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The Pamphlet Collection of Sir Robert Stout: Volume 81

Chapter IX. — Increment Land Values and Closer Settlement

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Chapter IX.

Increment Land Values and Closer Settlement.

This is a question that lies at the root of the whole social problem. Upon its solution fundamentally depends whether the country is to be settled by a prosperous class of primary producers or by a struggling class of late-and-early toilers, slaving to make a bare and precarious living, that, in course of time, may urge them to implore the State to take the whole thing over and relieve them of their miseries. In co-operative trading we have seen that, after all expenses, including interest upon capital, had been paid, the surplus profits were restored to members on their purchases, as the legitimate owners of what they themselves created. Waiving the question of the right of making a commercial commodity of land at all—that is past praying for, and society has to get out of the trouble the best and fairest way it can—it may be freely conceded that landowners are fully entitled to have the legitimate capital value of their investments respected, but it is quite another thing that they should be permitted to make monopolistic use of it to confiscate the rights and interests of the general public. It is for this that the combines and trusts are made the subjects of restrictive and hostile legislation, and they receive more justification from the laws of orthodox political economy, founded upon the doctrines of competitive individualism and laissez faire, for their commercial and financial enterprises, than can be claimed by landowners who have simply to "lie low" and do nothing in order to reap the fruits of their monopoly, and leave the industrial community to do all the work.

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Land is The Great Natural Monopoly, to which no single individual nor single generation can claim special proprietary-rights, and, when made a commercial commodity of, there is no law in political economy so certain as that by which land increases in value by the increased demand for it by an increasing population, and that without any effort on the part of the owners.

The increasing value of land indicates the pressure of population on the means of subsistence, and is greater in densely populated countries, and in and near towns, than in new colonies and at distances from closely inhabited centres. The pressure may be temporarily relieved in the more densely populated situations, but only to be increased in the others, by the building of railways and ships, by which the surplus products of distant areas and countries can be economically exchanged, and emigration from thickly-populated countries to new lands facilitated. But this is only reducing the pressure to an average level by distributing it over a larger area—not arresting it for one moment, but giving it a wider base from which it commences at once to continue its upward movement. The law always holds good that the value of land rises with increase of population, and in a manner:—
1.More certain and unabatable than the rise in value of any other commodity; and,
2.Altogether different in character from the aggregate increase of other forms of wealth.

The value of a commodity does not primarily depend upon the capital employed, upon its production. It must have some value in use before it can have any in exchange. Air does not cost anything to produce, but its intrinsic value is such that, if it could be monopolised by a class, the rest of mankind would have to pay dearly for its use. On the other hand, an article may be costly to produce, and yet be unmarketable if it has no value in use. The supply of any commodity cannot be continued for less price than will repay cost of production, with something additional for profit; and page 94 it will not permanently rise above this level, provided that it ia possible to keep up the supply to an indefinite extent As soon as there is a tendency for prices to rise beyond this, the influx of fresh capital into the industry will again reduce prices to what is termed the natural value. Articles which cannot be thus indefinitely produced, or are under class control, are essentially monopolies, and although the cost of production to the owners may be comparatively low, the cost to consumers will be high in proportion to the intrinsic value of the article. The value of food in times of famine rises to whatever it is possible to give in exchange for it, for it is a matter of life or death. The demand for commodities less necessary to existence will not reach this extreme limit, and no scarcity will force an article beyond the price which people can be made to pay for it sooner than go without.

Commodities, therefore, which can be produced to an indefinite extent will be maintained, with more or less fluctuations, at prices which afford a margin for an ordinary rate of profit, and they are only articles of necessity of which the supply is, or can be made, limited, which can have an increment value above this natural level. Natural monopolies, and commodities incapable of indefinite supply, are not subject to this rule, but have an increment value not depending upon the cost to owners, but upon the important nature of the want to be supplied, and the more important the want the greater the possibility of the increment value.

The conclusion is inevitable that land, which is a commodity not only incapable of addition to its quantity, but which is constantly diminishing in inverse ratio to increase of population, and is the source of all supplies, must increase in value as time goes on at a greater ratio than that of any other commodity not of such prime and absolute necessity.

Again, there is no comparison between the increment value of land and the increase of other forms of wealth. Other wealth increases by adding building to building, railway to railway, improvement to improvement, and to maintain this increase, and counteract the effects of deterioration and de- page 95 cay, constant thrift and industry have to be practised. Amidst all this activity the value of land rises without the addition of a fraction to its quantity, and altogether independently of the efforts of the owners, or the fructification of the capital invested—or, rather, locked up—in it. Buildings and improvements are of no more value than what would be the cost there and then to reproduce 6hem; the increment is on the natural, or unimproved, value of the land alone. Capital employed in industrial pursuits increases by constant activity and thrift, and it is out of the product of this general industry and economy that landowners (as distinct from land cultivators) receive that which gives enhanced value to their investments. The profits arising from manufactures and commerce, and from improving and using land, represent something actually produced to maintain and increase the general wealth. The demand for houses does not necessarily increase the value of houses already built. It means an addition to the general wealth by the building of more houses, but a demand for land raises its value, and increases the wealth of its owners by diminishing the wealth of the rest of the community, and not by the addition of a single cent's worth to it. The conclusion is indisputably clear that capital invested in the raw material of the earth cannot be increased in the industrial and economic sense of the term, and that land investments are simply the purchasing of a power by which the owners can compel the industrial portion of the community to hand over an undue share of the wealth which they create to non-producers, a power which waxes greater and greater as population increases, with a relatively diminishing area of land to live upon.

There is no intention here to discuss how the problem of increment land values is to be solved. It is sufficient to call attention to the fact that there is such a problem to be solved, if the social problem itself is to be solved without State socialism. Co-operative societies of primary producers, and—thanks to the great work done by the State civil servants—co-operative societies of consumers, are each page 96 moving in a direction which eventually must bring them into close economic relationship with each other—the one in search of a market for their produce, the other of supplies, and both eliminating the services of middlemen and private capitalists from their ranks as they develop their several organisations. This is a process which has within it possibilities to solve whatever portion of the social problem may fall to the lot of intelligently organised individualism to accomplish, without any call for State aid. If, however, conservative anti-socialists are able to influence Governments not to undertake the solution of the increment of land values problem or its modification, but permit it to take its natural course unchecked, the agitation for State socialism, which the co-operative movement is calculated to overcome, may receive.fresh vigour from the hard lot of settlers placed on the land under conditions to which State socialism would be a welcome change.