Spencer Heath Archive

Item 1084

Dear Mr. Kendal:

 

I promised you so here goes,

 

The first thing is this:

Whenever anything is paid, the thing in which payment is made is either wealth or services in some other form. The thing for which it is paid may be either of two things and must be one or the other. It may be wealth or services received in exchange or it may be exemption from some harm or greater evil at the hands of him to whom the payment is made. In other words, payments are not made except on the one hand to gain or repay some benefit from the payee or on the other hand to escape some harm that he has power to inflict.

Now taxes are payments that are made in order to escape some greater harm at the hands of the power that collects. They are paid to escape loss, not to make any gain. The motivation to pay them is animal — to escape harm — not the human motivation which is pursuit of what is good, what is desired, and what has been visioned and dreamed.

But rent is no such payment as taxes. Rent is paid by way of exchange and without compulsion. No land owner can levy rent. Rent is rendered; that is why it is called rent. It is taken a render and not a prender, as the old law terms go. It is taken not by levy but by exchange. The historic struggle with the English kings was to keep them on their original basis of being maintained out of the rents freely rendered to the lords and barons within the realm and then by their consent rendered to the king in exchange for his public services to the realm. The Norman and later kings sought to break down this aboriginal plan. They sought to lay taxes — tribute, by force and without consent — instead of being content to take their revenue by consent of the lords out of the rents rendered to them.

Under the Saxon kings, this conflict did not arise. These kings were the servants of the Witan, the council of the earls who owned the lands, and the kings remained the servants of the realm because they had no power, no revenue, but that rendered to them by the lords of the land.

But with the Norman kings it was different. They had mighty dukedoms in France and there they recruited, again and again, the treasure and the men to make virtual warfare against their own people, against the free institutions of their English realm. Where Alfred enacted laws by express authority of his Witan, to whom he was beholden for all his power, the Norman kings took the moralistic view and sought to acknowledge no authority unless it be that of God, and that only as manifested in their personal will.

So, in England the institution of taxation by tribute, a prender instead of a render, was a Norman importation that brought chaos into the whole societal structure for hundreds of years and is today fast dissolving all those bonds of social union upon which civilized life depends.

It would be interesting to show in full how this poison of taxation destroys — how the multitudes of our social and economic evils arise from it, how it is that we cannot have taxation without the chills of depression alternating with the fevers of speculation and spurious prosperity, and over all the pall of monopoly with disemployment and starvation wages to both labor and capital and consequent restricted production at artificial prices that only a few can pay. But all this belongs to the pathology of taxation, all being the symptoms, the various manifestations, of the one basic disease, whereas the present is intended for a discussion of economic rent, that is, rent that arises out of the services given to land.

Economic rent is a normal phenomenon, a manifestation of the harmonies of natural law. The reason taxation is destructive and abnormal is because it is a violation of the principle of free exchange. Rent is normal because it is a manifestation of that principle. Rent is wealth or services given in exchange and upon terms of exchange that are measured in an open market and consented to by all parties concerned.

What is rent exchanged for? The thing that is received and for which rent is paid in exchange is a special kind of services called public services. If rent were paid for other than services, it would not be rendered; it would not be an exchange; it would be giving without getting. It would be taxation, tribute, robbery, enslavement, or anti-social spoliation of some kind, whatever the name, but it would not be rent.

The services for which rent is paid, being public services, must of necessity be performed by persons having public authority conferred upon them or, at least, recognized and accepted by the society at large. Indeed, the society cannot exercise any of its authority, or effectuate its collective will, except through officers and agents whom it establishes or recognizes for that purpose. Now society recognizes two distinct classes of public officers and servants, according as they have jurisdiction respectively over the private and over the public parts of its territory. The first are the proprietary officers, the second are the political or public servants. No society exists without these two sets of officers, but the political is an offshoot from the proprietary, which is patriarchal in its original form. The patriarchal society grows out of the tribal, as its habitations become fixed, and the proprietary-political grows out of the patriarchal. Every advanced society is of the proprietary-political character as to its jurisdiction over its territory and all its public services and authority. The proprietary consists of the land-holding, land-administering, rent-collecting class of public officers. Their services are administrative. They negotiate leases, establish tenancies, and to them is rendered up by the users of land all the public revenue or rent.

In all free and spontaneous societies, that is, societies that are not planned or under dictators, the king with all his military and judicial subordinates holds power under them, for he and his entire political (public service) organization depend for their revenue and supplies upon the public revenue of rent out of the hand of the proprietary to whom it has been rendered. And this basic dependence of the political upon the proprietary gives to the latter their administrative and supervisory position. It may be doubted if throughout all history there has ever been laid upon arbitrary and coercive, tribute-taking, and political power a single finger of restraint except by the hand of the proprietary that also furnished the “supplies.” Revolutions there have been, with but change of political personnel and transfer of power but never any curtailment of destructive political power — except by the landed proprietors themselves, in whatever age or land.

