Glasgow, published in 1822 an interesting but not over-sound treatise

entitled "Political Economy," in which the proposition is maintained,

that the universal market is strictly limited, and therefore that,

were it not for the unproductive consumption of the rich and

luxurious, and the equally unproductive consumption of national wars,

there would soon be a general glut of material commodities, and

consequently Production would have to cease for the lack of a vent for

its products. Pretty soon we shall be able to detect the enormous

fallacy in this proposition. On the other hand, in 1803, Jean-Baptiste

Say, a very competent French economist, in chapter xv of his

well-known treatise, fully developed this very important proposition,

if true, namely, _that production may go on indefinitely in all

directions without ever a fear of reaching a general glut of

products_.

What is a market? What is a limited market? What is an illimitable

market? A market, as we have already seen in substance, is nothing in

the world but certain _persons_ somewhere with return-services in

their hands desirous to part with these in order to get, that is, to

buy, some other services offered in exchange. Each set of services is

equally a market in relation to the other set. _A market is always

persons having something in their hands to sell._ Buyers and sellers

are equally a market in relation to each other. Whenever anybody goes

forth to buy, he must of course take with him something with which to

pay for what he wants to buy, that is to say, he must become a seller

the very instant he becomes a buyer; and whenever anybody wants to

sell something, he must of course want something already in the hands

of somebody else, in which to take his pay, that is, he becomes a

buyer the moment he becomes a seller. This helps us to see perfectly

what a market is. Defined in the terms of persons, _a market is two

men, each glad to get the product of the other, and to render in

return his own product_; defined in the terms of things, _a market for

products is products in market_.

Now, what can limit the universal market for material products?

Clearly, it can only be limited either in the element of _Desires_ or

in the element of _Return-Services_. But the desires of all men, even

of one man, which the efforts of other men may satisfy, have never yet

come to a stand-still. Who ever heard of even one man, who was in

possession of all the products of all kinds, that he wanted? Even if

there were one such man somewhere, there are millions upon millions of

other men, whose desires for products such as the efforts of other men

can furnish are unlimited in number and infinite in degree. It is not

possible, therefore, that there should be a lack of human desires

anywhere, that could put any bound to the production of commodities or

hinder in the least its ever-swelling march.

If only two things can limit the universal market, and if there never

has been and never can be any lack on the part of some men of Desires

which the efforts of other men can satisfy through exchange, can there

ever be any lack in the second element of a market, namely, in

Return-services? It is not meant to be asserted, that there are not

definite limitations at any one time or place, or in the whole world

at any given period, in the capacities of men then and there to

produce material commodities, with their knowledge of things and

powers of invention; but what _is_ meant to be asserted is this, that

wherever Production is most busy and universal in response to the

desires of some men somewhere, _there_ will be the greatest plenty of

return-services, with which to pay for the services of these "some

men somewhere" offered in response to the desires of the first set of

producers. Therefore, no general glut of products is possible to

occur. The more and the more _kinds_ of commodities produced anywhere,

the better market _that_ for the more and the more kinds of

commodities produced somewhere else. The nearer Industry may seem to

be about to come to the goal of a limit, the farther off from that

goal it is in reality. The aggregate of human industrial powers has

indeed a potential limit at any one moment, but the knowledge of

things and the power of invention and the means of transportation are

enlarging every moment of time; so that, that potential limit never

can become an actual limitation. Human industry will go on enlarging

and diversifying itself so long as the world shall stand.

Let us put this vastly important argument in other and briefer words:

the Desires of men which the Efforts of other men can satisfy through

exchange are unlimited in number and indefinite in degree; and

therefore, mutual industrial efforts can continue to be put forth in

exchange, until these unlimited and indefinite desires of all men are

all met,--a goal which clearly never can be reached.

This proposition demolishes at a stroke the fallacy, that pervades Dr.

Chalmers' book but just now alluded to; and, what is more to the

present point, demolishes equally fallacies current and prevalent in

the United States at this hour. What our national industries need and

all they need, what they always needed and all they ever will need, is

a quick market for their products; products in market is the only

market for products; but the United States for 30 years past has been

putting vast obstacles in the shape of formidable taxation in the way

of the presence of products from abroad in our domestic market, and

consequently and inexorably the market for domestic products has been

lost in foreign countries, to the immense and irreparable damage of

domestic producers as well as to the foreign producers themselves.

No general glut of exchangeable products is possible to take place in

this world under natural liberty and just law, because under these the

diversity of relative advantage and consequently the profitableness of

commercial exchanges is all the time widening everywhere, tending to

bring the whole earth into a commercial and blessed union.

On the other hand, while a general glut of products is impossible to

occur under a decent freedom, a partial glut in respect to certain

commodities in certain places is very common. Through want of

foresight as to a prospective demand, or miscalculation as to its

probable amount, particular services are sometimes offered in too

great abundance or of a kind not now adapted to the chosen market, and

in respect to these the market may truly be said to be glutted. This

frequently happens with editions of books; more copies are printed

than can be sold at paying prices. Also, when the fashion changes,

which is after all less capricious than is commonly supposed, the

goods that were fashionable but are so no longer, are very apt to be

somewhere in excess of the demand for them. Nothing can then hinder a

partial or total loss in their value in the hands of their last

holders. Precautions, however, may well be taken to avoid losses of

this character, through the cultivation of foresight, and by studying

as accurately as possible the nature of human desires and the not

altogether irregular changes that have been observed to take place in

them. This constitutes the art of mercantile sagacity; and the most

successful producers in all the departments of exchange are those who

best develop this attainable sagacity, who adapt their particular

services closest to the existing and to the coming demands; who, to

excellence in the substance of their products, add taste and

attractiveness to their form; and who, as the result of this, tend

rather to lead the fashions of the many than to follow in their wake.

It cannot be wrong to repeat here in substance, what has indeed been

said already in another connection, that Production as a general rule

is no dead level of monotonous exertion,--no going forth and coming

back on precisely the same track,--since its sphere is Life with all

its wants and Man with all his desires; since there is scope and verge

enough for the development of ingenious minds in almost all of its

departments; and since its ultimate goal is beyond the ken of man.

5. We must now study with considerable pains the ultimate facts and

the essential functions of LANDS in connection with the Production of

material commodities. This has always been the most vexed question in

our Science; but it is approaching, even if it has not already

reached, a satisfactory and final solution. The present writer

believes that his own studies and researches have thrown some original

and important light upon the perplexing problem of the Value of lands

and of their produce. His present readers are surely entitled to his

clearest possible presentation of all the facts and principles of this

radical question.

The French "physiocrats" of a hundred years ago, founders of the first

School in Political Economy, excellent men for the most part as well

as good economists in general, thought, that lands were property in a

peculiar and eminent sense, that they were the ultimate source of all

values but their own, and that consequently lands should bear the

weight of the national taxes. English economists, constituting with

their followers in other countries the second School in our Science,

while not going to the length of the physiocrats, still maintained

that the value of lands and of the produce of lands were distinct in

important respects from all other values whatever. In our own time and

country, Henry George, though belonging for the most part to the third

economic School, is a great stickler for a single tax on lands in lieu

of all other taxes. We must, then, concentrate all the lights we can

gather on these points of dispute and difficulty.

(a) _The presumption in science is always against the existence of a

few outlying cases, whenever the induction has been long and carefully

conducted by many persons, and the generalization appears on all other

grounds to be sound and comprehensive._ All induction proceeds upon

the premise, that Nature is _uniform_ in those essential resemblances

that constitute a _class_ of things in science. Nature has so often

justified confidence in her essential resemblances even under the

greatest differences in external circumstance and apparent diversity,

that the presumption becomes immensely strong in her favor, whenever a

generalization patiently gathered from many particulars seems to cover

the whole ground concerned except a few obstinate-looking items, that

have not yet been closely studied. Two to one these items also will

presently fall into their predestined place. We have already seen

abundant grounds for believing, that Values arise from human services

rendered and received: is it at all likely, considering the nature of

scientific generalization and the history of all the more advanced

sciences, that in Political Economy, lands and their produce should be

found to constitute an outlying exception to the law of all other

valuable things?

