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The Pamphlet Collection of Sir Robert Stout: Volume 72

A Comparison with Current Reforms

A Comparison with Current Reforms.

We are not adherents of any political party, and do not desire to make or unmake any Government, but to place before the whole people what we believe to be sound views upon the greatest of all economic questions. The following comparison is offered as an entirely friendly suggestion to all genuine and advanced reformers:—

Our present legislators recognise that, in some sense, the Land Question is the one of greatest importance; but they aim at increased settlement only, and it is evident they do not clearly recognise the other feature of fundamental importance in it—viz., the existence of private monopoly of ground-rent, whether by many or by few. If they clearly perceived this, as we hope they will come to do, they would not buy up estates from a few to sell parts of them again to the many. Neither would they let portions of such lands on long leases, at to-day's rental, without any provision for future re-assessments. For to do either of these is to maintain, almost intact, the same legal claim (on the part of individuals) to the enjoyment (respectively for ever or for a term of years) of the increment that the future must bring to all of these lands. This increment is not caused by the expenditure of individual labour and capital upon it, but by the increase around it of the community and its enterprise, on the one hand, and by the constant addition of public works and facilities on the other.

The result of both the selling and leasing plans will be to create a large privileged class out of a small one. They will enable page 10 greater number than formerly to take wealth that others have produced. They keep the same horse running on the course and only multiply its riders. It is a change of the horse that is required. The new freeholders may not, for many years, blossom out into a class, such as the landed aristocracies of the old world, living exclusively upon ground-rents; but this development is only a question of tint. Similarly, the earnings of the new class of leaseholders will be more and more largely supplemented, as time goes on, by the privilege ol reaping that which the public has sown.

The system of leasing public lands is open to another objection. This is that the rent is nearly always fixed before any proof of the value of the land has been afforded by actual trial. It follows that those who are fortunate in their selections obtain a special advantage, whilst those who are unfortunate protest and agitate until a Settlers lie-valuation Bill or a Fair Rent Bill is passed. This shows the equity and the necessity of periodical re-valuations of all lands.

One of the proposals made in the financial statement this session will illustrate the existing difficulty, and will show how the extension of all public services works with partiality to individuals. It is suggested that certain specified railway freights from places one hundred miles from the principal centres should be reduced so is to equal those from places only twenty miles distant. The more distant freeholders and leaseholders would benefit by this at the expense of the nearer ones, and the general public would have to make good any resulting deficiency in revenue. Under our system the re-assessment of lands, so benefited or depreciated, would redress any inequality, and cause it to be, at the most, only temporarily felt.

We feel convinced that thoughtful men and women in every department of life, who have taken the trouble to study the question, are aware that this is an important omission from the present efforts at reform; that they are economically deficient, and, as a consequence, must result in the continuance of a large number of existing evils. Like causes will (the conditions remaining the same) produce it like effects. Private monopoly of ground-rent, perpetuated and conferred upon more people, must work evil at an accelerated pace, whether the efforts of those who brought about the extension were intended benevolently or the reverse.

But this is not all, for under universal suffrage, in the justice of which we are firm believers, there will in future be more voters who are interested in this monopoly and who will therefore uphold its existence, and make its reform or destruction more and more difficult It is therefore of the utmost importance to the mass of the people that the changes made under a democratic system should be made on correct economic lines. When these have been determined upon, the only safe way to apply them will be to observe strict justice as between private and public claims. The masses have suffered long enough from the page 11 application of unsound principles. Their only safety, now that they have got the power, is to invoke the spirit of even-handed justice, and to sternly refuse every bait that may be held out to catch their selfish support. We ask no one to apply a weaker test than this to our proposals. Let them be criticised, firstly, to see if they are correctly conceived; secondly, to see whether they are just; and thirdly, whether they are calculated to effect their purpose. If our contentions are sound, we have no doubt that they will be gladly accepted by the more soundly progressive men both in Parliament and outside of it.

