Economic Harmonies

Rent
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13

If, when there is an increase in the value of land, there were a corresponding increase in the prices of agricultural products, I could understand the objections raised against the theory presented in chapter 9 of this book. It could then be said: As civilization advances, the worker’s situation becomes less favorable in relation to the landowner’s; this is perhaps a necessary development, but it is certainly not a law of harmony.

Fortunately, this is not the case. In general, the circumstances that increase the value of land decrease at the same time the prices of what is raised on it. Let me explain this by an illustration.

Let us suppose that there is a farm located twenty miles from the city and worth one hundred francs. A highway is constructed that runs close to this farm. It opens up a market for the crops, and at once the value of the farm rises to one hundred and fifty francs. The landowner, now having the means to make improvements or to raise a greater variety of crops, improves his property, and its value increases to two hundred francs.

Thus, the farm’s value has been doubled. Let us examine this additional value, first from the standpoint of justice, then from the standpoint of the utility enjoyed, not by the proprietor, but by the consumers in the city.

As for the increase in value coming from the improvements made by the landowner at his own expense, there is no question. This is a capital investment and follows the law of all capital investments.

The same is true, I venture to say, for the highway. The operation follows a more circuitous course, but the result is the same.

In fact, the owner, by reason of his farm, pays his share of the public expense. For many years he contributed to the general utility by doing work on outlying areas. Finally, a road has been constructed that runs in a direction that is helpful to him. All the taxes he has paid can be compared to stocks he might have bought in government enterprises; and the yearly rent, which now comes to him because of the new highway, may be regarded as their
dividend.

Will it be said that a landowner may pay taxes forever and never receive anything in return for them? This case, then, is analogous to the other; and the improvements, although effected through the complicated and more or less questionable medium of the tax, may be considered as having been carried out by the landowner and at his expense in proportion to the partial advantage that he realizes.

I spoke of a highway, but I could have cited any other example of government intervention. Police protection, for example, gives value to land as well as to capital and labor. But who pays for police protection? The landowner, the capitalist, the worker.

If the state spends its revenue wisely, equivalent value must in some form or other find its way back to the landowner, the capitalist, and the worker. For the landowner it can only be in the form of an increased price for his land. If the state spends its revenue unwisely, it is unfortunate. The tax money is lost; the taxpayers should have been more alert. In that case the land does not rise in value, but certainly that is not the fault of the landowner.

But, now that the land has thus increased in value through government action and private initiative, do the crops raised on it bring a higher price from the city dwellers? In other words, is the interest on these hundred francs added as a surcharge on every hundredweight of grain that comes from this land? If the grain previously cost fifteen francs, does it now cost fifteen and a fraction? This is a most interesting question, since justice and the universal harmony of men’s interests depend on its answer.

I reply confidently:
No.

No doubt the landowner will now get a return of five francs more (I am assuming a profit rate of five per cent), but he will not get them at a cost to anyone. Quite the contrary; the buyer, in his turn, will profit even more.

The fact is that the farm we have chosen as an illustration was originally remote from any markets, and little was produced on it. Because of transportation difficulties the products that reached the market were expensive. Today production has been stepped up; transportation is economical; a greater amount of grain reaches the market, costs less to get there, and is sold at a better price. So even though he yields the landowner a total profit of five francs, the buyer profits even more.

In a word, an economy of effort has been effected. To whose profit? To the profit of the two contracting parties. According to what law is a gain of this kind shared? The law that we have often cited in reference to capital, since this increase in value represents a capital gain.

When there is a capital gain, the landowner’s (or capitalist’s) share increases in absolute value and diminishes in relative value; the worker’s (or consumer’s) share rises in both absolute and relative value.

Observe how this occurs. As civilization develops, the lands nearest the centers of population increase in value. Inferior crops give way to superior ones. First, pasture lands give way to cereal crops; then, cereals are replaced by truck gardens. Foodstuffs come from greater distances at less cost, so that—and this is an unquestionable fact—meat, bread, vegetables, even flowers, cost less than in more backward countries, although labor is better paid than elsewhere.

The Clos-Vougeot*101

Services are exchanged for services. Often services prepared in advance are exchanged for present or future services.

Services have value, not according to the labor they demand or have demanded, but according to the labor they save.

Now, it is a fact that human labor is becoming more efficient.

From these two premises is deduced a very important phenomenon for social economy: In general, labor previously performed loses value when exchanged for current labor.
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Twenty years ago, let us say, I made something that cost me a hundred days’ work. I propose an exchange and say to my prospective buyer: Give me something that costs you likewise a hundred days. Probably he will be able to reply: In the last twenty years great progress has been made. What cost you a hundred days can now be made with seventy days’ labor. Now, I measure your service, not by the time it cost you, but by the service it renders me. This service of yours is worth seventy days, since with that amount of time I can perform it for myself or find someone to perform it for me.

Consequently, the value of capital falls constantly, and capital, or previous labor, is not in as favorable a position as superficial economists believe.

There is no machine not completely new that has not lost some of its value, exclusive of deterioration resulting from use, from the very fact that better ones are made now.

This is true also of land. There are very few farms that have not cost more labor to bring them to their present state of fertility than it would cost today with the more efficient means we have at our disposal.

Such is the
general, but not
inevitable, trend.

Labor performed in the past may render greater service today than it did previously. This is rare, but it does happen. For example, I have kept some wine that represents twenty days’ labor. If I had sold it immediately, my labor would have received a certain remuneration. I have kept my wine; it has improved; the next crop was a failure; in short, the price has gone up, and my return is greater. Why? Because I render
more service, because the buyer would have to take
more pains to get this wine than I took, because I satisfy a want that has become greater, of higher value, etc.

This is the question that must always be considered.

There are a thousand of us. We each have our acre of land, which we clear. Time goes by, and we sell it. Now, it happens that out of the thousand of us nine hundred and ninety-eight do not receive, or never will receive, as many days of current labor for our land as it has cost us; and that is because our past labor, which was less skillful, performs relatively less service than current labor. But there are two landowners whose labor has been more intelligent or, if you will, more successful. When they offer it for sale, it is found to represent inimitable services. Everyone says: It would cost me much more to perform this service for myself; hence, I shall pay a high price; and, provided I am not coerced, I am still very sure that it will not cost me as much as if I performed this service by any other means.

This is the story of the Clos-Vougeot. It is the same as the case of the man who finds a diamond or who has a beautiful voice or a figure to exhibit for five sous, etc.

In my native province there is much uncultivated land. The stranger never fails to ask: Why do you not cultivate this land? The answer is: Because the soil is poor. But, it may be objected, right beside it is absolutely similar land, and it is cultivated. To this objection the native finds no reply.

Is it because he was wrong to answer in the first place:
The soil is poor?

No, the reason why new land is not cleared is not that the soil is poor; for some of it is excellent, and still it is not cleared. This is the reason: to bring this uncultivated land to a state of fertility equal to that of the adjacent cultivated land would cost more than to buy the adjacent land itself.

Now, to any man capable of reflection this proves incontestably that the land has no value in itself.

(Develop all the implications of this idea.)
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Money
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Credit
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