(b) There is one vital distinction to be made at the outset and held

to throughout the discussion, namely, that, between all lands as a

_physical thing_, which God made and gave to all men in common

without any effort of their own, and some lands now as a _valuable

thing_, in all probability made such through the action of human

desires and human efforts brought to bear upon what _was_ merely

physical but what has now _become_ valuable. The failure to

distinguish between _lands_ as such and _valuable lands_ as such, has

always wrought confusion and mischief in the land problem. The two

things are utterly different and incommensurable. There are vast

stretches of lands on the surface of the earth, to which no _value_

ever attached or ever will attach. They are lands, and that is all.

Political Economy has nothing to say of them, and nothing to do with

them. Because they are never bought or sold, because they never give

birth to "produce," they lie wholly outside the field of Value. Then

there are immense areas of lands now valuable, that were once as

valueless as the first class. With these Political Economy has a great

deal to do, and also with the way in which they passed from valueless

to valuable. Then there is a third class of lands, that have not yet

been studied as they ought and till recently have not been studied at

all, namely, those known to have been valuable at one time, but which

have now lost their value either wholly or in large measure. There are

such lands as these in every State of our Union, and in every

civilized country beneath the sun; and Political Economy has already

learned something, and is destined to learn much more, about the

processes by which lands pass from out the first great class into the

second, and from the second into the third. Valueless, Valuable,

Unvalued,--these three words describe to the economist all the lands

of the world.

(c) If we may trust the simple record in Genesis, the whole earth was

given of God to the whole race, under the direction that they

"_replenish and subdue it_." All the lands were then certainly

valueless, although some of them were doubtless possessed of Utility,

that is, a capacity to gratify human desires through a direct

appropriation, which is a very different thing from Value, which last

is the rendering and receiving of equivalents as between two persons.

It seems very plain, that under this word, "Subdue," and under the

human services implied in that, came in the first idea of ownership in

land. When a family or tribe commenced the work of subjugation upon a

piece of land, when they enclosed it, settled on it, tilled it, in any

way whatever improved it by their own toil, then _could_ first the

idea of ownership dawn upon their minds, then first began that land to

be capable of value, since now that family might reasonably say to

another, If you want this field, you must give us an equivalent for

what we have expended on it to improve it. If the transfer took place,

what was it that was sold? What was it that was paid for by the party

of the second part? It could not be the inherent quality of the soil,

it could not be anything that the first family had gratuitously

entered upon, because similar free land with all its inherent

qualities lay open to occupation on every hand, and the second family

would surely say, For as much effort as you have put upon your land to

better it, we can make other free land as good as yours, consequently

we can give you no more at the most than a fair equivalent for your

efforts already expended. If the parcel were sold, therefore, the

_value_ of it must have been determined, not by the _gratuitous_

elements involved but the _onerous_ elements involved. The physical

thing, land, which cost nothing, has now become the valuable thing,

land, through a series of human efforts expended of such kind as call

out human desires for the results reached, and justify the rendering

of return-services for them; and that which the buyer pays for is

never the free _old_ but always the onerous _new_; new utilities,

that cost something, have been added to and intermixed with old

utilities, that cost nothing; and solely in consequence of this

expenditure of efforts on the part of some men, answering to the

desires and calling out the efforts of other men, do parcels of land

pass out from the first great class into the second great class. So

far as it can be gathered from the nature of the case, and from the

known steps of past experience, this is the simple and rational

process by which valueless lands become valuable, and _less_ valuable

become _more_ valuable lands.

(d) This line of proof, strong in itself, is strengthened by observing

how land-parcels gradually and practically pass out from the second

into the third class of lands,--from the Valuable into the Unvalued.

As it is only human Efforts wisely bestowed upon valueless lands or in

some connection with them, that ever make these valuable, so it is,

that these Efforts intermitted for a time, or less wisely bestowed, or

reckoned less in harmony with the present and prospective desires of

other men, invariably cause a loss of value in valuable lands; and, if

such neglect or unwisdom of effort continue long enough, nothing is

more certain, than that lands so treated will lose their value

altogether, nobody will give anything for them, they will drop out

from the second class into the third by the same path (only in inverse

order), by which they crept at first from valueless to valuable. Under

the writer's own observation in different parts of New England, whole

tiers of farms once valuable and productive have lost that character

either wholly or for the most part, taxes can no longer be collected

from them, nobody will really give anything for them in exchange, they

are abandoned of their former owners, they are left to lie waste or to

grow up into forest again. It follows from all this beyond a doubt,

and the logical issue is one of vast consequence to mankind, that

Value is no attribute of matter, no inherent quality of lands as such

wherever situated, but it comes and goes, it is a relation of mutual

purchase between human services rendered and received.

(e) Land-parcels becoming valuable in the way but just now indicated,

and so long as they continue valuable, that is, salable, are

technically _Commodities_, according to our triple division of all

Valuables. They belong in this grand division, that we are specially

studying in this chapter, for the same reason as a horse does or a

steam-engine does. Men did not originally make the land as a congeries

of matter, neither do men make horses, nor do they make the iron ore

out of which most parts of the steam-engine is made; but men do modify

bits of the land as God made it, they subdue it, they improve it in

manifold ways, they make it _desirable_ in the eyes of other men, and

thus or otherwise they come into possession of it, gain for themselves

a right to sell it, prepare it to be sold and sell it, on the same

principle as men raise and break and train horses and prepare them to

be sold and sell them, and just as men by many processes transform the

iron ore into a steam-engine and sell that. Ricardo, in his famous

doctrine of Rent, says a good deal about "the original and

indestructible powers of the soil"; but as a matter of fact, _there

are no such powers_, since the elements and properties that constitute

land are all the time changing under chemical and other action; and

even if there were such powers, it would still be impossible to

separate what God did for the land from what men have done in order to

fit it to be sold; and what men have ever been authorized to take pay

from other men for what God did in the creation of the world? The

simple truth is, that Value is never of God's creation but only of

men's exertion. There never was any land anywhere fit for cultivation

and sale without more or less expenditure of human labor and reserved

capital upon it; and the "powers" of the land, whatever they are,

instead of being "indestructible," are in a constant process of

wearing out, and require a constant application of labor and capital

to keep up their fertility. Valuable pieces of land, accordingly, like

all other commodities, derive their _utility_ partly from the free

contribution of Nature, and partly from the onerous contribution of

men; but, on the other hand, they derive their _value_, whether the

value be then increasing or diminishing, wholly from human desires and

corresponding efforts.

(f) It is but a step from this impregnable position to another,

namely, that Henry George is wholly wrong in his view, that there is

Value in lands as God made them and gave them to men in common; and

consequently, wholly wrong in his doctrine, that a single tax on land

values would be just and equal to land owners, and might well be made

to take the place of all other taxes on all other persons. He says:

"_If we are all here by the equal permission of the Creator, we are

all here with an equal title to the enjoyments of his bounty._" What

bounty? If he means the original utility which God put into all lands

in common, and which certain men have done nothing to better, there is

nobody to dispute his proposition. But he does not mean that, because

there is nothing of any significance that could come out of that. What

he means is, that it is God and not man who makes lands valuable. He

makes no distinction between Utility and Value in lands. He lumps the

two together in one, and calls the aggregate the Creator's "bounty."

He goes on to say: "_There is on earth no power which can rightfully

make a grant of exclusive ownership in land._" Well! Is there any

power on earth which can rightfully deny to any man or family the

proprietorship of his own exclusive _efforts_, nobody's else rights

being infringed thereby? Or can deny to him or them the _results_ of

such efforts, however embodied? When valueless lands are made valuable

by human efforts expended to that end, does not the "value" belong to

those who made it? When valuable lands have been made more valuable

than they were by the efforts and foresight of their owners, the

rights of others untouched, does not the "increment" belong to those

who have created it? The truth is, if Henry George's powers of radical

analysis had been at all equal to his remarkable power of rhetorical

presentation, the world would never have been treated to his popular

and imposing land-fallacies. Prudhon's "Property is theft," and

George's "Single tax on land," rest on the same basis of socialism.

