Fabian Tract No. 7· CAPITAL AND LAND. PuBLISHED BY THE FABIAN SOCIETY. "For the right moment you must wait, as FABIUS did most patiently when warring against HANNIBAL, though many censured his delays; but when the time comes you must strike hard, as FABIUS did, or your waiting will be in vain, and fruitless." FIFTH EDITION, REVISED. PRICE ONE PENNY. LONDON: To BE OBTAINED OF THE FABIAN SociETY. 27b STRA~m W.C. ] ANUARY, I 896. CAPITAL AND LAND. THE practical aim of Socialists with regard to the materials of wealth is" "the emancipation of land and industrial capital from individual and class ownership, and the vesting of them in the community for the general benefit." Land and capital are instruments with which man works for the production of wealth, material for the maintenance of his existence and comfort. Now it is important to notice that, though in common talk we separate the two, and though politicaleconomists have given a scientific dignity to this rough classification of the instruments of production, distinguishing as "land" that which has been provided by" Nature," and as" capital" that which has been made by human industry, the distinction is not one which can be clearly traced in dealing with the actual things which are the instruments of production, because most of these are compoundedof the gifts of Nature and the results of human activity. "Land." The only instruments given to us by Nature are climate, physical forces, and virgin soil. The use of these passes with legal "property" in the land to which they belong, and they are consequently classed with "land." Those virgin soils are called good or fertile which contain in abundance elements which the chemistry of animal or vegetable life can convert into the materials of human food, clothing, &c. Other mineral elements of particular patches of soil are convertible, by the arts of the mining, metallurgic, building, and engineering industries, into a thousand forms of wealth. How "Land" gets Value. But even these qualities of virgin soil are of no use or value unless they are found in accessible positions ; and their advantage to the proprietor of the land increases rapidly as human societydevelops in their neighborhood ; whilst in all advanced societies we find large areas of town lands whose usefulness and value have nothing to do with their soils, but are due entirely to the social existence and activity of man. Land in Cornhill, worth a million pounds an acre, owes its value to the world-wide industry and commerce whose threads are brought together there, not to its natural fertility or to the attractions of its climate. " Prairie value " is a fiction. Unpopulated land has only a value through the expectationthat it will be peopled. • See the "Basis" of the Fabian Society, page rg. 4 The "natural " capabilities of land are thus increased, and, indeed, even called into existence, by the mere development of society. But, further, every foot of agricultural and mining land in England has been improved as an instrument of production by the exercise of human labor. First, of human labor not on that land itself; by the improvement of the general climate, through clearing of forest and drainingof marsh ; by the making of canals, roads, railways, rendering every part of the country accessible ; by the growth of villages and towns, by the improvement of agricultural science ; and still more by the development of manufactures and foreign commerce. Of all this human labor, no man can say which part has made the value of his land, and none can prove his title to monopolize the value it has made. Secondly, all our land has been improved by labor bestowed especially upon it. Indeed, the land itself, as an zizstrument ofproductz( m, may be quite as truly said to be the work of man as the gift of Nature. Every farm or garden, every mine or quarry, is saturated with the effects of human labor. Capital is everywhereinfused into and intermixed with land. \Vho distinguishes from the mine the plant by which it exists? Who distinguishes from the farm the lanes, the hedges, the gates, the drains, the buildings, the farm-house? Certainly not the English man of business, be he landlord, farmer, auctioneer, or income tax commissioner. Only the bold bad economist attempts it, and, we must add, some few amongst our allies, the Land Nationalizers. It may be worth while to digressfor a while in the company of these latter. A Word to "Land Nationalizers." The arguments revived in our generation by John Stuart Mill and Henry George, and the activity of the various societies that have taken in hand the work of diffusing them, have now converted an immense body of public opinion to the Socialist view of the justice of, and urgent necessity for, Nationalization of the Land; or, at least, the absorption, by the State or Municipality, of ground ,. rents, mining royalties, and similar unearned profits from the soil. Land Nationalizers go, generally, so far with Socialists that (in the words of the Fabian " Basis ") they " work for the extinction of private property in land, and of the consequent