RENT IN AN ENCLOSED SOCIETY
RENT AND SOCIETY, Part 3
Rent is a measure of the degree of co-operation by the wider community with producers on different sites. Those producers scattered in outlying areas receive less co-operation. A site is valuable, not because of what is on it, but because of what is around it. The presence and activities of the community around a site cause rent.
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   The first part of this course sketched the marvellous order and abundance of the economic organism. The second part outlined the way in which this wealth is divided between the community and the individual. The key to this division of wealth is the law of rent.

   As it is stated in Progress and Poverty (Book III, Ch.2)

"The rent of land is determined by the excess of its produce over that which the same application can secure from the least productive land in use."
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   Clearly what this says is that labour on a favourable site will produce more than the same application of labour on an inferior site. This saving of labour induces the competition for better sites and that results in actual money payments being made. You will remember the simple diagram of rent and wages.
Diagram 1: Bar graph showing Rent and Wages, 

with same application of labour; orig 116 x 41 mm
However, as George himself explains, central sites are used more intensively than marginal ones and this further enlarges the difference in rent payments between central and marginal locations. So, while the simple diagram given above is useful and gives a rough idea about the difference in productivity on different sites, it only gives an approximate idea of the actual differences in rent payments between those sites.

The law of rent in turn leads as we saw to a law of wages.

Where men and land are free, earnings will tend to rise to the whole product of the least productive site in use.

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Rent has been called 'the wages of co-operation' since it-is a measure of the degree of co-operation by the wider community with producers on different sites. Those producers scattered in outlying areas receive less cooperation and produce less. A site is valuable, therefore, not because of what is on it, but because of what is around it. It is the presence and the activities of the community around a site which causes rent.

Unfortunately we do not live in a society which collects the rent of its sites as public revenue. We do not have free land, or free men; and we do not have the efficient, fair and less complicated society that would result from its collection. Instead, we live in a society where rent is privately owned and consequently where land, to which rent is attached, is sought after for its rent, enclosed and monopolised.

The law of rent still exists but now under conditions where, besides the productive use of land, there is the unproductive holding of land in the expectation of future gain.

The question is sometimes asked why do not those who hold land use it productively while they are waiting for the economic rent to increase. They could then claim the actual rent of the site while they waited. Some do of course. But it must be said that, many times, enterprises are bought solely with an eye for the rent (or surplus product for effort) which they yield.

This is often.the case where a company traditionally undervalues its location so that it loses touch with its true value. Such an enterprise can be bought cheaply if it is inefficient but welllocated. Its losses actually help pay the tax bill of the speculator.

Overall, it should be remembered that those in the business of buying and selling economic rent are not in the business of production - although they may appear to be. If they tried to actually run businesses they would soon acquire too many to run at the same time. Of course, much less effort is involved in this speculative activity, or inactivity, than in production, and the later sale of such land may bring more proflt than productive activity. Indeed, so-called capital gains are taxed less than productive activity.

An acquaintance representing Asian interests in Australia said that he supervised two businesses, one an engineering firm employing 400, and the other, a small property investment company with four or five people, a few square metres of office space and some phones. The first business made a profit of $50,000; the second business netted $5 million....

But, while this 'game' of monopoly is played, land remains one of the vital elements needed for existence. With the withdrawal of much land from its best use, there is an extension of the margin which lowers wages and constrains production (see Diagram 2).

Diagram 2: Bar graph; Extension of the margin 

due to holding land out of use; orig 117 x 43 mm

[ Top of Document ] [ Foot ]

It does not take long for an artificial scarcity of land to occur which gives rise to the idea that there are too many people. The imbalance of land and people turns whole classes of people into landless labourers whose poor bargaining position gives rise to a new law of wages.

Wages are determined by the least that men will accept.

This is because wage earners compete against each other for more or less scarce employment. A will be employed until B comes along and offers his services for less. In other words, those who labour get their own wages. However, there is even here a limit to this competition, which is the customary minimum established by what it takes to find food, clothing and shelter. This customary minimum varies between countries and rises or falls with the state of trade....

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

This situation, made even worse by the artificially high cost of land open to use, is the basic disease of any capitalist country. It is represented in Diagram 3. For the sake of simplicity land held out of use is not shown.

Diagram 3: Bar graph;

This tendency towards lower wages overlays but does not completely shroud the tendency of the economic organism to grow and to evolve. In other words, the growth of markets and of specialisation and invention continues, rather like a flower which one sees sometimes growing out of a concrete median strip. Sometimes specialisation and invention grow at a hectic pace as a way to contain costs. Goods and services tend to get more plentiful, more various, and cheaper in price. Real wages tend to rise despite inflation.

However, the picture of living standards is always confused. When one takes into account the status of workers and their fear of unemployment, accident, or ill-health, in other words, the intangible aspects of their situation, it is difficult to tell how well off they have hecome

Since wages are the least workers will accept without serious industrial and political unrest, taxation as a rule comes out of rent. In other words, employers commonly pay the taxes of their employees. Yet these same taxes also take away a good deal of the stability of businesses, that is, their ability to meet adverse circumstances. This is especially the case with those businesses on marginal locations, which lack economic rent upon which to lean for stability and profits.

Landowners of the most valuable land or resources become the prime lenders of money for production ( or investors). But interest to investors, too, must be paid for largely from rent. For employers themselves are producers subject to the same law of wages. They too have a customary minimum return and they will not work for less....

Wage earners organise against their employers in trades union to increase their earnings and, from their political action, a Welfare State arises which defends and gives some stability to what was before a fearful struggle for existence. The 'social wage', coming from taxation, also comes out of rent. The landowner now no longer receives nearly as much rent as he used to. You could say that he has been reduced to making a landlord's claim, which is what is left after taking out taxation and interest. This situation is represented by Diagram 4.

Diagram 4: Bar graph, Capitalism under  the 

Welfare State; orig 120 x 53 mm
One can now understand why some in the cornmunity called the 'new right', may well want to 'deregulate' this Welfare State so that rent may return to its original 'owners'.... We notice, too, that this "deregulation" does not include the land market, which we may only deregulate or free by the full collection of site rent. That is the only way to end land monopoly. In the meantime we may know by land price (or land value) that land monopoly exists.
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QUESTIONS
Q.1 Give a title to Diagram 1. (p. 16)

Q.2 Briefly say how wages fall to the least men will accept in an enclosed' society (i e. one divided into priva te properties with private claims to economic rent). (p 18)

Q.3 Outline the way it comes about that taxation and interest come out of rent leaving a much reduced 'landlord's claim'. (p 18, 19)

(To be continued)


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

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AUTHOR, AUTHOR!!! Care to contact the Sydney people who run this course? Write to the ASSOCIATION FOR GOOD GOVERNMENT, PO Box 443, Enfield, NSW, 2136, Australia.

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Georgists worldwide invite you to work towards a Pattern for a Better World, and study Georgist Policy, by selecting from our 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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