(g) All valuable land-parcels are material Commodities, made to be

such by onerous human efforts of some sort expended upon or in some

connection with the free Utilities furnished by Nature; the utilities

are one thing in origin and function, and the values are a very

different thing both in origin and function; and the present point is,

that nearly all valuable lands everywhere are Capital also, that is to

say, products reserved to aid in a further and future production.

Capital is a relatively small class under the immensely large class

Values. Capital is by no means coincident with Commodities, since vast

lines of the latter are consumed with no reference to a further

production by means of their use. But capital is always either

commodities or claims, and valuable bits of land are always

commodities and nearly always capital; because all tillage and pasture

lands, all forests grown for wood and timber, and lands of all sorts

rented or held for resale at a higher price, are capital under the

definition, are "_products reserved as an aid to further production_."

The peculiarity of all farming lands is this, they are themselves

commodities, in whose creation God's free gifts and men's onerous

labors have conspired; and they are held in reserve by their owners as

capital, for the sake of producing by their means with the help of

more of God's free gifts further valuable commodities, such as grain,

and fruit and timber. Farms in their highest reach of previous culture

still need for crops the sun and the rain. Indeed the sun is the most

useful and powerful force in the world. Oh! how it warms and lifts and

quickens! Give it and the rain and the dew but a fair chance on lands

properly prepared for them, and endless fields blossom like the rose

and are white to the harvest!

Agriculture always has been and always will be the vocation of the

masses of mankind. Under a fair freedom, and a decent law, and a

reasonable industry, Agriculture is always profitable; because it is

natural, that is, designed by God for the welfare of mankind; because

it lies at the basis of all other industries,--most of the food of

mankind, most of the raw material of all manufactures, most of the

subject-matter of all national and international commerce,--come out

of the farms of the world; because it has been ordered so in the

nature of things, that, under a tolerable freedom, a given amount of

agricultural products tends constantly to buy, that is, to pay for,

more and more of almost all kinds of manufactured products, for a

reason to be explained shortly, thus tending strongly to uplift the

farming masses in a scale of comforts; and because there is no other

main line of human activities so constantly and so prodigiously and so

gratuitously assisted by Natural Agents as is Agriculture. As Milton

has profoundly expressed it in the "Hymn to the Nativity," the Sun is

indeed to Mother Earth "_her lusty paramour_." But at this very time

of writing a wail is coming up in ever deepening tones from Italy and

France and Germany and Russia and especially the United States, that

a colossal blunder in legislation common to all these countries now,

say rather a colossal crime of the powerful few against the humble

many, in the shape of tariff-monopolies, neutralizes in large part

these natural advantages of agriculture, makes farming unprofitable

and farmers unable to pay their taxes, diverts young men in increasing

numbers from the farms to the towns, plasters the lands over with

mortgages, shuts out from their natural markets the products of the

land, thus depressing their price, and shuts off from farmers by

outrageous taxes their natural supplies, thus augmenting their price.

Farmers in all these countries are revolving between the upper and the

nether millstones. Count Giusso, ex-Mayor of Naples, and now a deputy

from that city, has just made a speech in the Italian Parliament,

which sets forth in strong terms the great depression in Agriculture,

and the critical condition of the public finances, brought about by

the new policy of protectionism there. He says: "_The Utopian idea of

creating an industrial Italy on the ruins of an agricultural Italy,

has been a colossal error big with disastrous results. We have

preferred the shop to the land; we have preferred the coal we do not

possess to our Italian sun; we have preferred the motive force of

steam to the most powerful motive force in the universe, the sun; and

we are naturally suffering the sad consequences._" Exports increased

in Italy in 1888 by $24,000,000, and imports by $42,000,000; and the

Count quotes the cry coming up from one end of the Peninsula to the

other: "_Give us the means of selling our products, and we will pay

the taxes._" England is the only considerable country in the world,

whose customs-revenue increased in the fiscal year 1888-89 over the

year before; this English increase was over 5 _per centum_, which

means an increase both in imports and exports, whose movements are

almost absolutely free so far as England is concerned; while in all

the countries mentioned above, which are under a different system in

that respect, there was a _deficit_ of revenue from tariff-taxes as

compared with the year before, and a _decrease_ in both exports and

imports.

(h) If nearly all bits of valuable lands be capital, as we have just

seen strong grounds for believing, then it follows of course, _that

the Rent of leased lands whether for buildings or harvests is the same

in nature with the Interest on money loaned, and is the measure of the

service rendered by the owners to the actual users of the Capital_.

This proposition, seen in its radical proofs and in its logical

corollaries, takes the very life out of Henry George's land-theories,

and out of the popular remedies thereto annexed. The writer firmly

believes also, that this proposition in the grounds of it and in the

inferences from it might have been used by Mr. Gladstone and his

followers with telling effect in the animated discussions of the Irish

land-question in the British Parliament during the decade 1880-90. In

the debates on the Irish Land Bill passed in 1881, the representatives

of the land-owners in Ireland held to their right to take all the rent

they could extort by the help of the law; on the other hand the

representatives of the Irish rent-payers held to their right as

cultivators and maintainers to withhold rent in large part or

altogether; and Mr. Gladstone, as representative of the nation, while

insisting on the right of the owners to certain rents, insisted

equally on the right of the cultivators to certain important

privileges in the soil. Our present proposition with those that spring

out of it, though it was not used by Gladstone, as it might well have

been to smooth his pathway through the roughness of that legislation,

yet justifies at one and the same time the discontent of the Irish

rent-payer, the claim of the Irish land-holder to an assured rent of

some sort, and the fundamental principle of the Irish Land Bill of

1881. That bill gives a certain modified ownership and control to the

actual cultivators and maintainers of the soil. That is right.

The principle of land-values herewith enunciated, their uprise and

increase and frequent decay also in all land-parcels, justifies

completely the concessions to tenants in that bill; while the old and

still commonly accepted English principles of land, and the false yet

famous doctrine of Rent promulgated by Ricardo at the beginning of the

century, are wholly against Gladstone and his concessions in that

bill. Let us now see whither simple analysis and logical processes

will quickly bring us in this whole matter. Valuable land was once

valueless, and always remained so, until, by virtue of human efforts

expended upon it or in some direct connection with it, coupled with

the desires of certain other men for that land or its produce,

accompanied with a readiness on the part of these men to render some

equivalent for it or its use, first imparted value to that particular

patch; moreover, it has been found in practice ten thousand times,

just as one would expect, knowing the origin of value in general,

that, unless human efforts are further and constantly expended on or

in connection with that piece, and unless desires of other men

continue to turn towards it in the way of exchange, its value will

silently and inevitably escape from it; therefore, whoever has come

into possession of that valuable piece of land by purchase or

inheritance, and foregoes the use of it in favor of another as a

tenant, is morally and commercially entitled to the stipulated return

for that use, _which is rent_; but also, if that other, aside from the

current use which is always a wearing-out process, contributes in any

way to the continuance and increase of the value and fertility of the

land, then and so far he gains rights in the land and becomes a sort

of joint owner of it, since what he has done in the way of maintenance

and improvement is inextricably mingled with what the other owners or

users have done, and is of the same nature with that; and, therefore,

the modified ownership of certain tenants recognized in Gladstone's

bill is in strict accordance with ultimate justice, as it is also in

strict accord with right, that the legal owner should continue to

receive a return in the shape of rent for all the fertility and

opportunity actually contributed by him, and no more. The discontent

of the Irish peasantry has largely come from an instinct or

intelligence more unerring than the economics of the land-owners,

namely, that they are called on to pay rent for what they themselves

have _contributed_ in addition to the rent for what they have

_received_. The true origin of value in land, and the only way in

which value in land is kept up, seems to have penetrated deeper into

the minds of Irish tenants than into the minds of many British

statesmen.

(i) If the bulk of all valuable land-parcels be capital, as it is,

then one might expect beforehand to find _a law of diminishing

returns_ from such lands, agricultural labor and skill remaining the

same; because, all capital is tools made such by the expenditure of

human efforts on changeable material, and then by the practice of

_abstinence_, and tools from their very nature are always wearing out.