individual appropriation, in the form of rent, of the price paid for permission to use the earth, as well as for the advantages of superior soils and sites." But some, who are thus far Land Nationalizers, still shrink from any interference with the legal powers enjoyed by the holders of capital. Hence a most unfortunate separation exists between them and the Socialists, whose design of nationalizing the industrial capitalwith the land appears to them unjustifiable and unessential. Capitalist and Landlord in One Boat. They use the argument that capital, unlike land, is created bylabor, and is therefore a proper subject of private ownership, while land is not. Socialists do not oyerJook the facts on which this 5 argument rests, but they deny, on the grounds already partly stated, that any distinction can be founded on them sufficiently clear and important to justify the conclusion drawn. But, supposing we assume it true that land is not the product of labor, and that capitalis ; it is not by any means true that the rent of land is not the product of labor, and that the interest on capital is. Nor is it true, as Land Nationalizers frequently seem to assume, that capital necessarily becomes the property of those whose labor produces it ; whereas land is undeniably in many cases owned by persons who have got it in exchange for capital, which may, according to our premisses, have been produced by their own labor. Now since private ownership, whether of land or capital, simply means the right to draw and dispose of a revenue from the property, whyshould the landowner be forbidden to do that which is allowed to the capitalist, in a society in which land and capital are commerciallyequivalent? Virgin soil, without labor upon or about it, can yield no revenue, and all capital has been produced by labor working on land. The landlord receives the revenue which labor produces on his land in the form of food, clothing, books, pictures, yachts, racehorses, and command of z"ndustrz"al capztal, in whatever proportions he thinks best. The ownership of land enables the landlord to take capital for nothing from the laborers as fast as their labor creates it, exa~tly as it enables him to squander idly other portions of its product in the manner that so scandalizes the land nationalizers. When his tenants improve their holdings by their own labor, the landlord, on the expiration of the lease, remorselessly appropriates the capital so created, by raising the rent. In the case of poor tenants holding farms from year to year in Ireland, the incessant stealing of capital by this method so outraged the moral sense of the community, that the legislature interfered to prevent it long before land nationalization was .commonly talked of in this country." Yet land nationalizers seem to be prepared to treat as sacred the landlord's claim to private propertyin capital acquired by thefts of this kind, although they will not hear ·Of their claim to property in land. Capital serves as an instrument for robbing in a precisely identical manner. In England industrial -capital is mainly created by wage workers-who get nothing for it hut permission to create in addition enough subsistence to keep each other alive in a poor way. Its immediate appropriation by idle proprietors and shareholders, whose economic relation to the workers is exactly the same in principle as that of the landlords, goes on everyday under our eyes. The landlord compels the worker to convert his land into a railway, his fen into a drained level, his barren seaside waste into a fashionable watering place, his mountain into a tunnel, his manor park into a suburb full of houses let on repairingleases ; and lo ! he has escaped the land nationalizers : his land is now become capital, and is sacred. The position is so glaringly absurd, and the proposed attempt to discriminate between the capital value and the land value of estates • See, for instance, the Irish Land Acts of 1870 and r88r. ' 6 is so futile, that it seems almost certain that the land nationalizers will go as far as the Socialists, as soon as they understand rhat the Socialists admit that labor has contributed to capital, and that labor gives some claim to ownership. The Socialists, however, must contend that only an insignificant part of our capital is now in the hands of those by whom the labor has been performed, or even of their descendants. How it was taken from them, none should know better than the land nationalizers. It is scarcely necessary to enlarge on or illustrate the obvious truth that, whatever the origin of land and capital, the source of the revenues drawn from them is contemporary labor. The remainder of this tract may still further impress the impossibility of maintaining any hard and fast lines between them, either as regards their characteristics and importance in developed societies, or the defensibility of their private ownership or the arguments for their nationalization. " Capital." To return from our digression : When we consider what is usually called capzlal, we are as much at a loss to disentangle it from