Spencer Heath Archive

Item 1002

The first statement of the proprietary community principle as published in mimeograph in 1936 together with related correspondence under the title, Politics versus Proprietorship, pages 10-22. What may have been the first pencil draft of this will be found in the Originals envelope for this Item, and the second, also in pencil, may have been Item 1006 (they have yet to be compared carefully to know which was earlier). The earliest exposition of the proprietary principle may have been a letter from Heath to his maternal aunt, Mrs. Minnie Payne Barr, August 1933, subsequently published as the chronologically opening piece in Politics versus Proprietorship. However, it is interesting that Heath was beginning to develop Roadsend Gardens at Elkridge as a land-lease, or proprietary, residential neighborhood before any writing about the principle involved.

Original -> 1002 [The notepad contains the originals of items 183, 973, and 975, but bears little relation to this documents.]

 

 

HENRY GEORGE

A Further Application of

His General Principles

 

For a reverent attempt, in the candid spirit of Henry George, to extend and to trace out more of the creative implications of the principles of social relationships so eloquently illuminated by him, no apology should be offered or required, for on the very first page of Progress and Poverty we have these words: “What I have most endeavored to do is to establish general principles, trusting to my readers to carry further their applications where this is needed.”

 

In his last and unfinished work, The Science of Political Economy, in chapter XI, he shows that exchanging is production and discloses that exchanging is more: it is the highest mode of produc­tion, and at page 340 he states that, “production and distribution are in fact not separate things.” He thus finds both production and distribution in the phenomenon of exchange. He came to this concep­tion chiefly in Chapter XI, which he left incomplete with the follow­ing announcement: “And in addition to the laws already explained there is another law or condition of nature related to men, which is taken advantage of to the enormous increase of productive power in ex­change.” (P. 316)

 

Here there followed a note, ” leave six pages.” It is clear that he intended to set out this additional law on those pages. From the trend and direction of his thought, it seems probable that he would have found exchange to include all of that production and distri­bution with which economics as a social science has any concern. He would have found adaptation and growing not necessarily to be social acts, but exchange an exclusively social phenomenon. The others may be performed by a lone individual outside of society with a view to immed­iate satisfactions without the intervention of trade or exchange. In them physical science may be availed of, but no social science can be involved except as to acts carried on in connection with exchange or with a view to and dependence upon goods being exchanged.

 

Exchange value is therefore a social value, which arises, in quantitative terms at least, only at the actual point of exchange. From the standpoint of exchanger, it is effort or labor; from that of exchangee, it is satisfaction and service — and each party balances labor performed or service rendered against satisfactions gained and service received. Since exchanging is the only mode of realizing value in exchange, and as this is the only kind of value that is socially produced or acted upon, it is the only kind of value to be dealt with in a social science.

 

So the essential subject matter of political economy is services and their exchange, and it includes both production and distribution, production being a concomitant of exchanges, and final distribution being coincident with the last exchange and not to be effected by any other means. It is true, of course, that wealth may be appropriated by force or theft; but this does not exemplify the operation of economic law, but rather an interruption of it, nor does allotment by gift in­stance anything but a special arrangement in the consuming of wealth. And George truly states (Science of Political Economy, p. 349) that production and distribution are in fact not separate things, and that interference with distribution is interference with production. He might have summarized that all economic interference is interference with exchanges.

 

Now value, value in any sense, appertains only to man, and in the economic sense value is at bottom the value of what men do for each other — the services they render each other by means of exchange. If these services are directly to the person, they are seen simply as services, and the profit in them, the production generated by their exchange, lies in the vastly increased satisfactions derived by serving each other above those which might be obtained by each one serving himself alone. Obtaining these great satisfactions is economic co-opera­tion and is the basis and incentive to all trade or exchange.

 

However, most services are not rendered direct to the person, but are first impressed upon some of the substance of the earth and ac­ted upon by a succession of persons whose services impress upon it in­crements of value, the accumulating total of which is expressed by the terms of each successive exchange. Substances so impressed are proper­ly called wealth, but we must remember that what makes them wealth is not their substance but the labor that has been impressed on and accumulated in them. These substances while in the course of exchange or of being used to facilitate exchange and until they reach the end point of exchange, which is consumption, and where they begin to revert to the earth, are properly called capital. All wealth, therefore, throughout its creation by exchanges and until consumption begins, is capital. And at all stages of exchange, what is really traded is accumulated services on their way to yielding satisfactions at the point where trade ends and consumption begins.

