The Unearned Increment.

A great deal has been said and written about the unearned increment. A few still continue to talk about it. Many in this country (New Zealand) who have found time to read over John Stuart Mill, put forward this doctrine of his with great fervour, particularly if they have little or no land it may be likely to affect. As a Scotchman I am very proud of Mill, but doubt sometimes if it is necessary to pay much heed to those who strut about among us under a few of his dingiest plumes, borrowed for the occasion. With Mill's life there are some melancholy facts, and with his death also, but he will ever be known as one of those teachers of a science for which Scotland is famous. He found political economy not ill-understood, but its truths not too well arranged. He brought his great breadth of intellect and generalising power to bear on them, and placed them and left them in an order and frame in which they still remain. But in a field so wide some minor page 111 studies went half-scanned. No man can own sufficient acumen to fully and unerringly pursue every truth and its bearings in that field. Mill, indeed, admits that he wrote his work rather hurriedly, and he did not consider it his best one. He is, however, the greatest in another and kindred science, which alone certifies him unsurpassed in his day on the arena of mind.

It is now more than 30 years since Mill wrote these words. I do not think he was the first to give birth to the idea, for Dr. Adam Smith proposed the taxation of ground rents in towns, but certain it is that though enforced in these and other words with no little plausibility and care, it has made very little progress and produced very little fruit. The reason is manifest: for when enquired faithfully into, it is seen to be utterly worthless and erroneous. The following simple lines will, I hope, show this:—

1. When the land was sold and parted with, this claim was not advanced and conceded by the parties concerned. There were in ancient times certain burdens laid on all the lands of England, but this was not one of them.

2. If it is unjust of the landowner to demand this increment, why does the buyer pay it? The landowner uses no physical force, either by the civil magistrate or individually, to enforce the payment. Why should the civil magistrate be asked to interfere to keep the people from paying money which they need not pay, if they deem it improper?

3. To separate the earned from the unearned increment would be a most difficult work. On many properties the improvements manifestly exceed the value of both these increments; but there may be others in a similar case which do not show the fact so clearly. For instance, if 500 trees be planted with ordinary care and ability and only five of them grow, the landowner has a right to claim credit for the 495 dead, as well as for the five alive. Experience is worth money. It is not always what is seen on a farm that is costly; it is sometimes what is not seen. Governments have probably already plenty to do without interferingor meddling in a business so intricate as this. The amount of corruption, indeed, likely to page 114 result from the attempts at valuation would be more than balanced by any revenue likely to accrue from it.

4. But if land be taxed for the causes stated, then a good many other things will also not escape. The world is full of such unearned increments. If a hot wind rise in Australia, and raise the price of oats here, and a merchant has a large lot in store before the hot wind blew, the price will rise, and he will get an unearned increment upon which he should get taxed. Nobody can maintain that it was through his labours—were they ever so Herculean—that the wind rose. Again, if a strike takes place among the coal-miners, an increment may result to those who happen to have coal in store, and this not through their own labour, but through the idleness of others. It would not, however, be wrong to tax them on such an increment. When commodities fall in price from a contrary cause, the owners should, I suppose, be compensated. Men make money by lucky speculations, and receive it by gift and private bequest. This last increment should, apparently, be treated as if it belonged wholly to society, or nearly so; for if it be wrong for a man to receive money from a society unearned, it must be wrong also to receive it from his neighbour unearned. There is no compulsion in either case on the givers. The public protected the page 115 giver when he made the money; and the public, on this theory, have the best right to it when the earner passes away. In a word, the reason of dear land is because that it is scarce land. Therefore, other commodities, when they happen to be scarce, should have the increment resultant taxed. But this scarcity, be it remembered, results from the supineness of the people interested, and from their possession of wealth; otherwise they would seek new fields of enterprise, where land is cheap and abundant.