land as we are to find land which does not partake of the attributes of capital. For though capital is commonly defined as wealth produced byhuman labor, and destined, not for the immediate satisfaction of human wants, but for transformation into, or production of, the means of such satisfaction in the future ; yet railways, docks, canals, mines, etc., which are classed as capital among the instruments of production, are really only somewhat elaborate modifications of land. The buildings and the plant with which they are worked are further removed from the form of land, but we lump the lot as capital. All farming improvements, all industrial buildings, all shops, all machinery, raw material, live and dead stock of every kind, are called capital. And just as there is a purely social element in the value of land, so are there purely social elements in the value of capital ; and its value, in all its forms, depends upon its acces ;• sibility and fitness here and now, and not on the labor it has cost. The New River Company's Water Shares have their present enormous value, not because Sir Hugh Middleton's venture was costly, but because London has become great. The usefulness of fixed and unchangeable forms of capital increases and decreases through external causes, just as does that of land. If instruments of production must be classified, the best division of them is into z"mmovables and movables/ the annual value of buildings, railways, mines, quarries, waterworks, gasworks, durable fixed machinery, and many other forms of so-called capital, manifestly agreeing with that of land in fluctuating according to causes of which the effects are generalized in the "Law of Rent " of abstract economics. Besides industrial capital, there is a considerable amount of what has conveniently been called "consumers' capital." Dwelling-houses, and all their domestic machinery and conveniences are as necessarv for production as land and factories ; for though the worker use's them in his character of consumer, they are necessary to maintain 7 him in efficiency for his work. All private stores of food and clothing, all forms of personal property, may likewise be classed as consumers' capital. It will, however, be evident that, in classingthese as capital, the signification of that name is becoming very vague and indefinite. Finally, we have such purely non-material and social kinds of capital as banking and credit organizations, inventions, ·and other devices for extending and intensifying our power over Nature ; social forces of immense importance for the carrying on of wealth production, largely capable of social ownership, not entirely capable of private monopoly, but at present appropriated by some individuals more than by others. What is the Estimated Value of our National Stock of the above-named form of Wealth? In December, 1889, Mr. Robert Giffen attempted to compute the capital value of realized property in the United Kingdom as it was in the year 1885.* The following table is reproduced from that furnished by him, the figures being corrected according to the official Returns of Income-Tax Assessments for 1894-95.t The estimate of the value of the capital is arrived at by taking what Mr. Giffen considered a suitable number of years' purchase of the income : No. of CapitalGross Annual Value of Property Assessed. Years' Purchase. Value. Under: Schedule A- Lands, rent-charges, tithes, &c... Land with houses on it Other profits from land Schedule B£ s6,582,o2o 149,625,984 533,88I 26 IS 30 £1,47I,I32,520 2,244,389,760 16,oi6,430 Farmers' profits Schedule C... 8 448,421,760§ Interest from Public Government Funds, not Englisht ScheduleD25 601,952,625 Quarries, mines, ironworks, &c.... Gas Works Water Works Canals, &c. . Fishings and shootingsMarkets, tolls, &c. Salt Springs or Works and Alum Works I 5,197,071 4,770,885 3,8o8,I79 3,493.590 732,598 626,349 262,779 4 25 20 20 20 20 20 6o,788,284§ I 19,272,125§ 76,I63,58o§ 69,87r,8oo§ 14,65I,960§ I2, 726,980§ 5,255,58o§ (For notes and explanations as to this table, see next page.) * See The Growth of Capital, by Robert Giffen (London, Bell & Sons, 1889). Also Essays in Finance, 2 vols., by the same author. t Thirty-eighth Report of the Commissioners of Inland Revenue. C-7854, 1895 ; price 6d. The amount stated as annual farmers' profits appears to be excessive, as Mr. Giffen overlooked the fact that the Income Tax Acts assume the net profits of agriculture (in England) to be equal to one-half the rent, not the whole as here given. The number of years' purchase of rural land may also be regarded as too high. On the other hand, that of urban properties is much understated. But these considerations do not materially affect the aggregate total, and Mr. Giffen's basis has therefore been throughout maintained. 