RENT IN A FREE SOCIETY
RENT AND SOCIETY, Part 2

   The first part of this course sketched a state of abundance. This abundance comes to mind when we consider what is available to us from our society in comparison to what we ourselves contribute to it. The sequence of events by which this abundance evolves by the development of trade and specialisation exhibits both order and reason, despite its coming about silently without being designed or planned by government.
   In fact, the interference with this natural order by bad government under the guidance of false ideas, produces the problems which we attribute to the economy.
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   Henry George had a good vantage point from which to observe these problems. He lived at a tirne when the United States was two societies. The first was the frontier society which had cheap land available for new arrivals; the second was the old' society of the East where new arrivals found that all land had been taken up.
   George saw that earnings had remained low in this second society despite the most momentous progress in human history. In one fortunate moment he saw why.
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   His insight was that when any kind of progress (such as a railroad) made society wealthier, those who owned the ground beneath that progress got most of the gains. The actual producers stayed pretty much as they had been before progress came.
   As Gladstone observed about the same time, the gains of wage earners from progress came mainly in the lower prices they had to pay for basic commodities.
   What Henry George was observing, and what we observed when we saw the abundance of the society in which we live, was economic rent. He had seen what happened to it where land was "free"; he had also seen what happened to it where all land was enclosed and monopolised.
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In our course we will see what happens to rent under both these circumstances. In this part we will exarnine what happens to economic rent where land is free.

As will soon become clear when we talk here of rent we do not mean the rent of a car, television set, or a set of golf clubs. We do not even mean the rent of a house. As we will see rent (or economic rent which is used interchangeably) has a special meaning.

But first let us ask how this term "rent" carne about. Landowners in England had seen their rents go up at the tirne England was blockaded by Napoleon. Just as dramatically they started to go down in 1815 when the war with France came to an end. They wished to know why. They also wished to apply their own blockade, in the form of protective tariffs against imports of wheat. David Ricardo, and others, carne upon a formula to deterrnine the rents of agricultural land. We can put this formula, known as 'the law of rent', in the following way.

The rent of land is determined by the excess of its produce over that which the same application (of labour and capital) can secure from the least productive land in use.

RENT AND SOCIETY, a Course; Giles, Campton_ RENT AND SOCIETY, a Course

The term 'rent' refers more properly to the surplus of production than to actual payment for land. Even before Ricardo the Physiocrats at the court of the French king, Louis XV had discovered that some farrning lands produced a surplus in addition to the necessary expenses of setting up and running the farm. On other farrning land others only covered their expenses of setting up and running their farrns. They did not produce a surplus; they, as we say, were only 'working for wages'.

Let us see how this rent comes about on agricultural land. To do this, let us imagine a plain bordered by a river at one end and mountains at the other. Let us now imagine the f1rst settler on this plain. Where will he settle? (We assume that land is free for the taking.) Now let us say that five other settlers arrive after him and take up equal shares of this plain. In all probability the soil would be richer beside the river and shallower near the mountains. Perhaps too the terrain near the hills would be rougher and harder to farm.

So, if all six farmers applied themselves equally to the task of farming, their produce would be different, depending upon how close they farmed to the river. We can represent this in a simple diagram which will help us understand better what Ricardo's law of rent is all about.

Bar graph showing Rent and Wages, 

orig 114 x 41 mm
Remember we are assuming equal application of labour to each of the sites. The horizontal line drawn from the least productive land on the right cuts what is produced into two parts. The two parts represent the shares which go to land and to labour. What falls above the line is rent; what falls below the line is earnings or wages. The line is sometimes called 'the rent line' but it could just as easily be called 'the wages line' for this line determines both what is rent and what is wages....

In fact, we now have a 'law of wages' which is:

When we say "free land" what is meant is that land is freely available. The least profitable land in use can also be called the marginal site. As the other settlers arrive, they have a choice between farming for themselves or working for those who are already farming. Let us imagine that the third settler to arrive ponders this choice. How much would he demand in wages? Why? ...
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According to our law of wages he produces 40 on his own land, so, all things being equal, he would demand 40 to work for others. In other words, where this system of land tenure prevails - as it did for some time in the American West -the least that an unemployed man will accept to work for others will be equal to what he can produce on the margin of production.

