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Chapter VIII.

Another Chat with the Socialist.

"Wonderful! You must be a magician, exclaimed the Socialist, as soon as the last deputation withdrew.

"I can hardly believe that these people have surrendered their capital so meekly otherwise than under the influenc[unclear: e] some magic. Seriously have you hypnotised them?"

"It would almost seem so; but the only magic I have made use of is the application of natural principles in the regulation of the relations between man and man."

"That hardly explains why such a selfish set of people [unclear: a] most capitalists are should surrender the power they ha[unclear: d] robbing the community of workers."

Because they are selfish, and because, having no longe[unclear: r] profitable monopoly, they do not care to provide people with water. You speak of them as 'capitalists.' In a sense, they were capitalists; but how much do you think their real capital amounted to?"

"Millions. Many millions. They were kings—water king.

I smiled, and handed him the estimate I had just receive from the surveyor, which gave the total of the waterworks [unclear: a], £36,582. He looked at me in amazement.

"This," I said, "is the full value of their plant, buildings engines, pipes, and meters, all included. For land, including river, you see, we need not pay, because its value—its marks value, understand—is gone."

"And what has become of the rest of their capital?" he asked.

"The rest you can get at the price of waste paper, since it is nothing else, and never was anything else. For that which you still call 'capital' consisted of nothing but parchments and papers—the bogies of which you and your school were [unclear: s] terribly afraid."

"But these shares represented capital?"

Very little indeed; and so far as shares represented real capital—that is, wealth in some form or other—it was harmless But such shares as those of the water company, or the title deeds of land, represented no existing wealth at all, but weak to be produced in the future. That is, the holders of such deed had a lien on future production."

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"I do not quite follow your meaning."

"I will explain, then. Supposing I owned yon narrow foot-path leading down to the river or lake, and that this enabled me to levy a toll on every passer-by before I allowed him to I quench his thirst. You, seeing I am doing a profitable business, propose to buy me out. I agree to sell—but what? Not the toll I have already collected, but the opportunity of levying toll in the future. I speak to you thus: My revenue from this river is £100 annually; but the city is growing, and this the only source of water for miles. As people increase, so my toll money must increase. Hence I want you to pay down equal to what I think I might be able to collect in the next twenty-seven or thirty years; or, in round figures, I require £2,700 for 'my property'! This at once constitutes me a 'capitalist' of that amount; yet the only real capital, that is 'wealth' in the shape of human labor, may consist in a gate to lock out the people. In the course of events natural opportunities are declared I common property, and the revenue derived from them goes to the State. What offer would you then make me for my property?"

"None at all; excepting, perhaps, a few shillings for your wooden gate," he said laughingly.

"Precisely. And that explains why the shares of the water company have fallen from £138,000 to £13 10s. You know now what has become of their other capital. In other words, it had no existence except on paper. And once the system which has sanctioned blackmailing is abolished, and the toll-gates which debarred mankind from Nature are pulled down, these papers are powerless, and require no further Act of Parliament to make them harmless. You will clearly understand, of course, that by real capital I mean something that is due to human exertion—accumulated labor; that is, wealth to which its rightful owner is entitled by virtue of his exertion."

"Well, all wealth is due to labor, for that matter."

"No, it is not. This is a great and fundamental error on your part. So far from this being true, labor has the smallest share in the production of wealth."

"What?" he asked in surprise, "wealth not due entirely to labor, when you yourself admit that capital itself is only accumulated labor?"

"Oh, bother capital! It is a perfect Mrs Harris in Political Economy. The two factors in the production of wealth are labor and the forces or raw products of Nature. Without the latter the former is absolutely impotent. Without the former but little is to be had. These two factors then—Nature and human labor—co-operate everywhere, though in variable proportion in different localities, in the production of these commodities men require. These commodities you may call wealth, or capital, page 36 or whatever else you please. Where Nature co-operates [unclear: m] freely, men are well off. Where Nature's share is less, [unclear: me] are worse off. But in most cases the greater part is don[unclear: e] Nature. Woe betide the people who are so situated that [unclear: la] has to do the greater part of the work."

"Do you know such a place?"

"Yes. Aden, for instance, which is lying in a desert. Their very firewood has to be fetched in small bundles on [unclear: came] from a distance; and their drink-water has to be distilled from sea water, and is sold by hawkers from house to house as [unclear: m] is in our streets."

"But how does that bear on our question?"

"It has an important bearing on it. You and many other were always clamoring for 'the fruits of your labor.'"