8 No. of Capital Gross Annual Value of Property Assessed. Years' Purchase. Value. ScheduleD- Cemeteries ... Puhlic Companies... Foreign and Colonial Investmentst Railways in United Kingdom ... Railways out of do.t Interest paidoutof Local Rates, &c. Other similar profits Trades and Professions (taking one-fifth of the gross incomes as interest on capital) ... Trades and Professions omitted from assessment, say 20 per cent. on amount assessed (£I8I,48I,609), taking one-fifth of this income also as interest on capital Income from capital of non-taxpayersForeign Investments, not included under Schedules C and Dt Movables, not yielding income ... Government and Local Public Property, say ... Total estimated capital value 67,385 65,83I,I4I I 7 ,I 58,86I 35,786,668 I4,I52,2I4 20 20 20 28 20 6,824,495 I,637,985 25 20 IS IS 70,000,000 50,ooo,ooo 10 I,347,700§ 1131616221820§ 343,177,220 I ,oo2 ,026,704 § 283,0+4,280 I7016I21375 32,759.700 544.444,830§ Io8,888,96o§ 350,ooo,oooll§ soo,ooo,ooo I ,ooo,ooo,oooll 6oo,ooo,oooll " Land" and " Capital" Indistinguishable. It may be noticed that there is no attempt in this table to distinguish between what Land Nationalizers might think should be classed as land, and what they would admit to be capital. The common sense of the ordinary business man and statistician recognises that such distinction is impracticable and arbitrary. To the business t These claims constitute part of the social question of other nations than our own. The amount in the last case is conjectural only, and is the same as that givenby Mr. Giffen in his estimate for r885. II These amounts being conjectural only, are reproduced from Mr. Giffen's estimate in I885, with small additions, amounting in all to £I55 1ooo,ooo, on the capitalvalue. § Of these totals which make up the" industrial capital" of the country, amounting to £4,I30,483,083, at least £2,020,4I7,I90 is under joint stock management, £I,035,029,835 being the paid-up capital of the I8,36I registered companies carryingon business in April, I894, and £985,387,355 being the paid-up capital of the railwaysin the United Kingdom at the end of I894· See the Annual Statistical Abstract, forty-second number, C-7875, I895 ; price Is. To this must be added the capitaladministered by chartered banks and trading companies, not registered under the Companies Acts. , It is interesting to compare this total for r895 with those arrived at in previous years, which were based on similar statistics and calculated on the same methods as now used. The total thus estimated by Mr. Giffen in I865, was £6,r I41063,000; in I875, £8,548,I2o,ooo; and in I885, [Io,079,579,ooo; while the total now given is £rr,393,567,993· The increase in realized wealth in thirty years may, therefore, safely be estimated at over five thousand millions sterling, or an average of I75 millions a y~r. The avera15e annual increase has been at the rate of 2~ per cent., or more than twtce the rate of mcrease of the population. q man they are both equally forms of property, merely different kinds of investments-that is, arrangements for obtaining a revenue from the labor of others. The practical statesman sees in them simplysources of income, and assesses them equally to income tax. Indeed, that famous tax of 20 per cent. on rent, of which the English Land Restoration League and many Radicals are demanding the revival, was not imposed as a land tax at all, but formed part of the incidence of a general tax of four shillings in the pound on the annual value of ALL REALIZED PROPERTY AND SALEABLE INTERESTS, excepting only farm stock and household furniture.* Will not the Land N ationalizers take this hint, and include all unearned incomes in their "SingleTax " Program ? Who own all this Land and Capital ? Who, then, are the Landlords and the Capitalists amongst us ? Theyare those persons who own the instruments of wealth-productionand enjoy the profits of them. In England, as in all developed industrial societies, almost the whole of the land and industrial capital, and most of the consumers' capital (chiefly consisting of dwelling-houses) is at present owned and controlled by one set of people, while it is another set of people who produce wealth by using them. "Capitalists," A glance at Mr. Giffen's table will show how little of the material wealth of England is available for immediate enjoyment or consumption, and how large a proportion is in the form of machinery to aid labor in the supply of our wants from day to day. The value of movable personal property, not employed as instruments of production, must be less than one-tenth of the total. Dwelling-houses, and the land attached to them, may amount to about two-tenths more. But occupying ownership of these properties is the exception, and most of them are used by their owners as an investment yielding rent, paid out of the earnings of working occupiers. The whole of the remainder consists of land and capital employed for wealth-production in agriculture, mining, transport, and other industries, trades, and professions. Four-fifths of our national wealth, we may safely say, consists of such instruments. The wants of the community are suppliedfrom year to year, and week to week, by the reciprocal services * It was an" Aid" (or tax upon realized property) imposed primarily upon all persons" having any Estate in ready Monies, or in any Debts whatsoever owing to them, within this Realm or without, or having any Estate in Goods, Wares, Merchandizes, or other Chattels or personal Estate whatsoever" . except "the Stock upon Lands and such Goods as are and for Household Stuff" • . . at the rate of "four Shillings in the Pound according to the true Yearly Value thereof," computed at 6 per cent. of their capital value (see the Act of Parliament of 1692. 