Increase of efforts in connection with any form of capital unimproved

by new inventions and uninvigorated by fresh skill, though they may

indeed increase the aggregate return, cannot, for the reason just

given, _secure an increase proportioned to the increase of the

efforts_. The English writers generally, and Mr. Ricardo in

particular, justly lay much stress on this proposition, although they

have not taken lands to be capital, and have proven the law of

diminishing returns in a different way from ours, and consequently

have not set the propositions of land in their best and most ultimate

relations. Their method of proving the law, however, is short and

conclusive: If by doubling the efforts upon a piece of land, double

the produce could be secured, and by quadrupling it, quadruple, and so

on, there would be no reason why any man should ever cultivate more

than a square acre, or even a square rod. He has a strong motive to

confine his culture to a small space, just so long as the amount of

produce is in the ratio of the efforts expended, because there is less

locomotion of tools and fertilizers and crops. The fact that he

extends his culture from one acre to another, and then to distant

acres, notwithstanding the inconvenience and expense of

transportation, is an irrefragable proof of the proposition in

question. Increase of agricultural efforts and expenditures on a given

space of land will secure a larger amount of produce, but as a general

law, _the increased amount will not be proportioned to the increased

expenditure_.

It is through this law of diminishing returns, that the Creator has

secured the gradual occupation, by men, of almost the whole earth.

There is a strong and natural tendency to leave the old acres to

advance upon new, the old countries to emigrate to new, whenever the

returns begin to bear a more unfavorable ratio to the labors bestowed.

The farmer will advance from the first to the second acre as soon as

he thinks that more produce can be obtained from it by a given amount

of efforts than can be gotten by a like expenditure of additional

efforts upon the first acre, allowance being made for the increased

inconvenience; and so, cultivation has gradually extended itself and

men have become dispersed over the whole earth. Other principles

leading to dispersion have undoubtedly co-operated, but this is the

fundamental one, operative at all times, changing the course of

population, and consequently of empire.

(j) It follows from the points already made, _that all permanent

improvements in agriculture retard the operation of the law of

diminishing returns_. The recent introduction of the silo, for

example, upon the long-used and wearing-out farms of New England

promises, if the public law would quit throwing in obstacles, to help

restore the fertility of many of them. The discovery of new and more

available fertilizers, the invention of better agricultural

implements, the light thrown by chemistry upon agriculture, the

consequent adoption of better methods of culture and rotation of

crops, the more perfect adaptation to the various soils of the kinds

of produce sought to be raised from them,--all these and similar

improvements tend to increase the ratio of produce to the labor, and

to disguise the law just established. The lands that are now under

cultivation may be made, under more skilful modes of culture to yield

indefinitely more than at present, and the vast still uncultivated

lands of the world may come to render an incalculable quantity of food

to the world's population; but yet, as improvements are naturally less

continuous in this than in most other departments of production, as

invention has much less play, as there is less opportunity for the

division and co-operation of laborers, _as nothing can materially

shorten the time during which the fruits of the earth must ripen_, it

is certain that possible improvements will never override the law of

diminishing returns; and, consequently, _that the value of

agricultural produce tends constantly to rise relatively to

manufactured products generally_.

(k) The last point to be made under the general topic we are now

discussing, is, _that the best tenure of lands in the interest of the

production of material commodities is the fee simple in the hands of

the actual cultivators_. This is the old Teutonic holding; but special

circumstances in the British Islands have gradually changed these

small holdings once cultivated by the hands of their free owners into

large estates, the parts of which are leased out at will or for a term

of years to tenants or "farmers" as they are there called, who, in

turn, being small capitalists, as the land-owners are large

capitalists, furnish the stock and hire the laborers and thus become

the actual cultivators, and even often sublet parts of their own

leased holdings to tenants of the next degree below, who can furnish

less stock and can hire fewer laborers. The word "farmer" as used in

the United States has a quite different meaning from that it bears in

Great Britain; it means here a man cultivating his own fields with his

own funds in his own way, and it means there a man cultivating

another's fields with his own funds in a way and on terms made a

matter of contract between the two; and these two modes of culture are

so distinct that they are not likely to lie alongside of each other to

any great extent for a very long time in the same country. Since her

great Revolution, and under the action of the law requiring the equal

partition of every man's landed estate among all his children, France

has had for the most part the small holding tilled by the owner's own

hands, instead of the great estates of the old _régime_, the average

being about 14 acres to each owner, and nearly one fourth of the

entire population being proprietors of land either in town or country;

in the United States the plough is guided almost wholly by the man who

owns the soil he tills; while in Great Britain the original peasant

proprietor has almost entirely disappeared. Each system has its

advocates and arguments.

The question at bottom is, whether capital in the form of tillable

land is more _effective_ when held in large masses and loaned out to

men, who possess small capitals in another form than land, and are

willing to apply these for a return upon that land, or when held in

small masses and used as capital by the owners themselves, who also

own some capital in another form than land and are willing to apply

this to their own profit upon their land. We hold, that the latter

method is better than the former, both for the maintenance and

improvement of the land itself as capital and also for the current

production of commodities from it, because, (1) when one owns the farm

he works, from the very nature of permanent ownership he takes a

greater interest in it, perhaps he has inherited it from his fathers,

perhaps he has bought it and paid for it at the hardest, at any rate

it is his own, and as all men work from _motives_ and the energy of

the work is proportioned to the constant press of the motives, then

must the owner of the capital, whose abstinence _makes_ it capital, be

under the strongest possible motive at once to improve his capital and

also to make the current produce from it as great as possible, since

the capital itself and all it yields is his own; moreover, (2)

ownership improves the moral _character_ of the cultivators, it tends

to make them industrious, thrifty, frugal, independent, hopeful of the

future, anxious to give their children better privileges than they

themselves had, and it would seem as if the masses of men are educated

by nothing so much, at least by nothing more, as and than by the

_ownership_ of land, wherever such tenure is possible and easy to the

masses; and (3) the outward testimony is abundant from many lands,

that the peasant proprietor _is_ a happier and more virtuous man, a

more productive and progressive one, than the mere tenant and

farm-laborer, while there is much perhaps less conclusive testimony

that leased lands are inferior in point of improvements and

productiveness to the same lands when cultivated by their owners and

to contiguous or at least similar lands still so cultivated.

It is a cognate point yet worthy of separate mention, that a general

division of lands into farms only moderately large and approximately

equal is most favorable to the largest aggregate production. Such a

division takes place of itself wherever the lands are held in fee

simple, and the cost of land-transfers is slight, and there are no

such obstacles as slavery or primogeniture, as has happened

practically in New England and in the Middle and Western States, and

as is now happening of its own accord more or less at the South. The

Greek writer, Aristotle, quoted some centuries before Christ from "the

African," probably some Carthaginian writer on agriculture, the now

familiar saying, "_the best manure for the land is the foot of the

owner_." This homely word long attributed to Dr. Franklin, who stole

it for his "Poor Richard's Almanack" more than a century ago, is based

on the sound principle, that personal supervision to be most effective

must be limited in its sphere, and that the best agricultural skill

becomes weak when it attempts to exhibit itself on too broad a

surface. Because a man can cultivate 100 acres better than any of his

neighbors, it does not prove that he will cultivate 50 acres

additional to them better than a neighbor of inferior skill, who is

the owner of these 50 and no more. When the freeholds are small and

nearly equal a wide competition among the farmers comes naturally into

play, success is seen to depend upon personal efforts of intelligence

and will, and interest and hope become the motives to the most

productive cultivation. There is a high pleasure in possession and in

self-guided exertion, and an impulse is broadly felt over the whole

region to get as much as possible out of the land and at the same time

to keep good and ever improve its condition. To protect and advance

his own interests, to attend upon the seasons, to watch and wait, to

foresee and plan and labor,--all this develops the farmer, and gives

him energy and independence; and wherever there is a broad basis of

such independent yeomanry to lean back upon, when heavy taxes are to

be raised and strong blows of battle are to be struck, the national

safety and position are assured.

