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The Pamphlet Collection of Sir Robert Stout: Volume 71

Chapter XXIX. — Four Objections to Giving Compensation

Chapter XXIX.

Four Objections to Giving Compensation.

There are several reasons which Single Taxers consider sufficient to warrant their refusal to give compensation. The first is that the laws which have enabled individuals to secure the perpetual ownership of page 61 land, in such a way as to monopolise the ground-rent fund, were made by legislators in their own interest. The principles of New Zealand law are derived from the mother country, and it has therefore been necessary to refer to her laws.

This was done under a former heading, dealing with feudalism, and need not be repeated. Many political and social improvements have been made since feudal times, and Single Taxers do not believe very much in "the good old days," of wish to return to them. But it is of great importance to point to a sound principle which was acknowledged and acted upon then, but which has gradually fallen into disuse in modern days. This principle was that land could only be held on the condition of the holder rendering service to the State. It formed the sound core at the heart of things then, and it must be revived and put into practice again. It has been shown that this has been reversed in England. The landowner receives the ground rent (the modern form of payment, which answers to the ancient personal service), but he only pays a small share of the taxes in common with his tenants.

It is superfluous to inquire who made these changes. It is sufficient to say that the landless people did not make them, and it is safe to assert that they never consented to them, seeing that their opinion was never asked. In the most advanced countries, politically, the landless people are only just acquiring equality of voting power, and are still groping after correct economic principles, preparatory to using the newly-found power beneficially.

The anomaly of omitting "service" as a condition has formed the basis of New Zealand laws. Land has been bought without the condition being attached that perpetual service should be rendered for it to the community. The freehold title carries with it the legal right for the owner to absorb all the future value of ground rent. Coin has been paid to the State as the consideration. This has already been admitted, but is repeated here for the purpose of asking if New Zealand legislator, as well as English ones, have or have not made land laws in their own interest, and without consulting the landless part of the community? The answer must be in the affirmative. In doing so, they have acted either ignorantly or wilfully. If ignorantly, they cannot make out a very good claim, and if wilfully, they surely dare not make any, that respect should be shown to such laws by the sufferers from them, after they have awakened to the position. The landowners have vigorously contended for the retention of their multiple votes based upon a landed-property qualification, and their success in keeping them is still in evidence to a certain extent. Land-owners even here have still the power of throwing their voting strength into either district in which their property lies; while landless people can vote only in the district in which they reside. Such a provision cannot escape the suggestion of being prompted by a self-interested motive.

The claim that an owner of land should have more voting and page 62 influencing power than a landless man has always been a most unreasonable one. It may be resolved into this: that a man who has by some means obtained a great and special legal privilege, for which he renders no public service, ought to have another granted to him in order that he may have a preponderating influence in opposing reforms. Further than this, it assumes that he who is maintained out of the ground-rent fund—created by his fellow-countrymen—should have a more effective voice than they in controlling the imposition of tuxes and their subsequent expenditure. This privilege enabled such men in this Colony to impose and maintain the iniquitous Property Tax, the leading principle of which was the confusion of laborer products with land values.

The working of all such laws has been unmistakably in the interest of landowners, and it has been shown to be against that of the whole community, and especially of the landless section. Laws made in their own interest by any class holding the power can only depend upon might, and not upon right, for their sanction and maintenance.