"Of course, and so we are still."

"Well, if you had 'the fruits of your labor' only, you would be worse off than the people in Aden; for these folks hav[unclear: e] least the sea-water for nothing. Wrhat you should have asked for is free access to Nature and an equal share in the bountie[unclear: s] Nature. The fruit of your toil would then be yours as a matter of course, since then no one could enslave you."

"And you think you have effected this with the single tax?"

"Certainly, For whatever is due to Nature now goes to the community, and the expenditure of the revenue thus derived benefits all alike. And all having an equal interest in the spending, care is taken that it is usefully employed. All being thus placed on an equality as regards the opportunitie[unclear: s] production, no one can lord it over the other. In other words now a truly free contract between buyer and seller, employe and employee, is possible."

"But still there will be some more skilful than others, and thus produce more."

"Yes; and these are the very men we wish to encourage to be emulated by the others. What we have achieved by the single tax is this: The road is now open to all, and everyone can run as fast as he pleases. The fastest runner will get the highest prize, but no longer at the expense of those less gifted Nor can he, by being the fastest runner, prevent other from reaching the same goal, though perhaps a little later. He can shut no gate, and erect no barriers. The road is to remain open to all and forever. There is a prize for everyone in the race, and the magnitude of the prize is determined by everyone for himself. Blanks there are for those only who are too lass to take part in the race."

"Answer me another question. Why is it that you hav[unclear: e] taxed the Water Company for the use of the river? For according to your view, this is a natural opportunity."

"It is. But we only charge for natural opportunities that are page 37 monopolized. These people do not now monopolize the water, but supply it to whosoever wants it. They simply act as carriers, and anybody else can do the same. If we charged them for the water, would we not tax those who use it?"

"Yes. And since the water is used by a portion of the nation only, whereas it belongs to the whole, should not those who enjoy it pay for it?"

"Oh, that is what you mean. There you are right. But then the people do pay for that already; since whatever advantage there is in being near a river attaches to the value of the ground occupied."

"I hardly see your point."

"And yet it is plain enough. Suppose there are two blocks; of land in every respect alike, save that the one is near the river, whereas to the other water has to be conveyed by some means. Say now that this would mean an annual expense of Would you not, in that case, esteem the former block of land worth by so much more than the latter?"

"That is my point."

"So that you would agree to take the latter block at £5 less rent only?"

"Yes."

"But the water being supplied, it will now be of equal value. So that if we charged for water in outlying districts the ground rent would be by so much less. But both water and ground rents belonging to the State, there is no need for separate charges, while it simplifies and cheapens the collection."

"Yes, you are right. It is very much the same as if one hotel charges half a crown for bedroom and eighteen pence for service, while another hotel charges four shillings inclusive. So far, then, theory is entirely in favor of the capitalists."

"In favor of the capitalists?"

"Very much so. You have remitted all their other taxes, and now do not even tax them for the use of the river. I must confess, however, that I am very confused about the whole matter, and not the least as regards yourself. I will be frank with you. At first I suspected you of collusion with the capitalists; but somehow they do not seem to be very grateful to you. And yet——"

"And yet?"

"I hardly know what to say. I am now satisfied as to your good intentions; but yet why are you so strenuously opposed to a Property or Income Tax?"

"For various reasons. In the first place because it is against the principle of our Constitution—that is, it is a direct interference with the liberties of the citizens. In the second, because such taxes fall on industry, and to that extent check or, at all events, hamper production."

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"These cannot be your only reasons, nor even the weightier. You cannot mean to say that by taxing the millionaire, who has acquired his wealth at the expense of the workers, you would check production. Why not recover at least a part of what they have stolen from others?"

"By a property tax?"

"Yes."

"Listen, and I will try to clear up the matter for you. But first I would draw your attention to the essential difference between the production of industry and the raw products of Nature—or, briefly, land. Suppose I owned a piece of land which yielded me an annual income of say £5, and that the current rate of interest was five per cent. You know that the selling value of such a piece of land would then be £100."

"Of course."

"Next we will suppose that a tax of ten shillings in the pound is imposed on ground values; so that, after paying this tax, the next revenue from the said land would only be £2 10s, then——"

"Then your land would be worth at the outside £50. And if the tax is twenty shillings in the pound, its capital value would be gone entirely. That you have already demonstrated whole sale; but it does not bear on my contention."