 

Successive steps in the course of exchange are usually not ef­fected by direct exchange of wealth for other wealth (capital for capital), but by a two-stage process in the first half of which the party delivering wealth accepts numerical tokens or credits which, upon some scale generally accepted and agreed upon, express the ex­changeableness of the wealth delivered as of the time and place of delivery. The second half and completion of the exchange step is in the yielding up of the tokens or transference of credits upon ac­ceptance of such variety and quantity of wealth, or direct service, as best meets desire and is of the same exchangeableness. The profit and advantage to both parties to the exchange, the creativeness of the process, lies in the enormous variety and amount of satisfactions and services that each obtains for a relatively simple and small amount of labor put forth.

 

This utility and free working of the normal processes of ex­change is immensely impeded and demoralized by a maze of regulations, restrictions, taxations, and so forth, applied by direct government authority and a like maze of monopolies and special privileges that grow out of government oppression and harassment of the processes of exchange, to justify all of which one must need suppose the produc­tion of wealth a crime. Under this hampering and discouraging of exchanges probably not more than a third of the normal production is ever attained and out of this must come every direct and indirect exaction of government, of monopolies and special privilege in ev­ery guise, leaving those low and high whose services created the wealth but a beggarly wage and so low an increase on legitimate capital that the upward flow of production through exchanges al­most ceases to move for long periods at a time. Now the evil in these governmental and private exactions is not that wealth is diverted from those who produce it, but that it does so without free bargaining and that no service or other wealth is rendered in return. It is not that wealth passes to this or that interest, but that it does so by coercion and without recompense. But, as­suming private violence to be restrained, it is only by govern­ment or by power derived from it that any coercion of free ex­changes (production) can be applied, and the basis of this is the exercise of power to tax, or the power to penalize productive acts which is, in its effects, the same thing.

 

Often it is said that taxes on production are payments for pub­lic services. They are not levied on this basis, but rather on the theory of ability to pay without ability of effective protest or evasion. Nevertheless, public services are financed and per­formed. But they are performed only upon the public property and highways and delivered only to the private locations contiguous thereto; that is to say, none but those who have exclusive rights in these locations either by lease or purchase can avail themselves of public services. These services, therefore, are paid for in part by taxes, and for the remainder by so much of rent as is taken in taxes, the balance of rent being apparently for no services. But how can there arise any balance of rent except services be performed? The answer is that this balance of rent above the cost of public ser­vices is the difference between their cost to rent-payers and their value to these same rent payers as reflected in the rent they pay. It is the profit upon their investment in public enterprise, correspond­ing with the profits upon investments in private enterprises, except that the profits upon public enterprises go not to the payers of rent who finance the enterprises but to the collectors of rent, the owners of land, who retain the profits without financing the enterprises.

 

However, this is no profit to the landowner, for, except in the event of population movements rapidly increasing the production of wealth and public services, in order to become an owner he must have paid for his land the entire capitalized value of the net income from it, and his return is no more from his land than it would have been from his capital without a purchase of land. And even where there is a rapid increase of population and demand for land, the only way a land speculator can realize profit from it is by having out-guessed the former owner as to how fast the value of the land will increase, for if he has not done this he will have paid in his purchase price for all or more increase of value than has taken place.

 

But there is a way for the landowner to make for himself at once handsome profits and increase of income and be a useful servant of his fellow-men at the same time, and this without any increase in population demand for land. He can do this by becoming himself a pro­ducer of and a restorer of land values. First, he must restore the value of land in his community by procuring the emancipation of rent paying business and industry from their present burden of taxes, and thereby also from the damages and demoralization to productive power caused by the manner in which these taxes are imposed.

 

This exemption from taxes would at once increase rents by the same amount, and at the same time vastly increased productivity and profits of industry when emancipated from the harassments of govern­ment and the blight of monopolies and special privilege would result in a further enormous increase in the demand for land with constant increase of rent, and all this last would be net return to the land­owner for his services in behalf of industry’s emancipation, even after paying out of his increased rents all of the taxes formerly laid upon productive enterprise.