Our plan would promote settlement, while it also aims directly at the root of that evil from which, we believe, arises the artificial distribution of wealth and comfort which produces the alarming discrepancy between the conditions of men to-day. This evil, we contend, is the private holding of the earth's surface, and consequently of the materials and forces of nature, together with the enjoyment of public facilities, without making an equivalent annual payment. It is this possession, by descent from sire to son or from one cash purchaser to another, of natural opportunities and social conveniences, without an equivalent payment to the public, that enables the few to appropriate part of the wealth produced by others. It does this by preventing the rest of the people from obtaining access to these advantages, except under the condition of paying rent annually to the holders thereof. This power, thus held by the few, enables them also to impose conditions of tenure, such as render the operations of their tenants—and therefore the possession of all the proceeds thereof—insecure. This discourages that enterprise and thoroughness without which the best use will never be made of land. It is a fact of universal experience that a tenant never cultivates or makes improvements as vigorously as an owner does; hence the universal desire for ownership. But existing conditions, by enabling a few to hold a saleable privilege, makes ownership impossible except to those who have capital beyond that which is necessary to buy stock, seed, implements, etc. The present system, though nominally a freehold one, really denies a freehold to the majority of the users of land. It will thus be seen that to the discouragement of the operations of all tenants is added the absolute prevention of most men securing that tenure which is the only one under which they may safely put forth their strength and ability, knowing that all the proceeds will be their own.

We seek to make it necessary that all should pay, year by year to the State, just as the many are now obliged to pay to the few, the equivalent value of the use of the natural and social opportunities which they personally enjoy. This payment would render the imposition of any taxes or rates unnecessary. At the same time, we wish to destroy all the uncertain conditions of tenure that the few now impose upon the many, and to establish perfect security of tenure for all. The result would encourage the best possible use of all land, and secure the full produce to the producer; If we can bring about this result we may page 12 expect every future user to work as vigorously as every present owner,

The next effect of our proposal of requiring an annual payment equivalent to the value of the opportunities enjoyed by each would be to take away the privilege which is now saleable. This would destroy the selling value of all land. After that is done the would-be user of land would not have to part with any capital before he could acquire the right to use it securely. Thus all his capital would be devoted to useful production, and none would be used for securing a privileged possession.

We submit that the adoption of these principles would give logical completeness to the best intentions of our present legislators. In the method by which we propose to give them effect we have endeavoured to show the utmost consideration to existing owners of land. Many of these have made great sacrifices to buy land—not for the sake of obtaining an income from others by becoming their landlords, nor for the sake of making an unearned profit by speculative holding and reselling, but—because purchase afforded their only chance of working without restriction or dictation and of retaining the proceeds of their industry. These owners, in common with the landlord and speculator, have viewed with great alarm our earlier proposal that the State should resume the ground-rent by gradually increasing the taxation upon it. Rapidly as our views are spreading over the world, this fear has always been its greatest hindrance. We are as much delighted as any owners can be at having at bust seen the prospect of a better solution of the difficulty, and we have hastened to make the plan widely known as soon as it was possible to work out its details.

Let us now pass to an analysis of the methods proposed respectively by Parliament and ourselves. That of the former involves the necessity of borrowing more money from England. This is required for both their operations—viz., that of buying back estates and that of lending cheap money to farmers. The borrowing plan has many disadvantages, of which we may name the following:—
1.It involves the Colony in further debt.
2.Owing to the cost of floating loans, we do not receive the whole sum for which we become indebted.
3.The interest on the whole sum becomes payable at once whereas there will be delay in getting some portions of the money placed here in a revenue-producing position.
4.The State has to collect the interest from parties in the Colony, and pay it to others outside.
5.The possible default of the State's debtors will not exonerated from paying in full to the foreign bondholders.
6.We have to bear the annual cost of remitting money to pay the interest due in England.page 13
7.Party feeling, whatever Government may be in power, must lead to taking undue risks in buying from or lending to partisans, while refusing desirable lands or securities offered by opponents. Apart from the demoralising tendency of such actions, they will certainly result in loss of funds, for the repayment of which the whole people is responsible.

