Land Rent

R.F. Dyson

[Chapter VI from the pamphlet, Natural Prosperity, 1931]

Carlyle truly said that there were only three ways in which wealth could be obtained besides producing it. A man could borrow it, beg it, or steal it. We have shown how wealth is produced. When it is borrowed, it has to lie returned in goods or money which will involve production. A Rift will account for begging. We will now show how it is stolen, legally of course but stolen nevertheless.

When production is carried out by co-operation, as in the division of labour, wealth is not the only thing which has a value. Under such conditions land bears a rental value. This rental value is not due to individual effort, and it is important to understand the matter thoroughly.

Two men chopping wood and expending exactly the same amount of effective labour each, would produce the same amount of firewood each, provided the trees were of equal hardness and size. That is, provided the opportunities of expending their labour were equal. If one man chopped soft wood and the other chopped hard wood the amounts of firewood each would gain at the end of the day would differ. And assuming that both kinds of wood fetched the same price per ton as firewood, the reward gained by him who had the superior opportunity would exceed that of the other, although each wood-cutter expended exactly the .same amount of effective labour.

Wealth is the offspring of raw materials and labour. Nature in her great variety of forms thereby presents to labour various opportunities for engaging in production. These opportunities vary in favourableness. Because man socks to satisfy his needs with the least exertion, opportunities which require the minimum addition of labour in order to produce wealth are considered more desirable than those requiring a greater addition of labour. Thus competition will arise for exclusive occupation of the more favourable opportunities which are open to labour.

The value which will be placed on the privilege of exclusive occupation of any opportunity will be the difference in the amount of wealth labour would gain through its use, and the amount an equal expenditure of exertion would gain from the use of the least favourable opportunity. It will be noted that if the sum of all differences was divided equally, opportunity would be equalised. This difference in value, which arises solely on account of competition for the privilege of exclusively using a natural opportunity more favourable than another, will be reflected in Land Values. The annual value of a block of land is termed Land Rent, or is commonly spoken of as the Unearned Increment of land.

When society was in its infancy people for the most part lived directly from agricultural and pastoral pursuits. At that stage, man had only increased his powers to the extent of a few crude implements, and consequently production was limited. Needs being restricted to food, clothing, and shelter, the difference in value of opportunities was simply the difference in natural soil fertility.

Although man's characteristics closely resemble those of other animals, the donkey for example, there is a difference. The latter's needs are the same now as they were thousands of years ago. Their satisfaction then as now constitutes our near relative's activities in life. Mankind's activities are likewise restricted to the satisfaction of its needs, but whereas the donkey's needs remain the same, those of man are continually increasing. When quantity is gained, we then desire quality. When that is attained, or before for that matter, there is always the endeavour to extend our natural powers in improved implements, machinery, etc., and thus free ourselves from the necessity of continuous toil. The driving force is always the desire to satisfy needs with the least exertion. In the leisure thus created, man instead of swishing flies like the donkey commences to observe the universe around him. His intellect grows whilst his body is at rest. Consequently new needs continually arise, so that his activities begin in another direction. It does not follow however that primary needs have no longer to be satisfied, in that respect man never changes. The new needs awaken new opportunities, which had previously remained dormant. Nature having provided the raw materials necessary for the satisfaction of all the needs of her children.

Thus when the division of labour extended with the growth of our infant society, giving rise to extensive trading or exchange, opportunities for engaging in this new mode of production made their appearance as well. Localities situated near a seaport, for instance, offered the most favourable opportunities for engaging in trade. The value of these opportunities would be reflected in the value of land; not because of its fertility for agricultural purposes, but on account of its situation or site value. As the village grew into a town or city, roads, railways, trams, and other community services, would form part of the growth. The value of these would be reflected in land values also; being an addition to previous site value, or, in the case of adjoining agricultural land, to its fertility value. The continual addition of site value to natural fertility value would eventually obliterate the difference of the latter. Poor _soil adjacent to a market returning as much to the farmer as richer soil some distance removed, owing to lesser cost of transport.

However the important point about the rental value of land is that, it is a reflection of the value of the privilege of exclusively occupying a natural opportunity for engaging in wealth production. The difference in favourableness of natural opportunities is awakened by social growth; that difference constitutes the value. Land Values therefore are purely a community product.