 

Further, in addition to this net gain, the landowner, now transmitting from private industry by way of rent the entire support of government and all its services, would find himself immensely inter­ested in economical and efficient administration of all public affairs because every slackening of government services would tend to reduce rents without reducing taxes, and every economy or improvement of these services would actually increase the landowner’s share in rent without increasing taxes at all. To gain all this it is only necessary for landowners to give their natural interest and attention to public affairs and assume their natural and appropriate function in the fruitful and progressive administration of them.

 

The great Henry George, not discerning this natural, at once pri­vate and public function, of landowners to invest their rents and also apply their services in the administration of public affairs and to receive in compensation for their services all the increase of rent above the cost of government, was driven to the conclusion, “Land must be made common property; the question of justice arises and we pass into the field of ethics.” (Progress and Poverty, page 3)

 

In this he showed that economic laws, as he perceived them, would not suffice; we must appeal to ethics and impose its decree. This in­dictment of the economic laws should be withheld at least until we have further fathomed them. They are based on a proposition that vio­lates no ethic, namely, that men must seek to satisfy their desires most fully by the best use of their powers, hence no ethical correc­tion should be required. This is seen to apply to those who receive wages, interest, and profits (contingent wages), but is not seen to apply to land owners. Those who produce and/or increase private val­ues by investment in and administration of private goods and facili­ties which they own or hire do so by increasing the value (exchangeableness) of the things which they own or hire.

 

Similarly, if landowners learn or be in any manner persuaded to use rent for investment in public enterprises and then productively and creatively administer these enterprises, the services they perform will be worth more than the cost or amount of rent invested in them, by an amount equal to the productivity of the service performed, which amount would immediately attach itself to and augment the pre­existing land values and thus flow to those whose service created it and this by the automatic operation of economic law without any ap­peal to supposedly more ethical science to supplement or “reform” any deficiency, or default.

 

We are further told, “there is a fundamental and irreconcilable difference between property in things which are the product of labor and property in land.” (Progress and Poverty, page 3) Doubtless this is in some sense true; but labor does not produce things any more than it produces land; it only produces the values that by its exer­cise are impressed on things, and this is as true of land in situ as of any part or thing separated from it, the site value being the val­ue of the social services delivered to it.

 

The query arises why landowners have not risen to their oppor­tunities and become heretofore investors in and administrators of those agencies which, by yielding public services, create land val­ues. There is no single or simple answer to this. But first, it is not wholly true. In Europe before the advent of democratically plan­ned societies, it was a frequent practice for lords of the land to organize free communities. These were called free cities or salvitates because their people and their wealth and trade were saved and protected from the violence and aggression that broadly prevailed. Hundreds of these communities were formed. The lord advertised far and wide for inhabitants, guaranteeing them protection and public or common services, such as avenging their wrongs, providing courts and highways, and securing justice in all things, exacting in return fees or rents from those who took the allotments of land. Here was the rough germ of a functional society with the owner of the land investing his rents in the common services and gaining recompense by their profitable administration. However, in the violence of the times these communities and the free cities were absorbed in petty kingdoms on their way toward becoming nationalistic states with their policies of taxing, regulating, and, through special privilege and monopolies, all but destroying productive enterprise.

 

Despite historic example, however, the modern landowning inter­ests share the almost universal lack of information on this subject, and they have no doubt been affected and misled by the prevalent idea that land value taxation, instead of affording them a rich field of investment and employment, would result in their destruction. Be­yond this the following observations on the sources of land value have a bearing.

 

There are two kinds of social (co-operative) activity. One of these is public and governmental and not capable of being carried on without governmental power and authority, either direct or delegated by charter or franchise to some individual, group, or corporation. The other kind of social activity is all that which is private and individual, and for the carrying on of which no governmental power is required. This includes private activities of every kind that minister to aspiration or desire, so only they be creative, in two ways. They are creative directly by leading to the satisfactions for which they are purposefully performed, and they are also creat­ive indirectly and unconsciously through the establishment of a field of economic and cultural advantage in a place or community, accord­ing to the extent to which these activities prevail. These advantages, of course, as all Georgists and all real estate salesmen so well know, attach themselves to the land, and thus land values are born which are in addition to that land value created by activities of the first kind, that is, by government authority or the exercise of delegated government power to provide what are called the public services, and which well might be wholly financed and creatively administered by owners of land.

 

We have, therefore, two elements entering into the desirability of using land, — that which results from public services and immuni­ties at the place where the land is, and that which results as a by­product of non-governmental activities in the economic and cultural advantages of the place where the land is.