Do you remember the passage at the beginning on rent. Have you seen evidence of the existence of this rent around you?

Ricardo and the Physiocrats believed that rent only existed in agriculture. George shows that, in the form of co-operation, rent exists, and is much larger, in cities than it is in the countryside.

In the following story, which we shall read in the second half, we will see this new factor coming into play.

THE SAVANNAH STORY

Here, let us imagine, is an unbound savannah, stretching off in unbroken sameness of grass and flower, tree and rill, till the traveller tires of the monotony. Along comes the wagon of the first immigrant. Where to settle he cannot tell every acre seems as good as every other acre. As to wood, as to water, as to fertility, as to situation, there is absolutely no choice, and he is perplexed by the embarrassment of richness.

Tired out with the search for one place that is better than another, he stops - somewhere, anywhere - and starts to make himself a home. The soil is virgin and rich, game is abundant, the streams flash with the finest trout. Nature is at her very best. He has what, were he in a populous district, would make him rich; but he is very poor.

Horse running
To say nothing of the mental craving, which would lead him to welcome the sorriest stranger, he labours under all the material disadvantages of solitude. He can get no temporary assistance for any work that requires a greater union of strength than that afforded by his own family, or by such help as he can permanently keep.

Though he has cattle, he cannot often have fresh meat, for to get a beefsteak he must kill a bullock. He must be his own blacksmith, wagonmaker, carpenter, and cobbler short, a "jack of all trades and master of none." He cannot have his children schooled, for, to do so, he must himself pay and maintain a teacher.

RENT AND SOCIETY, a Course _RENT AND SOCIETY, a Course

Such things as he cannot produce himself, he must buy in quantities and keep on hand, or else go without, for he cannot be constantly leaving his work and making a long journey to the verge of civilization; and when forced to do so, the getting of a vial of medicine or the replacement of a broken auger may cost him the labour of himself and horses for days. Under such circumstances, though nature is prolific, the man is poor. It is an easy matter for him to get enough to eat; but beyond this, his labour will suffice to satisfy only the simplest wants in the rudest way.

Soon there comes another immigrant. Although every quarter section of the boundless plain is as good as every other quarter section, he is not beset by any embarrassment as to where to settle. Though the land is the same, there is one place that is clearly better for him than any other place, and that is where there is already a settler and he may have a neighbour. He settles by the side of the first comer, whose condition is at once greatly improved, and to whom many things are now possible that were before impossible, for two men may help each other to do things that one man could never do.

Another immigrant comes, and, guided by the same attraction, settles where there are already two. Another, and another, until around our first comer there are a score of neighbours. Labour has now an effectiveness which, in the solitary state, it could not approach. If heavy work is to be done, the settlers have a logrolling, and together accomplish in a day what singly would require years. When one kills a bullock, the others take part of it, returning when they kill, and thus they have fresh meat all the time. Together they hire a schoolmaster, and the children of each are taught for a fractional part of what similar teaching would have cost the first settler.

It becomes a comparatively easy matter to send to the nearest town, for some one is always going. But there is less need for such journeys. A blacksmith and a wheelwright soon set up shops, and our settler can have his tools repaired for a small part of the labour it formerly cost him. A store is opened and he can get what he wants as he wants it; a post office, soon added, gives him regular communication with the rest of the world. Then come a cobbler, a carpenter, a harness maker, a doctor, and a little church soon arises.

Satisfactions become possible that in the solitary state were impossible. There are gratifications for the social and the intellectual nature - for that part of the man that rises above the animal. The power of sympathy, the sense of companionship, the emulation of comparison and contrast, open a wider, and fuller, and more varied life. In rejoicing, there are others to rejoice, in sorrow, the mourners do not mourn alone.