5. Mill takes it for granted that the rent of land constantly tends to increase; and it is of course on this basis alone that the doctrine is raised. I think, however, that the value and rent of land does not so constantly tend to increase. Kingdoms wax, kingdoms stand still, and kingdoms wane. Town sections once upon a time in Babylon, Meroe, and Carthage sold, no doubt, for handsome sums; now they would not be worth sixpence apiece. When the kingdom waxes, what guarantee does society give that it will compensate or repay the tax when it wanes? For the last 50 years, when the peace spirit has been in the ascendent, land, perhaps, in the greater part of Europe has risen in price. In Turkey it has not risen, perhaps, very much. In England just now it is falling. Were wars to break out and consume capital, land would fall; but even with peace page 116 continuing it would be a very hazardous speculation in England, in my opinion (and lard and property is as secure there as anywhere), to value the lands as they at present stand, and to agree to tax for an increment and to compensate for a decrement. The means of transport have been so greatly improved that lands may easily become more equal in value all over the world, raising Colonial and American, and lowering English and Continental—raising the New World and lowering the Old. When the huge steam ship, with her compound engines, carries wheat across the Atlantic for, I think, 7d. a bushel, comment is unnecessary on the effect of such action, both on land, labour, and capital, all over the world.

Moreover, we have famines, and the death of millions of farmers, sometimes from that cause. What is to be done in this case? Here not only increments earned and unearned go down, but the landowner himself dies of starvation. The fall here seems so dangerous and decided that society should compensate him to the third generation. Indeed, these famines which now rage, or lately raged, in many countries, among landowners as well as other classes of the community, show that land is not such a highly favoured friend after all.

6. The return from labour and capita! also rises page 117 in the ordinary course of social economy, and where true progress is existent. This increment would seem to belong to the State also. The condition of the working classes has greatly improved. Once they were slaves; now they are free, and get very high wages also.

Therefore I do not see why, when the wages of labour rise, land should not also to some extent rise with it. Riches are the result of labour and natural resources, and the landowner has worked as well as the rest of his countrymen. Even if there are idle landowners, there are also idle merchants and capitalists. If there be a reason why the landowner's profits should be kept at a certain level by law, and his unearned increments alone attacked, these facts will need to be remembered. Where true progress exists, and where the labourer takes his labour to the best field, and the capitalist does the same, land, with its increment even, will not give so much higher a return than labour or money invested in other ways-If people choose to coop themselves up in a small island like Britain, progress is partial and unsound, and the case is altered, and the landowner has some advantage. But the cause of the advantage is not from him, but from the stupidity of the people themselves. When this stupidity slowly or quickly vanishes, as it is now doing, the land there will fall, page 118 as it is now doing. A nation, I maintain, can generally only be said to be truly progressing when its people are moving towards an equality in weight and wealth with an idea! standard where a proper proportion only of civilised population is contained in it. When the too-heavily populated England and Ireland commingle with the too-lightly populated America, there is progress, as the benefits are undoubted to both. True progress is, indeed, where the land all over the world is occupied and laboured on in an equal and equally-increasing volume and economy; and not, as now, in patches where we see masses of population in the most absurd holes and corners of the earth, growling at each other, or dying of want. Were people to believe this, and which would result in an emigration which would bring all the lands of the world into a market at once, land increment would not be so considerable anywhere or in any society. As it is, the rise in the price of land is the natural and proper force for driving population from over-populated, or comparatively over-populated countries, and is thus a force for good.

It may still be urged that men will grow more numerous in many lands as certainly as they will in few—that there will then be an even general, and certain increment, instead of as now, an uneven and page 119 partial one—that the increment will then be spread widely, thinly, and equally, and that more so than now; but that it will still tend to grow thicker. This is possible. But I think it will thicken so slowly as, taken with the other reasons, not to be worth noticing. Man will not so easily over-crowd the world. He has many destroyers, both without and within him. There is also a scientific energy and advance in this age which may place the day of scarcity and increment a long way off.

When one looks at the map of the world, and sees the vast tracts of uninhabited country, it seems very premature to impose such a tax. The land-owner, unless backed up by external stupidity, indolence, or more probably cowardice, could not carry his head so high under such conditions. It would seem, if anything in the world could be had cheap and easily, it should be land. For, save around the coasts of continents, and on a few islands, the world is still all but a desert. One is inclined to propose that, if any tax is necessary, it should be laid on those who have no land, because they did not go forth and seek new habitations. The land-owners should be rather encouraged to demand high prices, with this possible policy in view.

The question, on reflection, where this and page 120 several other questions in economical philosophy lead up to is: Shall it be Communism, or no? For if the civil magistrate is to claim for the people every unearned increment which the individual now claims as his own, the people may at once throw their earned and unearned wages into the same basket, and share as far as they can alike.

1883.