 

At this point an interesting question arises: even with land­owners financing all the public services, should they then take all of the advantages appertaining to land arising from land values, including those which proceed from activities of the second kind in which the landowners as such have played no creative part?  The an­swer is that they should not, nor can they. If the rent paid by the productive (exchanging) forces of any community should absorb all the value and advantage of occupying that community, there would be no ad­vantage to the population in occupying that place and the rent must fall. But this is a condition that could not arise because rent is paid only for advantages that exceed their cost to the rent-paying interests, and these interests will not compete against each other beyond the point of net advantage to themselves, nor will landowners fail to compete against each other in providing public services on favorable terms. This profit and advantage to rent payers, which induces them to become such, insures retention by them of all the value and advantages which result from their own activities.

 

Landowners however finding that, beyond the values created by their services in the administration of public affairs, there is what we may call a cultural advantage arising in their communities when they have supplied all the public services for which there is need and demand, may well discover that by lending their support to and promoting the cultural activities of their communities, they can increase the demand for the public services which they supply, and further advance their pecuniary interests by enhancement of rent in this way. Thus will arise a natural inducement to them to enter upon a higher plane of community service and also a natural and automatic reward for services of this kind.

 

From this view it is easy to see that to the status of landowner there would be attracted not only persons of high gifts for adminis­tering government affairs, but also those of best talents for the extension of community activity on high cultural planes. And as the public desires come to attach progressively to satisfactions of higher kinds, the relatively more important would become the cultural val­ues which the landowners helped to advance. This of course would tend to draw all that part of the population having the gifts of states­manship and cultural capacity into such community service as requires these gifts, either by becoming owners of land, if they had resources to invest, or by taking employment under those who do so invest, just as in private industries engineers and technicians take employment under those whose investments are in capital goods and whose business it is to add to the value of that which they own and have by impress­ing upon it the values that their labor and the labor of their asso­ciates create.

 

From what has gone before it can be seen that what vitiates capitalism, when rightly understood (see Progress and Poverty, Ch.5, Book 1), is not its growth but its immaturity; that the use of capi­tal, which is the use of goods in the processes of manipulation and in the flow of exchange, has not been properly extended to community goods, that is, goods employed in the furnishing of such services as are of necessity public and collective, and the values of which are manifested as land values.

 

It is to the interest of every individual and every class that this other phase and completion of the capitalistic organization be advanced as speedily as good order and the growth of intelligence on the subject will permit. Some landowners, lacking understanding, may be reluctant to have the burden lifted from the back of labor and en­terprise, or to yield up for public purposes any of the increased rent or value this would bring to them; but when the body of landown­ing population has assumed its profitable obligations and status, it may be relied upon to bring all its recalcitrant members into line.

 

The first essential is a widespread discovery and realization of the creative social functions appertaining to the status of ownership in land and of the high and honorable rewards that are the normal and spontaneous fruits to the owner himself of this function being per­formed. There is here a complete welding of the particular interest with the general interest, certainly a state of affairs that does not now exist but a consummation devoutly to be desired. The discovery of this natural and creative relation and activity as a proper and use­ful function of land ownership — a relation rudely acknowledged in ancient times and still expressed or implied in every title deed — this re-discovery today, with appreciation of its tremendous signif­icance in our modern complex society, should lead to an almost spon­taneous emancipation of creative industry from governmental strangu­lation and the cut-throat employment of governmental power by private interests. The first effect would be the elimination of the tax load and its transfer to the side of profits on the financial statement of every business large and small.

 

As a second effect there would be an enormous expansion of un­hampered exchanges completed to the point of consumption under the double incentive of rising profits and unrestricted operations. The demand for land and the great profits from its use would increase the offerings for it and cause an enormous rise in rents and in the sel­ling price of land. This enhancement of rent might well lead to a vol­untary financing of public services by landowners and a gradual entry into land ownership of those persons and classes who could create the highest public values at lowest cost. And the proper reward for these services lies in the ever increasing spread between the investment and the maintenance costs of those services and their actual value to the community as expressed in the rents or annual land values gener­ated by them.

 

In a like manner, the vastly increased profits and rewards of a free and unburdened industrial economy would draw away from land ownership precisely those persons of greatest gifts in the field of investment and administration belonging to that other and more famil­iar aspect of capitalism, which is private industry and trade. The re-cognition of those two proper fields of investment and creative enterprise in public and private administration is a first requisite to a balanced economy as between public and private values, activi­ties, and affairs.

