Spencer Heath Archive

Item 1312

Carbons of an exchange of letters between Henry J. Foley, 8825 173^rd Street, Jamaica, New York, addressed to Heath at 420 W. 116^th Street, New York City, August 19, 1940, and Heath’s reply from Woodstock Hotel, New York City, on Roadsend Gardens, Elkridge, Maryland letterhead September 12, 1940

 

Dear Mr. Heath:                        August 19, 1940

 

If I understand the plan you propose, it would not make for prosperity. The Ricardo Law of Rent would still operate, wages would still be the product minus the rent, and there would be nothing to keep the landlords from setting the rent at the figure which would leave the tenant the wages necessary for subsistence. The only difference would be that the money now taken by the government in taxes would be added to the rent taken by the landlord.

 

     Is not the system you propose practically the same as the British landlord system, which wrecked England and starved Ireland? The landlords were really the Land Lords. They owned not only the land, but as lords they owned the government, the Parliament. Certainly, if the landlord system were adapted to prosperity the British landlords had their chance to demonstrate it.

 

     Moreover, if the thing could bring material prosperity, would it not atrophy the manhood of the nation? The population, tenants, would have no say in government, and every interest in government would disappear because it would have no occasion for use, like the eyes of the fishes in the Mammoth Cave. The nation would become a vast herd of human cattle, like the people of ancient Peru.

 

         I cannot see the reason for allowing the landlords to pocket the rent. A hotel corporation which should lease a plot for the building of a hotel would not ask the owner to surrender the ground rent or any part of it. They would pay over the rent, and reward themselves by the products of their labor and services in running the hotel. In the same way, every tenant under the George plan would pay to the public every value of the plot, and take his reward from the sale of his labors and services on the plot.

 

     My very best wishes for your health and happiness.

 

              Yours for freedom and prosperity,

 

                       /s/ Henry J. Foley

 

 

_________________________________

 

September 12, 1940

Dear Friend:

I thank you a lot for your letter of August 19th. You are quite right; the plan that I, like Henry George, propose, as you seem to understand it, would certainly not make for prosperity. What we propose is: “To abolish all taxation save that on land values.” Wages, including interest, profits, fees, commissions, etc., would still be the total product minus rent, but not minus taxation and the ruinous social cost of taxation. The magnitude of the total product would thus become enormous. This stupendous new value rising out of the service of abolishing taxation and all its paralyzing effects would flow into the general exchange markets, and there be distributed, as all values are, by the free and voluntary processes of contract and consent which constitute the democracy of the market. All income would be raised and all would be distributed by the process of the market in the same way that the market now distributes the beggarly little that remains after taxation takes forcibly more than a third out of a tax-stunted and under-functioning total productivity.

 

     There is no distribution of rent or any other income until after the taxation that has first paralyzed and inhibited production has taken its heavy toll out of the little production that does come through. This socially disposable balance of production, and this alone, is disposable under the free contractual engagements that constitute the general market and system of exchange. It flows in as many different directions as the different services that brought it into the market. The part called wages (real wages) flows to those who have performed current services at contracted rates. The part called interest flows to those who have supplied the use of accumulated services called capital. The part called rent flows to those who have merchandised and thus socially distributed the use of sites and resources, including the use of public improvements (public capital). The part called profits is the portion that remains in the hands of owners of enterprises to afford them recompense for their supervisory and administrative services as owners. The relative proportions in which this total disposable product is divided up to constitute these incomes is purely a matter of contract and consent among those who bring their current services or the services accumulated in commodities or properties into the general market. In this there are no preferences or discriminations. All have equal opportunity to deal with each other on equal terms — so far as the market itself is concerned. If there are any special and exclusive privileges or advantages, they are established and maintained only by the compulsions and favoritisms of the tax-taking political authority, or such criminal operations and activities as it does not prevent or suppress. None of these can arise out of the operations of the market itself.

 

     As to Ricardo’s “law” — that special formulation of the doctrine of Malthus — this operates among men, as among animals, who do not practice division of labor and thus produce for and exchange with others, but live only on their individual extractions from their usually precarious environment. Any driving off of late comers by earlier arrivals upon an area of bounty or fertility would be an operation of the law of the jungle, and not of a market, which is governed not by force but by contract and consent. In a civilized community, possession and distribution of land by force has been abrogated in favor of contract and consent upon terms democratically determined. There is always diversity of owners competing against each other for tenants or purchasers. They bear the price down from above, just as diverse tenants and purchasers bear it up from below. This is equable; this is what prevents “the landlords from setting the rent at the figures which would leave the tenant only the wages necessary for subsistence.” From the operation of the market there is no ground of dissent. And so long as there is an open market, there can be no closed monopoly. But if decree is imposed on consent, then only force and compulsion, and no free market, remains.

     Ricardo assumed ownership as preventing distribution of land, not as a service making it peaceably and contractually possible. He also assumed equal application of labor and capital on the best and poorest — all grades of land. Neither of these assumptions is correct.

     It is a curious notion that because Production equals Rent plus Wages plus Interest, and Wages plus Interest must equal Production minus Rent, then Rent must necessarily increase or decrease at a greater or different rate than Wages or Interest. The fact that the three together make up a total has nothing whatever to do with any rate of increase or decrease among them. It is no more pertinent than that because Three equals One plus One plus One, then Three minus One equals One plus One. The fact that the whole must equal the sum of its parts has nothing to do with their respective magnitudes. That is a matter of how — by what process — the whole is divided into parts.