6. We come now in the last place to consider the _Costs of Production_

of material commodities of all sorts. Valuable patches of land, all

prepared for Production in its several kinds, are the most important

Commodities in the world, and the largest also in volume of Value.

What did it cost "_to subdue_" the present tillable lands of this

country? How much did it cost to get ready for grazing the broad

pastures? To make accessible the forests that yield the timber? To

open up the mines also and bring them into "touch" with the

population? These questions are of great consequence, not that the

actual past cost of any class of these more permanent "commodities" in

the commercial world will be any safe guide to their present value,

since cheaper and cheaper means of subduing the rugged forms of Nature

are all the while coming into play, and all things that did cost more

once tend pitilessly to fall to what similar things cost now; and

since also it is never "efforts" alone that determine the value of

anything, but efforts in conjunction with the "desires" of other men.

Still, the _amount_ of efforts expended at any given time upon these

more stable commodities to make them productive, that is, their cost

of production, is always gauged in general by an _estimate_ of what

the "desires" for them will be when completed; and this makes their

cost of production a sort of loose measure of their value at the time.

The main reason, however, why the cost of production of these primal

commodities, namely, valuable land-patches, whatever may be expected

to be produced from them afterwards, is so important, is, that as a

general rule, the less the cost of any commodity meeting a universal

want _the wider and surer is its market_. The larger the circle of the

buyers of anything the more certain its sale; because, the world over,

the men of small incomes are manifold larger in number than the men of

large incomes. Society is like a pyramid: the lowest course of masonry

is the longest and widest,--has the most stones or bricks in it,--and

ever fewer towards the top.

If we reckon valuable lands as the _primary_ commodities, then the

_secondary_ commodities will be of two classes, namely, (1) the

_produce_ of these valuable lands, whether animal or vegetable or

mineral, such as cattle and cereals and coal; and (2) vendible

material products obtained by human efforts from non-valuable land and

sea, such as furs and fish. This division of material commodities into

primary and secondary, and the distinction among secondary commodities

according as their source is costly and costless, has never before

been drawn in Political Economy; and it is fully believed, that the

thoughtful reader and student will pretty soon perceive its advantages

in helping clear up one of the most confused and perplexing sections

of our Science, namely, that which relates to the causes and measures

of _Rent_. We are now to inquire into the elements of the _cost of

production_ of each of these three classes of commodities; and we may

find ourselves surprised at the simplicity and certainty of these

elements.

_1._ We will now look into the Cost of Production of valuable

land-patches themselves, the first and most important class of

commodities. Here, as everywhere else in Valuables, we discover

certain free gifts of Nature, without whose presence indeed the value

could never come into being, but which are not _constituents_ of the

value, because they are gratuitous, given of God, and because the

natural competition among buyers and sellers inevitably flings out

from all effect on value of the otherwise possible action of these

free and bountiful gifts, as have been already fully illustrated in

chapter first. No piece of land ever yet had one particle of Value

until human efforts of some sort had been expended on it or in some

connection with it, for two excellent reasons, first, no man would

ever even _think_ of saying to another in reference to such a piece of

land "Give me something for it and I will pass it over to you," and

second, even if he did think of such an absurdity the other would

reply "Why should I give you anything for something to which you have

not the least claim, especially as I can take for nothing just such

pieces all around here?" It must be remembered, not only that God gave

the whole earth to all mankind without distinction, but also that his

bountiful hand scattered all peculiar kinds of patches in great number

upon each of the Continents. There is a plenty of Utility (gratuitous)

in land-parcels just as God made them, but no possibility of Value

(onerous) till other hands than His have touched and benefited them.

What, then, are the onerous elements that enter into the value of

land-parcels and constitute their Cost of Production? There are only

two such elements, namely, _Cost of Labor and Cost of Capital_. To

find out exactly what "Labor" is, and what there is in it entitling

and assuring its reward in "Wages," will be the task and perhaps also

the pleasure of the next chapter; but it will suffice for the present

discussion to say, that Labor is human exertion put forth for the sake

of a commercial return. Lands can by no possibility be brought out of

a state of nature into a state of value without the expenditure of

Labor; and the actual or estimated cost of this labor, accordingly, is

the first constituent of the Cost of Production of valuable lands

considered as Commodities. Labor, however, can not apply itself to

free lands in order to make them valuable without the co-operation of

another onerous element, namely, Capital, in some of its many forms.

For example, if forest lands are to be made tillable, the trees must

first be cut down, and this will require besides the muscular exertion

of the laborer something in the way of an axe, which is capital, the

result of previous labor reserved to assist in further production: if

native prairie is to be subdued to a valuable commodity, something of

the nature of a plough must be employed in the process, and horses or

a steam engine to propel it, and a plough and horses are capital, and

still require fresh labor to make them useful in production. But

capital always costs something; and, therefore, the cost of the

Capital enters in as a second constituent into the cost of production

of Land-Commodities. But these two costs are all. We shall search in

vain for any other onerous element in the cost of producing

commodities. There are two variables only in the Cost of Production,

which itself is the sum of the two subordinate costs.

(a) And now let us analyze first the Cost of Labor in this connection,

and then second the Cost of Capital, and we shall soon reach radical

and unchangeable ground, and find in the sum of these two an aggregate

Cost of Production, and also all of the variables that can ever enter

into such Cost. It is plain to reason, that only by Labor non-valuable

land-pieces ever did or ever can become valuable. Captain John Smith

understood this in 1607 at Jamestown as well as anybody understands it

now: there were 48 gentlemen, and only 12 tillers of the soil, among

the 105 colonists, who originally landed there: "_nothing is to be

expected hence_," he wrote of the new country, _but by_ "_labor_:" new

supplies of laborers, aided by a wise allotment of land-parcels to

each colonist, secured after five years of struggle the lasting

fortunes of Virginia: "_men fell to building houses and planting

corn_": the very streets of Jamestown were sown with tobacco; and in

fifteen years the colony numbered 5000 souls.

Now the cost of Labor is analyzable into three variables only, namely,

(1) the _efficiency_ of the labor; (2) the _rate_ of nominal wages

paid; (3) the cost to the employer of _that valuable_, in which the

wages are paid. Let us see: what an employer wants _is to get things

done_; consequently, if an employer hire two men to work for him at

the same rate of wages, and if one be twice as efficient a laborer as

the other, the _cost_ of the labor of the first is only one half the

cost of the labor of the second: therefore, a _high rate of wages_

does not mean _a high cost of labor_ whenever and wherever the

laborers are very efficient. As a rule, it is found, that the cost of

labor in reference to a given product is _the least_ in those

countries, like the United States and Great Britain, in which the

rates of nominal wages are _the highest_; because, it is found also,

that a high _efficiency_ of laborers accompanies both as a cause and

as an effect high rates of wages.

Secondly, there are striking differences in the rates of nominal wages

paid for a day's work in the same general employment in different

parts of the same country, and especially in different countries. The

agricultural laborer in the west of England, say in Wiltshire, gets

about 10_s._ per week, while in the north of England, say

Nottinghamshire, laborers at the same general work get about 16_s._

per week. Walker in his Wages-Question gathers from the best

authorities many such statements as these: "On the Grand Trunk Railway

in Canada the French-Canadian laborers received 3_s._ 6_d._ a day,

while the Englishmen received from 5_s._ to 6_s._ a day, but it was

found that the English did the greatest amount of work for the

money." "In the quarry at Bonnieres, in which Frenchmen, Irishmen, and

Englishmen were employed side by side, the Frenchmen received 3, the

Irishmen 4, and the Englishmen 6, francs a day; and at those different

rates the Englishman was found to be the most advantageous workman of

the three." "The statistics of the iron industry in France show, that

on the average 42 men are employed to do the same work in smelting pig

iron as is done by 25 men on the Tees." "In India, although the cost

of daily labor ranges from 4-1/2_d._ to 6_d._ a day, mile for mile,

the cost of railway work is about the same as in England." Thus it is

plain, that a _high rate of wages_ does not import a _high cost of

labor_, but rather the reverse. A vast mass of current fallacies are

disposed of in a moment by this truth seen in its grounds. The United

States have shown in the past the highest rates of nominal wages in

the world, and at the same time have shown the lowest costs of labor

to the employers, because as a rule the laborers here have been more

efficient than elsewhere. England has the highest rates of wages and

the lowest costs of labor in Europe for the same reason. The degree of

_efficiency_ shown by different laborers is the second variable in a

cost of labor.