 

This extension of view upon the implications residing in a policy of exempting all private exchanges from the burdens of social needs and transferring this burden to social income can be approached from a number of different angles and lines of thought as it certain­ly will be by others who will have greater industry and investigatory resources.

 

It can be developed upon a systematic plan of government with reference to the general sovereignty extending to the entire terri­tory and the particular or residual sovereignty reposed in those who hold particular parcels of the territory by delegation of sovereign power and the responsibilities and rewards imposed and made possible by that delegation of power, the landowner being an inevitable and integral element in the organization of the state as a framework, an articulated general organ or skeleton, as it were, upon whose rugged service and support all the particular organs with their intricate and automatic reciprocal relations may depend.

 

Another approach is the evolutionary, the conception of society as a developing organism with differentiation of parts and their de­velopment of special functions, each part by its very nature and for­mation contributing to the well-being of every other and of the whole, as exemplified in the minute division of labor and professions and the establishment of economic classes and industries along functional lines.

 

Another would be the historical view, tracing throughout the past the ubiquitous principle and practice of the producing interests hold­ing lands of their lords and chiefs who gave protection and other rude public services in exchange for dues.

 

Another and negative view would be through the study of “planned” societies with their principle of democracy — the theoretical exten­sion of rulership to wider and wider classes without any automatic or other selectivity and without regard to their relationship as creators or recipients of public services and values, the results being dissipation and abuse of public power to private ends and the democ­racy in form becoming ever more demagogic in fact. The extension of the demagoguery into every field of private as well as public service is the “planning” program, which history shows has always led to dictatorship, either before or after a camorra of code authori­ties have completely monopolized and paralyzed the processes of ex­change.

 

The values of man are within himself, within his own nature, no less than the powers and capacities of man. The kingdom, the glo­ry, as well as the power, are within. They must manifest from within outwardly. The organism must partake of the nature immanent in the mysteries of the single cell; the society, of the nature of its in­dividuals. As the cells proliferate, they must differentiate in sep­arate lines of their primal potency to reintegrate into separate or­gans, all as members of one another.

 

So in the society, its organic growth is by the same law. Its individuals, as they multiply, must differentiate along separate lines of their common potency. Under their immanent nature they must spontaneously relate themselves together as functioning groups in the mutual and reciprocal service their nature compels. The process itself is already described; we must find the milieu of unrestriction where it can carry on, the milieu of non-invasion of the indi­vidual by his fellows; but, most of all, non-invasion, non-suppression, non-regimentation, by the state, which formed to protect men from each other and to serve them in ways they cannot serve themselves, must not itself devour them.

 

It is not in the boxed codes and compartments of government gone amuck, but under free and spontaneous, non-coercive organiza­tion, that individuals produce wealth and all the beauty that can flow from its possession and use. We have seen, even in its bondage, the mighty fruitfulness of a spontaneous economy, and we have seen that fruitfulness destroyed by tax-clogging and privilege-choking of the channels of exchange until it is only in fond visions of fair fu­tures that our government has any hope to draw its mounting billions from the streams it has destroyed.

 

It is not to be expected that very many will at once grasp the importance of the new aspects and functions of land ownership as to investing in public services and enterprises and administering them for both public and private profit through the purposeful creation and enlargement of rent. We are too much prepossessed with the abnormalities of our present state to perceive and trace out these creative relations. We are prone to protest, to condemn, and to de­stroy, what in our poor sight we deem ill, and we personify as evil and would cast out as demons whole classes of our fellow creatures whose normally creative functions, when not restricted and distort­ed, we and they have been so unable to understand.

With taxation absorbing from a quarter to one half the entire national income, and the necessary and unnecessary expenses and wastes of government rising on a multiplying scale, with all Western nations, as the historian Ferrero has said, taxing themselves out of existence, and with the administration of public offices and services almost un­iversally in control of parasitic gangs and political machines whose every interest is in corruption and against the public solvency and welfare, it is at the least timely that we carefully examine and ap­praise the actualities and the noble possibilities of our capital-based economy.

 

But without Henry George and his teachings these extensions of his thought and basic principles could not have been made: so they must not come to a close without tribute of love and reverence to a heart that pulsed to the world’s great anguish, a brain that searched out order where dismal chaos seemed to reign, a spirit rare and beau­tiful, wholly consecrated to mankind.

 

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