Another principle may be laid down in reference to all laws, and that is: that where they affect anything which, like land, is essential to human life, one generation can have no right to bind the next. There is ancient and weighty precedent for this contention. The Mosaic law, in dealing with property, made a special exception as regards land (see Leviticus xxv.). It limited all dealings in it to a maximum period of fifty years, and stipulated that, whenever the term began, it must end at the national Jubilee year, so that it made it impossible for a man, whatever might be his needs, to alienate the land for ever from his descendants. It was not the land, but the use of the land, which was dealt with: "The land shall not be sold for ever: for the land is mine" (v. 23). "According unto the number of years of the fruits he shall sell unto thee" (v. 15). Leasing, and not selling, was therefore the only kind of dealing which was permitted. Moreover, the lease could be redeemed at any time by refunding a part of the payment proportioned to the number of years which had still to run (v. 25-27). Land itself would, under such restrictions, never obtain a selling value; it could only carry a rental value. These were manifestly fair and necessary provisions, because otherwise a man, prompted by either necessity, extravagance, or greed, could secure an advantage by pledging the chance of his descendants. The Jubilee was to be ushered in with great rejoicings, and, notably, by a proclamation of "liberty" to all the inhabitants of the land (v. 10). Moses classed the continued secure possession of land by every family with the idea of "liberty." Universal family inheritance, proportioned in area to the number of males in each, was the basis prescribed for the original division of Canaan—"To many thou shalt give the more inheritance, and to few thou shalt give the less inheritance" (Numbers xxvi. 51-56). Further than this, and in order to prevent any chance of original favouritism in regard to quality and situation, it page 63 was ordered the location of the several tribes should be decided by lot. The Jubilee was the plan devised for making this system secure to future generations. As an additional precaution, apparently to reduce the chance of the divisions becoming disproportioned to the number of the future people, they were forbidden to make tribal inter-marriages. Every provision was evidently made with the idea of preventing any class from absorbing, and any other class from losing, the right to use the land. A very instructive confirmation of these principles is given fully 1000 years later by Nehemiah, who made the nobles restore lands, vineyards, olive-yards, and houses, to their countrymen (Nehemiah v.).

The land laws of New Zealand, the same as those of England, allow land once alienated to individuals by one generation to pass to other individuals by inheritance and sale to all future generations. The landless people of later generations receive no consideration for being deprived of this land. It is only the monied men amongst them who can get secure possession of any of it. The mass of people in each generation, therefore, becomes less and less able to obtain the chance of employing itself. It follows, as a consequence, that it becomes less and less able to obtain real "freedom of contract" in selling its services for wages. Landowning legislators have thus laid a foundation of ice, upon which many an industrious man has slipped into poverty. A more genial sun than they have allowed to shine will arise to melt the foundation clean away. A new one must then be substituted, which shall be solidly built and truly laid, with the sanction of the whole community, so that every industrious man may build upon it with the assurance that the whole produce will remain his own.

Single Taxers maintain that secure individual possession of land is a necessary condition precedent to its most advantageous use. This is the great point which freehold secures, and which leasehold prevents. They therefore object to any man forestalling the chances of users by buying land as an investment for the purpose of leasing it. They also object to users being allowed to buy land in perpetuity for a lump sum, because (1) their payment does not benefit future generations, from whom the land is withheld; and (2) the necessary sum for buying an indefinite future value can never be calculated. They also object to the system because it prevents users from getting secure possession without buying.

Henry George rouses the ire of his opponents by the statement that he "would take the kernel and leave the landlords the shell." The statement, and the anger which arises, both assume that the land-lords now possess the kernel which exists in land possession, and that landless people have it not. It is, doubtless, the recognition of this, as the salient fact of their position, which causes landowners to become irate when it is proposed that the kernel should be taken from their exclusive possession, and made common property.

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But what prior claim have landowners established to the kernel? None whatever! It has been pointed out that they were for centuries practically the only legislators, and that there is not yet an English-speaking community in which they do not possess a "voting" advantage over landless men. They have made laws which have enabled them to hold the land as a privileged preserve; which have provided that inheritance and purchase should bar the chance of landless people to employ themselves on land, without first reckoning with them—the owners; and which have increased the difficulty of obtaining it by heaping stamp duties and legal impediments upon its transfer.

In all these arrangements, they have assumed that there was no one else entitled to be consulted. The ignorant many, the landless many, the politically powerless many! Consult them! Assume that they have any interest in the question! Absurd on the face of it! This has been the theory acted upon in the past. Nay, it is so still. The supporters of the system even now deny that the landless people have any interest in the question. They are not entitled to the kernel; that is for the landowners. And the kernel may be inherited from generation to generation; as a strict preserve, kept away from landless people. This belief is apparently shared in by the New Zealand sup-porters of the "eternal" lease, with its non-revisable rent, based upon to-day's selling value. Those who take up these leases, and their descendants after them, are declared to have the sole right to the increase of the ground-rent fund—regardless of the real or supposed interests of their fellow-countrymen—for ten centuries to come.