4 William and Mary, cap. I., sec. 2), including also the emoluments of public officers, at that time regarded as saleable property (sec. 3), and finally " to the end a. further Aid and Supply for their :'11ajesties' Occasions may be raised," a similar tax is imposed on Lands "according to the true yearly Value thereof at a Rack Rent" (sec. 4). IO of the active workers who use and administer them. The worker, of whatever kind, is paid by a wage, a salary, a professional income, or profits due to his skill in organizing or directing industry, the amount of which is determined by competition between himself and other workers. The owners of the instruments of production receive as rent and interest such an amount of the value of the produce as equalizes the normal income of the workers in each calling ; that is to say, they obtain from the workers who are using their land and capital a toll equal to the difference between the product of industryengaged in with any particular instrument of land or capital, and the product of the like industry engaged in with the least efficient instrument actually employed anywhere at the time. Some of the workers are, it is true, themselves capitalists, that is to say, own larger or smaller amounts of land and capital ; and manycapitalists work. How many, and how much? Here are some facts gathered from the Report of the Commissioners of Inland Revenue for I 894-95, and other reliable sources. "Landlords." The landlords (t".e., persons owning more than a field or a tenement each) number only 180,524. Out of a population of 37,ooo,ooo, one two-hundredth part of the population owns ten-elevenths of the total area.'" About six-sevenths in number, and more than nine-tenths in value of the properties assessed to land and house tax are owned bypersons whose incomes exceed £400 a year.t Not four per cent. of persons dying (of whom one half are adults) leave behind them £IOo worth of property, including personaleffects not of the nature of land or industral capitaU One-half of the wealth of the kingdom is held by persons who leave at death at least £2o,ooo, exclusive of land and houses. These persons form a class somewhat over 25,000 in number.ll "Workers.'' How much land and capital do the manual labor class own ? Supposing that they were the owners of the whole of- the deposits (1894) in the P.O. Savings Banks§ £89,266,o66 , , Trustee , § 43,474,904the Consols purchased for small holders by the Post Office§ 7,028,196the nominal capital (I 893) of the Building Societies~ ... 44,421,531 * Mulhall's "Dictionary of Statistics," p. 266. t Inland Revenue Reports, C-7854, 1895 (Abatements and Exemptions, Schedule A, p. 37)· t See Probate Duty Returns. II See Mulhall's "Dictionary of Statistics," pp. 278, 279. Also ·• Facts for Socialists," published by the Fabian Society; price Jd. § See" Statistical Abstract," 1895. ,-See "Second Annual Report of the Labor Department of the Board of Trade," C-7,900, 1895. II The nominal capital of the- Trade Unions (I893)'"' ... £I,556,563 Co-operative Societies (1893)" 17,350,622 t Friendly and Provident Societies (1892)* 26,003,o6I Industrial Life Assurance Societies (I893)t I21I29,228 they would own land and capital valued at ... 24I 1230,J4I II that is to say, little more than one-fiftieth part of the land and capital with which they work. The number of persons •' employed at wages" in the industries of the kingdom, is estimated at about fourteen millions, including over four million women. The share of the able-bodied manual workers, in property, then, must average not more than £!7 per head of those in employment, producing less than ten shillings a year interest. What the. value of the capitalowned by workers above the manual labor class may be, can only be conjectured. But we know from the Income Tax returns that out of the total of I 6! millions of separate incomes, only It millions amount to £I so a year and upwards ; and we have noticed how small is the number of persons owning large amounts of property in the instruments of production. What sort of a System is this ? Labor politicians, Land Nationalizers, Conservatives, Radicals, all who interest themselves in social science as the study of the well-being of man, will agree with us that The Use of Land and Capital should be to serve as instruments for the active, the energetic, the industrious, the intelligent of mankind to produce wealth for themselves and those who are necessarily dependent on them, and to maintain the conditions of healthy existence for the society which they compose. And will they not also agree with us that it is The Abuse of Land and Capital that they should be made by the laws of any people a " property "