It is as well to note also that the value of land in a city, for example, is not produced by the activities of the city alone. All secondary industries are rooted in primary industries. The farmer contributes to the city land values, and the man in town to the value of rural land. The land values of Australia are due to the activities of the whole of the population of this continent.

Where a community exists the site values, figuratively speaking, will be under its feet. 'Where population is densest the site or rental value per acre will be highest. It will remain unimpaired even should the buildings, etc., be totally . destroyed. When San Francisco was destroyed by earthquake and fire, the site values were the same the day after the catastrophe as the day before it. The opposite effect was produced some thirty years ago at Coolgardie, W.A., when the population deserted the site for the new gold fields at Kalgoorlie. They took the site values with them and left the improvements, the best of which could be rented for a few pence a week. Vacant blocks could be had for the asking.

We have previously seen that what constitutes a title of ownership to wealth, or its equivalent in money, is the fact of having produced or earned it. There is no other ground whatsoever on which claim can be made to ownership; except that of free gift, which is merely n transfer From the producer. The rental or site value of land must therefore belong to the community since it is the sole producer of it.

It is an obvious fact that without the opportunity to labour man would produce no wealth. It is also obvious that a producer or set of producers co-operating must have exclusive occupation of an opportunity. Two farmers cannot both sow a crop on the same piece of ground at the same time. Nor can two buildings occupy the site for one. Further, none will engage in production unless they feel sure they will be left in possession of their product. Thus exclusive occupation and security of tenure of opportunities are also essentials to wealth production. Since opportunities can be utilised only through land, exclusive occupation and security of tenure of portions of the earth's surface are necessary factors in our social structure.

Mankind reached those conclusions through the use of its common-sense. However, having progressed so far, the next step was to turn common-sense out to grass.

The notion is still prevalent that exclusive occupation and security of tenure of an opportunity can be assured only if land is treated as an article of wealth like a kettle. That is the quick-sand on which we are endeavouring to build our social structure.

Private ownership of land may give exclusive occupation, to the occupier, who need not be the owner, but it happens to be the basic factor which makes security of tenure for the majority an impossibility. Security of tenure can be assured only if a producer is left in the full possession of the product of his labour, either in the intermediate form of money gained through the primary exchange, or the goods or .services he purchases in the final exchange. That is, security of tenure rests on the observance of the right of private property. The first step in that direction is to establish clearly what can and what cannot be made private property.

Title of ownership of wealth or its equivalent in money rests solely on the fact of the owner having earned it through exerting his powers in legitimate channels. There is no difficulty in establishing Jones's right to the ownership of the kettle which is used in his household, or to the money he earns as an engine driver. The man who made the earth however never has' existed. Land therefore cannot be owned in the sense which is attached to the ownership of wealth, if mankind laboured for the whole of eternity, it could not create one single atom of matter. With tin- aid of natural forces it can only change matter into different forms, which process is wealth production. The Authorship of the universe remains anonymous. There can be no ground therefore to a claim of private ownership of the earth or any portion of it. We can only assume that the earth is a free gift of the Creator to the whole of mankind. Further, since Nature knows no favourites, it follows that it is a gift to all generations in equality; from which we deduce the right of equality of opportunity for each to exert his powers. The failure to observe those simple facts is what caused the downfall of every previous civilisation, for economic law is as inexorable as death.

It is just as impossible to secure to each his full earnings and at the same time to treat land as wealth, as it is to make an omelet without breaking the eggs. For first of all the private ownership of land means the private collection of its rental value. Since the rental value, which is always collected in money, is purely a community product, incomes gained through its private collection are as morally indefensible as incomes gained through common burglary. Many of us manage to humbug ourselves about quite a number of things. We can humbug ourselves into the idea that there is a vast difference between taking community money and searching another's pockets because the former happens to be legal, but we cannot humbug ourselves into the belief that we are enjoying a pleasant time here on earth. Consequently brains will have to be brushed.

An act of theft is morally wrong because it enables some to live on the labour of others. The private collection of land rent is worse than burglary because it is a continuous and increasing theft, and also it keeps opportunities unequal. That is economically wrong because incomes gained in that manner are not limited by the natural productive powers of the recipients, and consequently a few people receive incomes far in excess of their needs. Further, it causes an unnatural subdivision of wages, which means that no producer can receive his full earnings. We will now proceed to explore those sub- divisions.