Single Taxers declare that there are people beside landowners, and even beside "eternal" leaseholders, who ought to be consulted in land transactions; that the results of the present system prove it to be injurious to landless people, to tenants, injurious even to working proprietors, and therefore to the people collectively; that this injury is of itself a sufficient reason to condemn the system: and that, apart from results, the original titles were bad, because no power ever possessed the right to confer them. Neither inheritance nor purchase can mend them in this respect, and therefore no title to-day is valid as barring the claim of landless people. Purchasers only acquire what the sellers have to dispose of. As between the two the transactions are doubtless complete, but there may be a third party outside the door who is interested, but who is not privy to the transaction, is not consulted, and receives none of the purchase money. As between the three parties—provided there is a third—the transaction is not complete, and is, therefore, not binding.

To make the meaning of the argument quite unmistakable, take an illustration from the system of slavery. Don't be horrified! It is not a very remote comparison; neither is it a disrespectful one. It is well within living memory that Englishmen, statesmen, and ministers of religion, upheld its principle most strenuously. A few philanthropists—far fewer than the present band of Single Taxers—denounced it root page 65 and branch, and would throw it down utterly. They condemned the principle, and would not hear of men being so placed that they should be thankful that their masters acted kindly when the law allowed them to flog. So Single Taxers condemn the principle, and refuse to recognise as proper the thankfulness of a tenant who receives 20 per cent remission of rent from a landlord whom the State allows to rack-rent him. In both cases mercy and leniency are insults; it is just conditions which alone can, or ought to, satisfy.

But to the illustration. If A owns a slave, and B buys him, the transaction is complete as between the two. A's ownership is extinguished by his acceptance of B's money. It would be robbery if A came and took the slave back. It would be robbery if the State took him from B and returned him to A. But what about the slave's part in the transaction 3 He hasn't been consulted; no price was originally paid to him in consideration of surrendering his liberty; this further transaction doesn't benefit him, but it presupposes his continuing to surrender his liberty.

At this day it will be admitted that the slave ought to have been consulted; that he had an equal right with A and B to his own liberty; that he was not bound by the transaction into which A and B entered; that he was entitled to seek his liberty without any reference to the fact that B had paid money to A on the strength of his continuing to surrender it.

So it has come to pass that landless people have begun to question their position and that of the landowners. The questioning will be continued by them, and many already see through it. The landless people have not been consulted, neither have they been bought out of their rights, for they have not received the purchase money. No purchase price could ever pay them and their descendants. The only price which could ever equitaby discharge the indebtedness of those who own or use land, would be an annual payment to the whole community for its use equivalent to its value from year to year. The harbours of the Colony might as well have been sold as the land. Syndicates would buy them yet, if they were offered, and would make a good thing out of charging ships for admission. And why not sell them? Every reason against doing so weighs equally against selling ground rent concessions!

The day is likely to arrive soon when Englishmen, statesmen, and ministers of religion, who now denounce the proposal, will as clearly approve of it as they now do of the abolition of our slave-owning system.

The compensation argument will run its course, and the £20,000,000 awarded to the slave-owners in Jamaica will be trotted out as a precedent. But it won't do! There was a big third party with a breeches-pocket who paid that money to free the oppressed. There is no hope of such an one appearing in this case. If the oppressor is to receive compensation in this one, it must come from the oppressed. There is no third party.

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But apart from this, Single Taxers object to the principle of compensation in both cases. They say that the State would have been quite right in taking the slave from A or B without compensation, and presenting him to himself. For the same reason—viz., that all the parties interested have not been consulted—they contend that the State is justified in taking the monopoly of ground rent from landowners and presenting it to those who have created the fund, i.e., the whole community.

The second reason for declining to sanction compensation is that the economic and social remits of the monopolisation of ground rent have proved detrimental to the welfare of the community. These results were not so marked in former years as they have become since the introduction of steam transit, the discovery of electricity, and the great introduction of machinery into production of every kind. In the former times alluded to, the great contrast now existing between the values of certain central localities and those of merely country lands had not arisen. It has, therefore, come to pass that these legalised bargains in land, originally unsound in their nature, have become increasingly productive of evil; that they have brought to many land-owners wealth which was the produce of other men's labour. That this wrong distribution of the wealth produced has led to the great contrast, now more than ever apparent, between the rich and the poor; that it has created a class of landed proprietors who "toil not, neither do they spin;" that it has tended to the absorption of many small estates of working proprietors by their larger neighbours; has, in its further developments, led to the crushing of small manufacturers by larger ones; to the creation of great distributing agencies and the corresponding reduction of the number of small retailers; and to the superseding of independent hotelkeepers by mere servants of brewers and wine and spirit merchants. That the inevitable result of such changes has been to compel large numbers who once worked on their own account to seek situations and to become mere wage-earners, with no alternative pursuit open to them; that a further result of this tendency has been to make wage-earners compete with each other in order to obtain a mere existence, and so to squeeze the less capable of the race onward and downward into conditions of pitiable poverty. If these results can be connected with the system which permits the monopolisation of ground rents, it may well be suggested that restitution would be more fitting than compensation.