OBJECTIVES:   Social Justice, Land Rights for All, Environmental Protection, Sustainable Development, Decentralisation, Opposition to Anti-Enterprise Taxes and Monopolies, Proportional Representation, Liberty from Unjust Sex Discrimination,Collection of Site Revenue and Resource Rentals, Responsible Government Expenditure, Exclusive Land Occupation, Collection of Misappropriated "Economic Rent," Natural Public Revenue, Abolition of Involuntary Unemployment, Wealth Producers to keep Full Value of their Production and Enterprise, Reducing Speculation, Freedom, Civil Liberties, Human Rights.

There are husking bees, and apple parings, and quilting parties. Though the ballroom be unplastered and the orchestra but a fiddle, the notes of the magician are yet in the strain, and Cupid dances with the dancers. At the wedding, there are others to admire and enjoy; in the house of death, there are watchers; by the open grave, stands human sympathy to sustain the mourners.

Occasionally, comes a straggling lecturer to open up glimpses of the world of science, of literature, or of art; in election times, come stump speakers, and the citizen rises to a sense of dignity and power, as the cause of empires is tried before him in the struggle of John Doe and Richard Roe for his support and vote.

And, by and by, comes the circus, talked of months before, and opening to children whose horizon has been the prairie, all the realms of the imagination - princes and princesses of fairy tale, mailclad crusaders and turbaned Moors, Cinderella's fairy coach, and the giants of nursery lore; lions such as crouched before Daniel, or in circling Roman amphitheatre tore the saints of God; ostriches who recall the sandy deserts; camels such as stood around when the wicked brethren raised Joseph from the well and sold him into bondage; elephants such as crossed the Alps with Hannibal, or felt the sword of the Maccabees; and glorious music that thrills and builds in the chambers of the mind as rose the sunny dome of Kubla Khan.

Go to our settler now, and say to him: "You have so many fruit trees which you planted; so much fencing, such a well, a barn, a house - in short, you have by your labour added so much value to this farm. Your land itself is not quite so good. You have been cropping it, and by and by it will need manure. I will give you the full value of all your improvements if you will give it to me, and go again with your family beyond the verge of settlement." He would laugh at you. His land yields no more wheat or potatoes than before, but it does yield far more of all the necessaries and comforts of life

His labour upon it will bring no heavier crops, and, we will suppose, no more valuable crops, but it will bring far more of all the other things for which men work. The presence of other settlers the increase of population - has added to the productiveness, in these things, of labour bestowed upon it, and this added productiveness gives it a superiority over land of equal natural quality where there are as yet no settlers. If no land remains to be taken up, except such as is as far removed from population as was our settler's land when he first went upon it, the value or rent of this land will be measured by the whole of this added capability.

If, however, as we have supposed, there is a continuous stretch of equal land, over which population is now spreading, it will not be necessary for the new settler to go into the wilderness, as did the first. He will settle just beyond the other settlers, and will get the advantage of proximity to them. The value or rent of our settler's land will thus depend on the advantage which it has, from being at the centre of population, over that on the verge. In the one case, the margin of production will remain as before; in the other, the margin of production will be raised.

RENT AND SOCIETY, a Course; Giles, Campton _RENT AND SOCIETY, a Course

Population still continues to increase, and as it increases so do the economies which its increase permits, and which in effect add to the productiveness of the land. Our first settler's land, being the centre of population, the store, the blacksmith's forge, the wheelwright's shop, are set up on it, or on its margin, where soon arises a village, which rapidly grows into a town, the centre of exchanges for the people of the whole district.

With no greater agricultural productiveness than it had at first, this land now begins to develop a productiveness of a higher kind. To labour expended in raising corn, or wheat or potatoes, it will yield no more of those things than at first; but to labour expended in the subdivided branches of production which require proximity to other producers, and, especially, to labour expended in that final part of production, which consists in distribution, it will yield much larger returns.