Thirdly, if that valuable, whether money or other, in which wages are

paid, varies in cost to the employer, then the cost of the labor paid

for by that valuable, efficiency of the laborers, and nominal rate of

pay remaining the same, will of course be varied thereby. We shall

learn hereafter in the chapter under that title, that the value of

"Money" is by no means invariable even in one country, just as we have

already learned the variable nature of all other values; and, too,

wages are not always paid in money, though they are commonly reckoned

in the terms of money; and accordingly, the third and last variable

in a cost of labor is the cost to the employer of that valuable,

whatever it be, in which the wages are paid. Assuming, as we may, that

given wages are paid in money, then any country that has for any

reason a more abundant money than another may clearly pay higher rates

of nominal wages than that other without making its costs of labor any

higher than in that. The United States, for example, has usually had a

very abundant money (not always of the best kind), which of course has

tended to make higher the current prices of all commodities, and this

has enabled capitalist-employers to pay higher nominal rates of wages,

without at all enhancing relatively the costs of labor, and also

without really benefiting the laborers.

(b) We will now analyze second the Cost of Capital in this connection,

as the only other element of cost in the Cost of Production of

Commodities in general, and particularly now in the cost of making

worthless land-pieces valuable so as to be used in further production.

Here too we find three variables, no one of which can be safely

neglected any more than the other three in the reckoning that has for

its object a prospective cost of production. These are, first, _the

current rate per centum_; second, _the time for which the capital is

advanced_; and third, _the liability of that form of capital to slow

or rapid wearing out_. For instance, under the first variable, the

rate per centum of capital, if the rate at Amsterdam be 3 and that at

New York be 7, if the cost of labor be equal in the two cities, if the

time of advance be one year, and if there be no liability of the

capital to wear out; then any commodity made at Amsterdam with an

outlay of $100 may be sold at a profit for $103, while a similar

commodity made at New York with the same outlay cannot be sold for

less than $107. All other things being equal, a _low rate per centum_

of capital in any country gives that country an advantage in the

markets of the world for selling its commodities over other countries

offering similar commodities where the rate is higher, because its

cost of their production is less. Of course also such a country can

subjugate its wild lands and make them valuable at less cost than the

other countries.

To illustrate the operation of the second variable, the time for which

the capital is advanced, let the same suppositions be continued,

except that the _time of advance_ at New York be extended to four

years. Then the commodity may be sold at and from Amsterdam, as

before, at $103, but the corresponding commodity at and from New York

for not less than $131, so far as mere cost of production determines

the prices. This point is also well shown up in the case of wine,

which, to reach its perfection, requires to be kept a number of years,

for, if it be genuine and ripe, its cost of production has been by so

much enhanced by its delay in reaching the market. If the time of

advance be long, and the rate _per centum_ high at the same time, the

cost of capital from the two causes combined multiplies the cost of

the product; and consequently, only countries in which the _rates_ are

low can successfully engage in enterprises requiring a large capital

to be invested for _long periods_ before returns are realized. One

million of Dutch capital at 3% a year, expecting to realize returns

only after 20 years, may be remunerated by products selling for

$1,806,111; but American capital under like circumstances, except that

the rate here is 7%, must have a return of $3,869,685, or lose by the

operation.

To illustrate the action of the third and last variable, we must

observe, that all forms of capital wear out, but some forms much

faster than others, and that this makes a difference in the

sinking-funds that must be reserved out of the gross profits of the

capital in order to replace the principal whole. This difference will

at once affect the cost of capital, and so of production, and so

indirectly the ultimate value of the product. Suppose there are two

commodities, which we will call A and B, produced in two different

establishments, in each of which is invested a capital of $11,000, in

one of which is used a machine that costs $1000 and is wholly worn out

by one year's use, and in the other a machine costing the same sum,

which will last, however, for ten years. Suppose further, that the

rate _per centum_ of profit be 10, and the time consumed in completing

each of the two products be one year. Now there is a marked difference

in the Cost of Capital in the two establishments, and this difference

will indirectly but immediately appear in the Value of the respective

products. For, to A must be charged not only $1100, the interest on

the whole capital at the current rate, but also another $1000,

wherewith to replace the machine already worn out by a single year's

use. A, accordingly, cannot be sold without loss for less than $2100.

B, however, will cost less and can be sold for less at the usual

profit. Because, to it must be charged, as before, $1100, current rate

of profit on the capital invested, and only $100 (really less than

that for an obvious reason) to replace the durable machine after ten

years' use. The capitalist, therefore, can sell B for $1200, and make

something over the current rate of profit.

Since the cost of capital invariably resolves itself into these three

variables, every capitalist in order to become successful as such must

give strict attention to all three of these points. To any one who

projects the making of valueless into valuable land, or valuable into

more valuable land, by the expenditure of capital upon them for that

purpose, it becomes a matter of prime importance for him to inquire

how long a time the whole process will take, how much he must allow

_per annum_ for the cost of all the implements employed, and

especially how complete in action and duration are these costly

implements. The _durability of machinery_, whatever the name it bear

and whatsoever the work it do, is at once the most significant and the

most neglected point in the actual and prospective Production of our

time and country; and no condemnation can be too severe upon a policy

of public law, such as now prevails, whose whole tendency and actual

effect is to worsen the quality and lessen the durability of all

commercial implements whatsoever, from the needle to the locomotive.

The same abominable public policy increases the cost and decreases the

durability of all agricultural implements, like the axe and the

plough, designed and adapted to transform valueless and non-productive

into valuable and food-producing lands.

_2._ Now, having fully seen the elements of the cost of reducing land

itself from a natural into a valuable and productive form, what next

are the elements of the cost of production of those material

commodities produced for sale _by the aid_ of these subdued and now

productive lands? Commodities so produced constitute the second class

in the law of their Cost of Production. And a vastly important class

it is. The food of the world, so far as that food is purchased as the

product, whether animal or vegetable, of valuable lands; the fuel of

the world, so far as that fuel is bought from owned and accessible

forests and mines; the clothing of the world, so far as the fabrics

come from the cultivated cotton and flax and wool and skins offered

for sale; the shelter of the world, so far as the wood and brick and

stones and lime are drawn from valuable lands and quarries; and the

warehouses and the temples and the theatres of the world, built, as

they are, out of the products of costly and rentful lands: these all,

and many more like these, constitute a class of commodities immense in

their volume, whose cost of production has in it an element peculiar

and additional to that of the first class already analyzed, and to

that of the third class also soon to be considered.

This peculiar and additional element in the cost of production of

these things, class second of commodities, is called RENT.

Interminable have been and still are, especially in the British

Islands, the definitions and discussions upon Rent: they have boxed

the compass of economical nomenclature: they have run up and down the

entire gamut of possible expression on such a theme. David Ricardo,

the Anglo-Jewish Banker, formerly announced, near the beginning of

this century, that "_Rent is that portion of the produce of the earth,

which is paid to the landlord for the use of the original and

indestructible powers of the soil._" Two objections lie with fatal

weight against this definition and all that is involved in it: first,

there _are_ no "indestructible powers of the soil," either "original"

or acquired, since the universal verdict of all agriculture has been

and still is, that the "powers" of all soils are continually wearing

out, and need to be constantly renovated by fertilizers and

manipulations of all sorts; and second, even if there were such

"original and indestructible powers," it would be impossible to

separate them from the additional "powers" acquired by means of the

capital expended to bring that land from the state of nature to its

present state, and the landlord has had nothing to do with any

"powers" of the land except those conferred by his own labor and

capital upon it, and can by no possibility put himself into a position

where he can _enforce_ any claim of his own for a return from any

"original powers" of any land-parcel whatever. The simple truth is,

and it illumines the whole subject of agriculture and its products,

that the value of land-parcels and also the value of the transient use

of them, or _Rent_, hang wholly on the onerous human efforts involved

in them, and not at all on original and gratuitous utilities. Science

has only to unfold the plan of God and its actual and beneficent

workings. "_In the sweat of thy face shalt thou eat bread._" All that

God furnishes to men in order to get a living and in order even to get

rich is Opportunity. The opportunity is ample. The call to a

partnership in Effort as between God and men is loud and constant. The

world with all its powers, free lands with all their utilities, the

change of seasons, the blessed sun and the blessed dew and rain, the

constant disintegration of rocks beneath the soil and the gradual

clothing with lichens and moss and verdure of the rocks above in

preparation for a new soil, and the wonderful chemistry of the vast

laboratory of Nature, all work night and day without fee or reward in

the service of mankind. But men themselves must not intermit their

labor. All values are of _their_ creation and maintenance. If they

cease or relax their labor upon land-pieces so only made valuable and

rentful, then will the value and the rent begin to slip away

inexorably, and no prayers and no regrets will avail to call them

back.