The aggregate rent that proprietors receive is the net value of all the public services, including their own administrative services. This rent is, on the whole, very scanty, because vacant lands yield no rent at all. This reflects the low value of government — how little worth having its services are. The destructive use of political power results from the modern lack of any supervision of the political power by the proprietary, to their very great cost and loss in public revenue (rent). The Physiocrats saw that taxes and all destructive acts maintained by taxes were impairments of the public services and therefore a deduction against rent. With this in view, at the present time it may be wondered that there is any rent at all now being paid. The fact is that little or no rent is now paid, except where large amounts of public capital have been put in public use. Even so, it can be paid only out of such production as taxation has not destroyed, and paid by the monopoly interests that rise out of the general constrictions on trade. So the rents now collected are only the shreds of value left in the public services after bad taxation and bad spending of the taxes have wrought their deadly results.

Having seen how it is depleted, we can now give attention to such rent revenue as there is. Like all legitimate revenue, it is paid for services and is the measure of their value. Let us see what are the elements from which arise any proper revenue: These are labor and capital. Labor is of two kinds, administrative and subordinate. The return to administrators is contingent and we call it profit. The return to subordinates is fixed and we call it wages. Capital is of two kinds: The materials worked upon and the tools and facilities used in working upon them. The services of labor are much more productive and of higher value when materials and tools are engaged than when labor is applied only to nature and no capital (materials and tools) is employed. But when the results of past labor (capital) are annexed to present labor, so much of the increase of productivity to present labor as the market determines for the owners of the capital is called interest. This is the market value of past labor (in its fruits) continuing to assist present labor. From these circumstances it comes about that there are two elements to be recompensed in every revenue: The return to present labor, this being the profits (or contingent wages) of administrators and the fixed wages of subordinate labor, and the return to previous labor that is called interest.

Rent being a revenue (wealth) that measures the value of and is given in recompense for public services, it must reflect the value of the labor and the earnings of the capital out of which the services arise. Now it happens that the wages of all public servants are taken by them through taxation, and taxation, being a negative public service, is a deduction from rent and therefore cannot appear in the rent (meaning of course net rent after taxes). For this reason the net rent received by proprietors today does not contain the wages of public servants. There is left to proprietors, therefore, beside the value of their present very small administrative services, only the earnings of the free capital employed in the public services — that is, the earnings of the unborrowed capital, the capital earnings after deduction of service on the public debt. So present-day net ground rent is chiefly the earnings of the unborrowed public capital. I say chiefly because a small portion has to pay the administrative costs of land owning — the costs of management of tenancies and collection of rent.

Taking the net rent of any community (after all taxes) as 100 and assuming the administrative costs of land owners as 10, then there remains a value of 90. This 90 is a true capital value because it is the earnings of all the free capital in the public use. It does not contain the land owners’ administrative profits (or wages) for that 10 has been deducted, and it does not contain the wages of any public servants because such wages have all been taken by taxation, as have also the charges on the public debt. Taking 90 then as the actual income from all the free public capital, the value of all such public capital will be in accordance with the prevailing interest rate. In a market where such capital commands two per cent the value of this free public capital would be represented by the figure 4500. /Sentence? check original/ The capitalizable rent of 90 is therefore really the earnings of actual capital to the value of 4500. This capital, not having been borrowed, is really the property of those from whom it was seized by taxation, but as they cannot be identified no restitution of its earnings to them is possible. It is his undivided interest in this free public capital that a land owner sells when he sells “land” on the basis of its capitalized net rent. Of course when he sells land that yields no present rent he is not selling any present wealth. He is only trading his relative fear for other men’s relative hopes as to future rent coming to be paid.

Having now seen that net rent (less administrative costs) is the yield from actual capital that has been forcibly appropriated to public use, it remains to inquire how this income distributes itself among land owners and what are the forces and conditions that cause it to rise and fall. This is illustrated by the condition common in many communities where perhaps only one in four of its most desirable and best served locations is occupied and yielding rent, notwithstanding that all of them have equal or similar municipal and governmental services. This condition reflects the fact that under the prevailing tax restrictions on exchange and production not enough employment of labor can be carried on to require the assistance of more than a small part of the public labor and capital and therefore not enough wealth is being produced to constitute effective demand for more than a small number of the locations to which the public services are supplied. All the rest of the locations must remain unoccupied and sterile of rent. The owners of the few occupied locations collect in their rents all the public service value that there is in the whole community and this, as we have seen, is almost exclusively the earnings of the unborrowed capital in the public use.