The wheatgrower may go further on, and find land on which his labour will produce as much wheat, and nearly as much wealth; but the artisan, the manufacturer, the storekeeper, the professional man, find that their labour expended here, at the centre of exchanges, will yield them much more than if expended even at a little distance away from it; and this excess of productiveness for such purposes the landowner can claim just as he could an excess in its wheat-producing power.

And so our settler is able to sell in building lots a few of his acres for prices which it would not bring for wheatgrowing if its fertility had been multiplied many times. With the proceeds, he builds himself a fine house, and furnishes it handsomely. That is to say, to reduce the transaction to its lowest terms, the people who wish to use the land build and furnish the house for him, on condition that he will let them avail themselves of the superior productiveness which the increase of population has given the land.

Population still keeps on increasing, giving a greater and greater utility to the land, and more and more wealth to its owner. The town has grown into a city - a St. Louis, a Chicago or a San Francisco - and still it grows. Production is here carried on upon a great scale, with the best machinery and the most favourable facilities; the division of labour becomes extremely minute, wonderfully multiplying efficiency; exchanges are of such volume and rapidity that they are made with the minimum of friction and loss

Here is the heart, the brain, of the vast social organism that has grown up forrn the germ of the first settlement; here has developed one of the great ganglia of the human world. Hither run all roads, hither set all currents, through all the vast regions round about. Here, if you have anything to buy, is the largest and the choicest stock. Here intellectual activity is gathered into a focus, and here springs that stimulus which is born of the collision of mind with mind. Here are the great libraries, the storehouses and granaries of knowledge, the learned professors, the famous specialists.

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Here are museums and art galleries, collections of philosophical apparatus, and all things rare, and valuable, and best of their kind. Here come great actors, and orators, and singers, from all over the world. Here, in short, is a centre of human life, in all its varied manifestations.

So enormous are the advantages which this land now offers for the application of labour, that instead of one man with a span of horses scratching over acres, you may count in places thousands of workers to the acre, working tier on tier, on floors raised one above the other, five, six, seven and eight stories from the ground, while underneath the surface of the earth engines are throbbing with pulsations that exert the force of thousands of horses.

How does this story differ from the example of the arising of economic rent given in the first half?...

Putting the two stories together clearly shows that while increasing population may expand onto less fertile land, cooperation will produce a counter - tendency which, even on the margin enhances production considerably. Rent may grow relative to earnings, but the division of labour and trade multiplies rent. This rent is the abundance which is the fruit of 'co-operation in equality'. George also adds that, as more basic desires are satisfied, new and higher desires manifest themselves drawing civilization upwards. This is indeed a picture of bliss.

RENT AND SOCIETY, a Course; Giles, Campton _RENT AND SOCIETY, a Course

Next week we shall examine a more familiar world, the world where all land is enclosed and monopolised. But enough has been said to show that a system of land tenure, coming as it does between land and labour, can make an important difference to the structure of society.

QUESTIONS

Q.1 What is rent? (p 9)

Q.2 What do producers earn in a society where land is freely available (p 10)

Q.3 What would happen under competition in this free society were some employers to offer (from ignorance) a wage above this "general level of wages"? What if employers offered too little? (p 10)

Q.4 What is the more important factor in producing rent fertility of soil or 'co-operation in equality'? What does this latter term mean to you'? (p 14)

Will rents charged on the hest sites sweep away all the advantages of occupying them?

(To be continued)


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Georgists worldwide invite you to work towards a Pattern for a Better World, and study Georgist Policy, by selecting from Graham Hart's other writings, and our 22 October 1996 leaflet on the King Street Land Tax Increase, or even the prophetic statements of CLYDE CAMERON, former Federal Minister, in Revenue that is not a Tax, whose 1989 words are just as true today as then. If interested in ELECTIONS look at "You Don't Have to Vote" by Eileen Bennett.

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(This document scanned at Tax Reform Australia, Melbourne, November 1996, and put on WWW 20 Dec 96; last revised 08 January 1998)
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