A third reason may be found by carefully considering the actual position of landowners in New Zealand. In several respects their position here differs from that of English owners. Let it be admitted that many owners have paid cash to the State for land which they now own, and that very little time has elapsed since cash was thus paid for most of the land. But these facts are often stated as if they formed a conclusive argument against all land reform here, or at least against any reform which was not accompanied by compensation. But let us page 67 look at the matter all round. There can be very little doubt that purchases made from the State are more in the interest of the buyers than those which are made from private individuals. In the latter case, the proceeds would have become the exclusive possession of the sellers. Not so in that of the State. It does not capitalise the money and use the interest in reduction of future taxation. If this were done the case of the landowners would be very different. But the State promptly expends it all upon public improvements, which result in more good to landowners than to any other class of the community. It is often asserted, as if in contradiction of this statement, that it supplied employment and wages for the working classes. Agreed, at once; but that is no contradiction. Such employment is only the necessary channel, and not the goal. The money necessarily went through men's hands, as through a machine, in which it was transmuted into public improvements. It was not thereby lost, because value was returned for the wages which were paid. The resulting improvements were worth the cash expended or invested in wages. The money so expended in public improvements found its goal in the increase of land values within the sphere of its influence. It was not Spent, but invested, to the permanent benefit of land values. Or, again, the effect was collectively the same as if the money had been returned to the owners on the condition that they expended it outside of their own lands on public improvements. The owners could only effect these by hiring labour and paying wages. In return for these the owners would get an equivalent in the shape of enhanced value. The process in each case would be the same, and the result identical. The fitting expression from the owners in either case would be, "My money is restored; and lo, it is even in my sack!" It seems almost superfluous to repeat that no such benefit or return would have resulted from a purchase from private individuals. No private person would expend the proceeds of his sale around the land which he had sold. He would be much more likely to buy some more land, which was not as yet in great demand, and thus continue the "forestalling" process.

But there is another fact which is very generally ignored by those who look upon only one side of this question. It is a very large and important fact, and deserves more prominence than can be given to it here. This fact is, that the Colony has borrowed upwards of £30,000,000 (apart from the unproductive debt incurred for war expenditure), and has laid it out in public improvements. This burden rests upon the shoulders of the whole community, and the annual interest is provided by all, and absorbs about two-thirds of the entire taxes. Who has got the main benefit of this expenditure? The landowners of the Colony; yet the whole people pay the interest upon it. The case is analogous to that of the aforesaid practical return to them of their purchase money, in the form of increase to the value of their land.

This statement will strike many as being very extreme and unwarrantable, and, indeed, it must so appear to all who have not studied page 68 the causes of the increase of ground rent and of selling value. But it is sober and demonstrable truth, nevertheless. We have not borrowed 30,000,000 sovereigns, but railways, roads, bridges, school buildings, Government premises, telegraph plant, etc. Sovereigns are far better left out of our reasoning oil economic questions. They only serve to add another term to the problem, and therefore to complicate it. The "interchangeability of wealth" is the central key to a clear and simple understanding of all questions of production and distribution. The proximity of all these borrowed conveniences to private lands, has attracted population, increased the profitableness of existing industries, and brought additional ones into being. Each step has added to the ground-rental values of the lands affected. This has increased the selling value of all private lands, and whetted the desire of speculators and income-seeking investors to purchase the Crown lands which are still available. Landowners look to these changes as to their "star of hope." They make no concealment of this in their conversation. Land agents boldly advertise them as inducements to purchasers to come forward. Buyers look to them as unquestionable plums intended to reward what they consider to be their enterprise. They have no doubt whatever that they are properly their perquisites, and they often get very angry when anyone disputes their equitable light to them. Every increase in population, every improvement in the means of production and transit, every increase of expenditure on public improvements, adds to the ground-rent fund—though the owners may sleep in the meantime. This fund, with its constant increase, goes, under our present system, to no one but landowners. But what equity is there in such an absorption by individuals of these benefits, without payment or even acknowledgment to the community which has brought them to their doors? There is no equity in it; it is confiscation, and must be stopped. It is, in other things, considered that payment should be received from those who reap a benefit, but our land laws are founded upon a principle which opposes a silent, but effectual, denial to such commonsense fairness. That fatal principle is the delusion that land may be treated in the same way as the products of man's labour.