Now, then, since commodities of the second class in the cost of their

production must respond not only to the _current_ cost of Labor and

Capital in bringing them to market, but also something additional in

the way of Rent to the _past_ cost of the implement, the land-parcel,

without whose contributing agency present results could not be gained;

_Rent is the Rendering for the present use of a Valuable made such by

past Labor and Capital._ Land-parcels leased for agriculture; mines

and the access to them leased for the production of metals and

minerals; and forests whose growth has been permitted by the past

_abstinence_ of their owners; all properly yield a rent; because these

forms of capital, whose existence is due to past labor and capital,

are present contributors to products, whose sale must compensate not

only present labor and the use of current capital, but also the use of

these more permanent forms of capital long ago created.

A competent authority estimated in 1881, that the land-parcels of the

United Kingdom of Great Britain were worth £3,000,000,000; and there

were at the same time 6,000,000 of inhabited houses, excluding

factories and business premises and tenements renting for £20 and

under. Most of these lands and houses are rented by their owners to

the actual occupiers on the just principle explained above, inasmuch

as the lease-system is the prevailing one in that country. According

to the Census of 1880, there were 4,008,907 so-called farms in the

United States in that year. Most of these are held in fee simple, and

are tilled by their owners; but just so far as land-patches and

forests and mines are leased in this country, their products must

provide in their price of sale for current rents, as well as current

costs of present production. This is just as it should be, and just as

it must be, if Capital is to take this form of assisting the processes

of future production.

But this form of Capital, as well as all other forms of the same, is

perpetually wearing out, that is to say, is gradually losing its power

to contribute as at first to the present and future processes of

production. This loss is in the very nature of things,--in the very

nature of all Capital. The great Father never intended that His

children should cease from work. He has ordered all things so, that

they cannot cease from work, and continue to live in any comfort and

progress. Value, as we have already thoroughly learned, is not a

quality that can be put into anything _to stay there_: it is a

recurring relation of mutual services between man and man; and each of

these services of the three kinds involves recurring Efforts. Capital

is a form of Value; and, consequently, it cannot possibly take on a

shape not subject to the _law of diminishing returns_. This is

deductive proof. And precisely the same result is reached by

Induction. Men have noticed and recorded the fact at all times, and

have made provision for it in their pecuniary calculations, that tools

and machinery need to be repaired and then replaced, that the current

interest on moneyed capital tends to decline from generation to

generation in all progressive countries, and also that lands and other

forms of real estate so lose their productive and rental power unless

cared for in renovation that men migrate and emigrate in consequence.

How much Rent shall the tenant pay to the landlord for the present use

of the latter's old lands? Or in other words, how much shall be added

to the going price of the product on account of the diminishing return

due for the use of the old landed capital? This is a hard question to

answer: probably the hardest question that is ever asked in practical

Economics. Mr. Gladstone wrestled with it as complicated with a larger

political question in passing the Irish Land Bill of 1881. Another

honest athlete, Mr. Parnell, wrestled with it upon the same

parliamentary arena. Scores of able and practical statesmen in Great

Britain, and elsewhere, have struggled to reach a practical answer to

this question; and scores of able and theoretical economists in all

countries have striven to reach a theoretical answer to it. Most of

these answers have been inharmonious, and many of them contradictory,

with each other. The Land Bill of 1881 created a parliamentary

Commission, whose duty and authority it was, to visit the Irish

counties in person, to gain information in detail, to take sworn

testimony of all the parties concerned, and then to lift or lower

rents according to their discretion. The discontent of the Irish

tenants in general was considerably mollified by the action of this

Commission; while the debates and wrangles of the parliamentary

session of 1889, and the persistent agitations for Home Rule (an

agitation at once political and economical), show that the results of

the work of that Commission were not wholly satisfactory.

(a) It is easy enough to see why the solution of this general problem

is so extremely difficult. The new is mixed in with the old. The

result of the old labor and capital is a productive piece of land; the

current labor and capital is expended upon the same piece to make it

more productive; the same sort of thing is done now that was done

then, and the results of the two are now thoroughly intermixed; there

were original free utilities in soil and growths and deposits, but

these had and have no value and can never yield rent; the old labor

and capital improved the soil by clearing and drainage and

fertilizers, and made the growths and deposits more valuable and

accessible, so that even the old onerous was more or less transformed

into the original gratuitous; and now the new onerous, the fresh

cultivation and fertilization and betterments generally, in soils and

roads and buildings, are inextricably commingled with former

betterments of the same general kind and with the original free gifts

of Nature. No wonder the Commission of 1881 found difficulty in

determining what was what and which was which! No wonder that Irish

tenants on long leases quarrel with their landlords about the

betterments, how much is new, how much is old! It is clear, that when

the lease is ended, the landlord ought to compensate the tenant for

all that portion of the latter's betterments, which is not already

worn out; it is equally clear, that the tenant ought to be willing to

pay a fair rent for the use of the unexpended betterments of the

landlord and his predecessors; while there is room and verge enough

for endless disputes between them as to the respective amounts of

these, and consequently as to the amounts of rent and of its

remissions.

These difficulties and intricacies do not belong to the _principles_

of the Science of buying and selling, which are in the main clear and

certain in their action, but are incidents of determining in certain

cases _what that is_, which is bought and sold. Parties in interest in

all kinds of buying and selling are sometimes compelled to go to the

courts in order to have the Law decide what their respective rights

are as buyers and sellers; but this is no fault of Political Economy

as a science, or of trading as an art; two men in all cases make their

own bargain, according to their own estimate of the respective

rendering and receiving of each; if the uncertainties of language, the

misconception on the part of one or both of the terms agreed upon, and

the misapprehension of some of the circumstances of the case, breed

confusion and litigation, all this cannot be justly charged to the

science of Political Economy.

Nevertheless, it is into these incidental intricacies and

uncertainties, that Henry George's now famous theory of landed rents

and the taxation of them, strikes its roots. Instead of building his

structure upon firm and open ground, so that thoughtful men can see

that his basis is solid and scientific, Mr. George dashes at once into

a thicket and lays his foundations with quickness and assurance where

all is dark and doubtful, or at best where all is rather incidental

than fundamental and demonstrable, and pretty soon displays a

superstructure that appears attractive both without and within,

through whose airy halls he knows how to conduct to their delight the

credulous and discontented, and on whose walls hang plausible pictures

calculated to invite and hold the attention of the masses. Let the

perfect integrity and rhetorical ability of Mr. George be freely

conceded; let it be freely conceded also, that he teaches in his books

and lectures a great deal of vastly important industrial truth in a

popular way so as to accomplish great good, such, for example, as the

imperative need of greater simplicity in taxation, and the

indisputable right of the people to their liberty in buying and

selling; yet it must at the same time be owned, that he has never yet

found out exactly what _Value_ is in general, consequently what are

the causes of value in lands, and what are the nature and grounds of

Rent. Something more of patient and radical analysis at the outset,

and of logical and scientific unfolding afterwards, would have made

Henry George one of the chief benefactors of his age.