Beyond all these, another doubtful element is contained in the Treasurer's proposals. It is this: that both the purchasing and lending schemes involve dealings in improvements as well as land. The Treasurer's own words are—"I believe . . . it will be quite safe to . . . advance up to two-thirds of the value of the security." If this suggestion were adopted it would cause some part of the State's security to rest upon perishable improvements. This is certainly a most dangerous course for the State to embark upon. Again, we must always remember that the buying and lending schemes are to be applied only to country properties, and that the improvements upon these are not of such a permanent character as those in towns.

Another important fact about the present schemes, whatever their good points may be, is the very limited extent to which they can be realised. They must always be limited in two respects: first, by the extent to which the electors will sanction an increase of debt; and second, by the extent to which the English lenders will be willing to make advances. No doubt the Government is quite as conscious of this as we are, and chafes equally under the restraint. We trust, therefore, that it will carefully consider our proposal, the more so as coming from a body that is favourable to its general policy, and is only anxious to see that policy improved and extended.

In this hope we will now proceed to comment upon the leading features of our method. Having just dealt with the financial difficulties presented by the borrowing feature of the Government plan, it may be convenient to consider, in this respect, the advantages of issuing debentures instead—
1.It does not increase the debt of the Colony.
2.There will be no loss incurred analagous to that of the cost of floating a loan in London.
3.The ground-rent would become payable all over the Colony as soon as the interest on the debentures began to accrue, and thus no gap would occur between the two such as that which must take place during the investment of a loan.
4.The State would receive from and pay to the same parties at first, and would in most cases continue to do so. No money, or its equivalent in produce, would be sent out of the Colony.

With regard to the risk assumed by the State in agreeing to pay interest, it will be seen that is long is the land and its debenture continue to be held by the original owner he could only make default in the event of future re-assessment raising page 14 his ground-rent to a greater amount than the interest due on his debenture. But he could only handle and sell his debenture in the event of his improvements amounting to 30 per cent, of his unimproved land value. In this case they would be too valuable to throw away. He would not, therefore, be likely to sell his debenture, desert his land, and leave the Colony.

In the other event, of an owner wishing to sell a property with less than 30 per cent, of improvements upon it, he would be interested in doing so to a bonâ fide user, because his debenture would still be withheld until the new owner raised the improvements to the stipulated amount. The State's risk of getting the ground-rent from the new owner would thus be very small, because no one under the new régime would hold land out of use for speculative purposes, and he could not use it without laying out something upon it in improvements, and thus acquiring such an interest as would always be worth holding on to and therefore paying rent to conserve.

6.The interest would be payable in the Colony, and would, therefore, cost nothing for remittance. We propose to pay the same as the Government proposes to charge—viz., 5 per cent, believing it to be a fair minimum rate for private loans.
7.Party feeling could not enter into our plan, because the Government would not acquire the titles to land or exercise control upon it at any point.
8.Two of the most important incidental advantages of our proposal are, that it would at one operation (a) render all existing land value a liquid asset, and (b) destroy its future selling value. The debentures granted to owners and mortgagees would be readily sold, and their proceeds used as capital for assisting production. At the same time, their issue by the State would entitle it to charge ground-rent upon all land, and this would kill its selling value. Thus, intending users, who have sufficient capital to start production upon either a large or small scale, would not be met by the present prohibitive demand of a cash premium before they can obtain perfectly secure tenure of land. Both convertibility of present land values and opportunity for secure and universal use of land are thus brought into existence by a single operation.
9.The stimulus which all business operations would receive from the additions of convertibility and opportunity would have the effect of making the public revenue in every department more buoyant. Thus, the Colonial Treasurer would find his estimates of revenue exceeded at once, and would not have to wait for a surplus until a new assessment of land brought him in an increase of ground-rental.
page 15

Another contrast is presented by the fact that we ask the State to accept no responsibility in regard to improvements.

Then our proposal would achieve a universal reform by making present and future ground-rent a public instead of a private fund.

We are not content to do this merely in country districts, and only here and there even in them; but we wish to carry out our principle universally, both in town and country. We wish to remove nut only agriculture but every other use of land from the interference of landlords, speculators, mortgagees, or political parties, and from the control of officials. We aim at placing all operations of industry for the future upon a basis that shall secure the produce to the producer, and to bring this change about without introducing, either at the beginning or during the progress of the reform, the slightest dislocation of colonial, local, or individual finance.