"I'll show you that it does, if you will be but patient. Let us now see how a property tax would work. Instead of one hundred pounds' worth of land, say that I possessed one hundred pounds' worth of coal, or bread, or any other industrial product, and that you imposed an all-round property tax of ten shillings in the pound. What would be the result of that? You are silent. Well, then, I will answer the question myself. My coal would at once be worth £150. But that is not all. In selling the coal, I put on my profit of say ten per cent. This, before the tax, would have amounted to £10; but after the imposition of the tax I would get ten per cent, profit on £150 instead of on £100, or £15 instead of £10. Who do you think would gain most by this transaction—the workers on the capitalist?"

"Go on!"

"This, then, is one of the reasons why I am opposed to taxing the products of human labor under any pretense whatever. Before giving you any of the others, I want you to realize and commit to memory this stern fact: A tax on produce always falls ultimately on the consumer, and that because a tax on any artificial commodity always enhances the price of that commodity."

"That's true enough. The Custom Duties always increased the price of commodities, and their burden fell upon those who consumed them. But is not the same true of taxes on the raw product?"

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"Confining the term raw product to the raw material of Nature—i.e., land—No. For if you tax land, people are bound to produce in order to be able to pay the tax, or else they must give up the land to others to use. And since a tax on land values absorbs only the difference of the values of the different natural opportunities in use, its effect is simply to place the occupants of land of different qualities on an equality. That is, the opportunities of production would be the same to all, no matter what may be the difference in the quality of the land each occupies. But the value of commodities produced will be determined by their cost of production; that is, by the amount of labor expended. Hence, if you tax the manufactured article, you will thereby enhance the cost of the commodity; and if intending purchasers refuse to pay the increased price, any such commodity will cease to be produced."

"And your other points?"

"We have not yet finished with the first. You object to 'capital.' Now I have already drawn a distinction between real and fictitious capital: the former being represented by accumulated labor, the latter by parchments. In the one case you pay to recoup past labor—as when you pay for the use of a spade, a plane, or a house; in the other you pay for access to Nature."

"I understand that distinction."

"Well, then, let the plow represent ten days' labor (or its equivalent in gold), and the tax on it one day's labor—"

"I see your point. The return would then have to be altogether eleven day's labor."

"Exactly. Then note well the second economic principle. A tax on land values destroys fictitious capital, while a tax on industry creates it. This may help you to understand why those gentlemen would prefer to have their property taxed rather than the land, and why the land tax has made waste paper of their scrip. There is yet another well-ascertained economic principle bearing on this point. Every tax that falls on industry, no matter in what form imposed, can be, and always is, shifted on to the ultimate consumer. But a tax on land values cannot be shifted, because, as above explained, it only places the occupants of different quantities or qualities of land on a footing of equality."

"I don't quite see that."

"And yet it is plain enough; but let me give you a concrete case. Supposing two farmers, A and B; the one possessing land that yields say 20 bushels of wheat, while the other land, with an equal outlay of labor and capital, yields 30 bushels. Now if we taxed the latter 10 bushels, this would simply equalise their respective gains. Each would now retain a net produce of 20 bushels. And manifestly the taxed farmer could page 40 not put an extra price on his wheat, because no one would pay him more for his wheat than they would to the other. But supposing we impose a tax of is per bushel of wheat—"

"That will do; I can see it now."

"Then we can pass on to the next point. My object being to prevent people reaping where they had not sown, I have, of course, to destroy all fictitious capital; for then they could only demand service for service and value for value. But had I only imposed half the present amount of land tax, I should have abolished half only of this fictitious capital, leaving the lucky owners still in possession of half of their privileges. And if, to supplement the revenue, I had imposed an equivalent tax upon property, I should have re-created thereby as much fictitious capital as the land tax had destroyed; that is, things would have remained pretty much as they were before."

"Good! You have now made it impossible for people to rob their fellows in the future. But how about the millions they possess already?"

"Good Heavens, man! Millions of nonsense! Have I not already made clear to you that these millions existed on paper only? That the wealth of these millionaires did not consist of what they actually possessed, but in the share of the annus produce they could command? Take any millionaire you please, and make an inventory of his present possessions. Two or three costly palaces, now rather expensive luxuries, with no rents coming in and a heavy ground tax to pay. Some fine furniture, a few ornaments, a few pounds of gold and silver, and a cellar full of scrip. How long can these perishable things last at best? And what harm can they do to anyone while they do last What better means of 'getting at them' could you possibly devise than preventing them from plundering, and make thee pay the full value of any privileges they wish to retain—so long as the few gimcracks in their possession will enable them to defray the expense thereof?"