(b) It is also very easy to see, that the current price of produce,

that is, what is gotten in return for the sale of what is gotten out

of the land-parcels, must have a dominant influence upon what can be

paid as rent for the use of the parcels. Unless the return from the

produce be sufficient to reward at current rates the present labor and

capital employed upon the parcel, the parcel will not continue to be

cultivated at all, otherwise men would act without a motive for

action, which they never do; unless, therefore, the price of produce

be more than high enough to repay current wages and profits, there

will be nothing left for Rent; and, consequently, the amount of the

rent that can continue to be paid for lands will be _the difference

between the going price of what is produced from them and the current

expenses of cultivating them_. Here, as everywhere else within the

domain of Exchange, Competition exerts its beneficent action. If one

dealer, or ten, endeavors to put a price upon the produce more than

enough to pay current wages and profits with a fair margin for the

diminishing rate of rent, there are a plenty of others, dealers in the

same grade of produce, who will be content with a fair return for

present and past expenditure of labor and capital; and the action of

these will effectually debar the others from exorbitant rates. The

price of produce, accordingly, under free competition, is the divinely

appointed regulator of landed rents. It regulates also, though more

indirectly, the current rates of wages and profits in agriculture.

Very different from this is Ricardo's doctrine of Rent. He makes

everything turn on the Cost of Production of the Produce, which is

Effort, ignoring the ever-varying demands for the produce, which is

Desire. His doctrine, too famous and too long received for us to pass

by in this connection, though now superannuated, was for substance,

this: there are some lands in every country whose produce just repays

the expenses of cultivation, and consequently yields no margin for

rent; and the cost of production on these rentless and poorest lands

under cultivation, will determine the price of the produce; and as

there can be but one price in the same market, the produce raised on

more fertile land will be sold for the same price, and this price,

besides paying the cost of cultivation, will yield a rent rising

higher according as the land is more fertile; so that the rent paid on

any land is always a measure of the excess of productiveness of that

land over the least productive land under paying cultivation; and

therefore, an increased demand for food in consequence of increased

population, and the higher price resulting, will force cultivation

down upon still poorer soils, or compel a higher culture for less

remunerative returns on the old soils, according to the law of

diminishing returns, which in either case will raise the rents on all

the soils above that grade that just repays the expenses of

cultivation; so that it is the sole interest of landlords, as such,

that population should be dense and food high, their interest being

directly antagonistic to that of the other classes of the community.

(c) Finally, in this connection, it is easy enough to see, what were

the motives on the part of the landlords, and what were the results on

the part of the masses, of Great Britain, in putting on and keeping on

the infamous Corn Laws, so-called, which were repealed forever in

1846. The Corn Laws forbade the importation of foreign cereals under

heavy pecuniary penalties. The simple purpose of the landlords then

governing England was to raise the price of their grain by shutting

off Competition of foreigners by means of these prohibitory

tariff-taxes. It was Protectionism pure and simple. It was designed to

raise the price of bread to the masses of their countrymen, and often

did raise it to the point of their starvation. But we have just seen,

that the higher the price of the produce, the wider the margin for

Rent for the lands that produce it. The Corn Laws of England enriched

the landlords at the expense of all other classes and to the

starvation of many of the poor. As has been well said, this was the

most successful of all the many expedients that have been tried, "_to

fertilize the rich man's land by the sweat of the poor man's brow_."

The words of Daniel O'Connell, spoken Sept. 28, 1843, in his

parliamentary fight against the high-tariff Corn Laws, were surfeited

with truth and righteousness: "_But what is the meaning of

'Protection'? It means an additional sixpence for each loaf; that is

the Irish of it. If the landlord had not the protection, the loaf

would sell for a shilling, but if he has protection, it will sell for

one and sixpence. Protection is the English for sixpence; and what is

more, it is the English for an extorted sixpence. The real meaning of

'Protection,' therefore, is robbery,--robbery of the poor by the

rich._"

At the present moment and for twenty-five years past, the public laws

of the United States ostensibly relating to Taxes, have had an immense

influence upon the value and rents of the agricultural lands of the

country to depress them; because these laws have put up nearly or

wholly impassable barriers to the coming in of those foreign goods,

against which the farmers would naturally and profitably and

inevitably have sold their surplus agricultural produce; by destroying

the foreign market for farm products, these laws do in effect destroy

a large part of the value of the farms of the country, and of what

would otherwise be the rentals of a part of them; the Constitution of

the country expressly forbids any taxation whatever of Exports, but

these laws have precisely the same effect on the value of farm

products if they were themselves forbidden to be exported, because

those goods for which these would be otherwise exchanged for a profit

are forbidden to be imported. _A market for products is products in

market._ Thus these wretched laws lower the price of farm products,

and consequently the value of farms and of their rents, and impoverish

the farmers who are nearly one-half of the entire population of the

country.

While these paragraphs are being written, comes the intelligence of

the formation of the "North American Salt Company," whose purpose is

in their own language "_to unify and systematize the salt interests of

the United States and Canada_," and to this end "_arrangements have

been completed for the purchase and control of nearly all the existing

salt properties of the North American continent_." As this is a fair

instance out of some thousands, in which a tariff-tax has the designed

effect to lift or lower values which deeply concern the people, let

us look at it for a moment. On the average of the past twenty-five

years the tariff-tax on salt has in general doubled the cost of that

necessary of life to the whole people of the United States. When

Canada had no such tax, American makers of it sold salt sometimes to

the Canadians 40% less than they would sell it to their own

countrymen. On the basis of this United States tariff-tax (it would

never have been dreamed of without it) this new company comes forward

with a scheme of international monopoly to control in their own

interest the price of a prime necessity of life. They propose to issue

stock and bonds to the amount of $15,000,000, with which to buy up

"the existing salt properties"; and they frankly avow in the

prospectus from which we are quoting, that profits of $2,000,000 a

year on their capital are justified by the present outlook. Whence are

these immense profits to come? Out of the pockets of the masses of the

American people bound hand and foot in the meshes of a legal monopoly,

which they themselves allow themselves to be ensnared in! In a similar

but more outrageous way, are bound up at the present moment in the

secret so-called "Trusts" about forty more of the necessaries of life;

each one of which, unless it be the "Standard Oil Trust," has its

footing in a so-called "protective" tariff-tax, and would collapse

instantly on the repeal of that!

It was necessary in order to complete our study of the second class of

material commodities, namely, those produced from valuable and rentful

lands, to glance in passing at the frequently disturbing effect on

these, aside from their cost of production, of sinister laws plausibly

imposed upon an unsuspicious people in the interest and at the

instance of a privileged few.

_3._ It only remains in this chapter, devoted to the discussion of

material Commodities in their three economic classes, to conclude

with a glance at the third class, namely, those material valuables

that are obtained from free and unowned sources, such as masts cut in

the wilds of America on both oceans two and three hundred years ago,

and fish caught on the Banks of Newfoundland, and furs gathered to

such profit in the north by the Hudson's Bay Company, and salt

evaporated in the tropics by a free sun from old ocean's brine.

These, and all such things as these, have a cost of production

determined only by the cost of present labor and capital, and

consequently a grade of value determined only by present Demand and

Supply, unentangled for the most part by questions of rent and prior

claim and taxation and nationality. All these things, accordingly, are

relatively cheap, except as the element of Scarcity, and on that

account of strong Desire, may sometimes come in to enhance the value.

No man can tell the time exactly when French fishermen from the coasts

of Brittany ventured over to the Banks of Newfoundland in their frail

barks for the abundant cod in those waters, and went back home again

at the close of the season freighted with plenty of a free and cheap

food for their families and countrymen; or when it was that rude men

calling themselves English followed these in their western track for

the same general purposes, to become thereby hardy seamen on deeper

seas, such as those who gained long afterwards the naval victories of

Nelson; and we have all read in the fascinating pages of Irving the

ventures and adventures of John Jacob Astor, the attraction of free

furs in the Northwest of America, the hazards and the history incident

to obtaining them, and the immense profits gained by their sale in the

markets of the old world.

FOOTNOTES:

[3] Baines' History of the Cotton Manufacture, as condensed and quoted

in Walpole's History of England, Vol. I.

[4] Charles Knight's History of England, III. 292 _et seq._