It will have been noticed, also, that our plan does not need the control of officials in parcelling out land for settlement. It is now assumed, and rightly so, that official help is necessary to obtain land for those who cannot otherwise get it. But we take away every inducement which now prompts men to secure land for other purposes than use. When this is done, by charging all lands with ground-rent according to their respective values, they may be exchanged between individuals, like any form of produce or merchandise, without fear of injustice to any one. When the owning of land ceases to be a saleable privilege, the public interests cannot suffer from private dealings pit, and it will not be necessary to continue official regulation.

We contend that when the State receives all ground-rent, which it will do after it has redeemed the debentures, no landlord will be able, by letting his land, to obtain a margin of income from it over and above the rent he pays for it; no speculator will hold land out of use when it involves him in an annual loss equal to the ground-rent payable for it. Landlordism and speculation will, therefore, cease to exist long before the process of redemption is complete. Investments will after this be sought for only in improvements, or in productive, useful, or pleasure-giving operations.

Amongst the detailed consequences that may reasonably be expected follow will be that—
  • Men who are not capitalists will be able to get secure possession of land:
  • building and improvement will no longer be discouraged by in-security of tenure:
  • business of all kinds will be stimulated:
  • employment will be increased:
  • skilful and thrifty men could more easily start for themselves:
  • less competition for employment will be the result, and employment will, therefore, be more constant, and wages must rise.?page 16
  • The rise of wages,
  • the greater constancy of employment,
  • the increase of employment,
  • the increase in the number of men workings for themselves,
  • the growth of improvements,
  • the stimulus given to all businesses, and ultimately
  • the absence of interest charge on foreign loans,
  • will increase the purchasing power of the community,
  • will extinguish the unemployed difficulty, and
  • will leave only the aged and the afflicted to ask for charitable aid.

Most of the efforts now being made throughout the world are in the direction of State Socialism, whereas ours aim at individuals Not the individualism of the present, with its admixture of privilege to a section, because that does not by any means afford a fair presents of its possibilities. We are not at all surprised at the widespread dissatisfaction with existing mixed conditions, for we fully share it; but we wish to discriminate carefully between the good and the bad feature which these exhibit. Our contention is, that the evil does not lie with the individualistic features, but with certain faults that have distortion their true action. The points of divergence are those at which private monopoly has superseded individualism. The presence of monopoly must not be mistaken for a feature of individualism, but be looked upon as a partial denial of it. Its removal, therefore, will leave the great principle free to develop naturally. We have in the past grand certain concessions to private companies for the carrying on of useful operations that under existing conditions must of necessity become monopolies, and have often grown into very valuable ones railways and tramways for conveying goods or passengers, companies for the production and supply of gas or electricity, and compared for the conveyance of water, are of this nature. They have been allowed exclusive rights to the use of public highway and consequently to exclusive supply of the inhabitants occupying large areas of land. Thus they enjoy, without progressive en payment, the increasing benefits for which freeholders obtain, and tenants pay, an ever-increasing ground-rent. Both privileges clearly come into the same category. It would be impossible to alter this allowing an indefinite number of competitors to enter the field, because the highways could not contain the necessary rails or pipes. We consider, therefore, that the only feasible plan of giving the public the advantage of the increasing value which the community attaches in highways and to districts is to conduct all such operations nationally or municipally—call it socially if you will. Our method of dealing with land value might be applied to the purchase of the interests such companies at the present market value of their shares. [unclear: image not readable] this was done they could be taken over and worked by the public authorities. This transfer would end the constant antagonism of page 17 public and private interests now existing, and would enable all to pull in the same direction for the general good. Individualism would, by the elimination of landlordism and monopoly, be freed from the complicating interests that now mar its development and lead so many, thinking these are inherent in the system, to look upon it as an effete and objectionable one. The fact is that real individual freedom has never yet been tried.

The proposed reform would, in our opinion, achieve the true and desirable conservation of individualism for the supply of personal wants, and the fitting introduction of socialism for the attainment of collective benefits.