Scarcely any statement of land reformers goes without challenge, and there are some even who have the hardihood to state that land value does not constantly rise. Return waves certainly occur, and striking instances of depreciation can be readily found. The system itself leads to "booming," and, of course, collapse of values must follow. All along the line many lose, and many more fail to make a profit, by land dealing. But turn to total figures. The 1891 assessment for the land tax gives £75,787,895 as the value of freehold land exclusive of improvements. What was the original selling value of this? A reference to paper "C. 1—Report on Crown Lands," fur any recent year shows that the total cash received by the Colony for the lands which it has alienated, is about £13,500,000. The unearned increase to owners has therefore been more than £62,000,000, apart from their own exertions as individuals, because it is exclusive of their own page 69 improvements. Of course, this unearned increment is clue to their presence as members of the community, just as much as to that of any other equal number of inhabitants. Their presence has created part of the fund, but they have received it all. They receive it in very unequal shares, and some, as has been admitted, have lost instead of getting any share. But their class alone gets it; no one will pretend that any landless man gets any of it, or that he ever stood any chance of a share. It would be interesting to see this increase of value explained from the landowner's point of view.

The conclusion forced upon land reformers by all this, is that New Zealand landowners, as a whole, have had a magnificent fund to work in. The landless man may well be described as Issachar was by his father Jacob (Genesis xlix.14-15): "Issachar is a strong ass, crouching dozen between two burdens: and he saw that rest was good, and the land that it was pleasant; and bowed his shoulder to bear, and became a servant unto tribute." The one burden is the obstruction and uncertainty placed in the way of the industrious, by the imposition of landlordism upon the community. The other burden is the taxation, two-thirds of which consists of interest paid for the improvements, which have been borrowed from England, and placed around the owner's lands, with the result of increasing their value.

But there is a fourth reason, which has been already alluded to, for disputing the compensation claim. The question at once arises, "If the owners are to receive compensation, who is to provide the money?" On this particular issue, the community is composed of only two sections: those who receive or enjoy ground rent, and those who do not. There is no third section. No one receives it unless he owns land. The line of cleavage, therefore, is that which separates land-owners from landless people. Now, it will have been observed that the whole indictment of the present system is that the landowners profit by it, while the landless suffer. If this indictment has not been sustained, then the claim for the reform has not been made good, and the compensation counter-claim will, therefore, not arise. But if the indictment should happen to be made good, and if Parliament should thereupon decide to institute the reform, and to award compensation, it will be found that the landless people would be the only ones who could be called upon to pay it. This would create a curious anomaly. The section which had suffered would be the one to pay compensation; the section which had profited would be the one to receive it. The claim is too absurd. We need not get up any indignation about it; it would be dismissed from any court.

If the present owners—the last of a long series—have to make a sacrifice, they cannot blame those who did not receive their purchase money. Whether they bought willingly or unwillingly, they can only appeal to their predecessors in ownership, and to that section of the community which maintained an unsound system. The willing buyers must also take to themselves their own share of blame in upholding page 70 it. The system in which they have hoped to participate was made and sustained by a political system, in which a preponderating voting power was given to landowners, as compared with landless men. The complaint of the present owners must, therefore, lie at the door of the past generation. They can only get out of their bargains by "unloading "on to future victims, and can only succeed in this by persuading the community in the meantime to go on suffering serious disabilities for their sakes. But this cannot be allowed. If the landowners want compensation, they must present their bill to their own class, which made the laws; to their own class, which has continued to bolster them up by plural property votes; to their own class, which has been the only one to benefit, and not to the landless people who have suffered by the system.

The gradual restoration of ground rent to its producers, and therefore to its equitable owners, is what is proposed. It is equivalent to a time-extension of the existing privilege of landowners, at a steadily decreasing rate. This is a great concession, and is all that landowners need expect to get.