     So far as taxes are concerned, they are taken out of production by force and without any exchange or corresponding recompense. The amount seized depends on the amount of force used, but so also does the amount available to be seized. Taxation destroys its own source and base until at last there is no residue for distribution by the market. While there is a residue remaining in the market, it is there distributed in accordance with the agreements that are entered into by the respective parties. Competition (so far as it is not set aside by force) makes these agreements fair as between the competing interests.

     But neither competition nor anything else makes it fair that under the blight of taxation there should be so much idle land, idle capital and idle men and, therefore, such meager production coming into the market and that more than a third even of this should be taken away.

     I certainly do not propose any system. I only propose that the system we have be better worked. The British land lords of the seventeenth century did, indeed, have this same system, and they worked it badly. There is no system or anything so good that it cannot be worked badly by the ignorant or the unenlightened. These British land lords did, indeed, own the government. That is what made them not so much land lords as tax lords. They had political power. Against the advice of John Locke and other wise men, they levied tribute by force, just as their predecessor in power, Charles Stuart, had done. They cut off his head but did not cut off his prerogative of taxation. That they took for themselves and with it they “wrecked England and starved Ireland,” just as you say. This brought on bloody riots and the series of reform laws that by the start of the present century completely divested the House of Land (and tax) Lords of their deadly political power, and transferred all their kingly power to tax, and thus to destroy, to the House of Common Demagogues, where it now resides.

     We should awake to the fact that the revolutions of the nineteenth century stripped land ownership of all the political and compulsive power that it had under the Continental totalitarian states, and that William I introduced into England when he made a political distribution of the sites and resources of that land. No land lords with us today have the power to take any revenue, but only to receive rent as the market recompense (value) of the services they perform in making social distribution of land, or of its use, by contract and consent. If and when they perform other and further services, they will be awarded further recompense to the full value of such service.

     Henry George proposed the great master-service to Society when he put the proposition into practical form by proposing, “To abolish all taxation save that upon land values.”

     This is a service that, put into effect, would make any bankrupt community solvent and any depressed community prosperous, — every economic desert inhabited, not to say what it would do for a relatively prosperous community. Now it happens that a community, like an individual, must use the process of the market, with its technique of contract and consent, to pay for any service it receives. And the recompense that a community pays in this manner for any services that its members have in common with each other, is called ground rent and is paid to land owners. It is, therefore, the business and to the interest of land owners to provide these services. As land owners, they have no other business, any more than the landlord of a hotel has any business but to provide for the comfort and convenience, safety and security of those who pay rent to him. The land owners have a profit motive for adopting the practical proposition of Henry George, and no other class has. This motive should be powerful, for it is demonstrable that by reason of the indirect effect a tax burden of One Dollar lifted or imposed raises or depresses rent by a very much greater amount.

     Yes, the landlords of England had their chance of being intelligent and becoming prosperous instead of being covetous and becoming bankrupt, as they have been. It is the same with those Single-Taxers who are so covetous to confiscate the landowners’ rent that they cannot understand what services land owners now perform, nor how the proposition of Henry George is a natural extension of the protective services for which tenants would award them more magnificent recompense than they ever dreamed.

     Compulsion or a plan to employ compulsion is disaster to any cause. Only by the services that men perform for each other and exchange in freedom among themselves, has the condition of mankind ever widely improved.

     The reason why land users put rent in the landlords’ pockets (and show no desire to take it out again), is that landlords perform an indispensable service for them. They make it possible for land users to have sites and resources divided among them on equal terms, in accordance with their unanimous will by contract and consent under the democratic process of the market in which all are free to register their votes. Without this contractual distribution of possession by the agency of proprietors, locations and benefits would have to be distributed arbitrarily by some coercive authority superior and inimical to the land users, or they would be left to contend with each other.

     In neither case could they have any security or equal opportunity of possession. In neither case could they perform and exchange services among themselves. In neither case could any society survive. In the words of Henry George, “..the ‘magic of property’… must be applied to our lands … must be retained if we would keep from relapsing into barbarism.” A service so vital as this to the very life of society, is not to be lightly dismissed as of no value and deserving no recompense. And when a population of land users under their free contractual engagements, determines and awards its recompense for this service, it has no more right than it has desire to reverse its own acts by relapsing into the barbarous technique of taxation, which Henry George proposed to destroy. Men do not make voluntary payments except they receive services, and the decent instinct of any community revolts at any proposition to seize back by force that which they have paid by way of exchange and consent.

     If it were possible to distribute land by the services of elected or appointed persons, it would still not be possible to recompense such persons in freedom by contract and consent. They would take their pay in advance of their promised services, and take it they would — by the destructive technique of taxation against present wealth and mortgages against the future wealth even of those who are not yet born.

     You are quite right; a hotel company does not demand back from the land owner any part of the rent it pays him for so serving it that it has peaceable and productive possession of its site. Neither does any number of hotel companies; nor does the entire population of land users in any community demand back from land owners or from anyone else any part of the price they have paid in recompense for services received. They do exactly what you say they would do — “They would pay over the rent and reward themselves by the products of their labor and services in running the hotel.”

     You are wrong when you say that “Every tenant under the George plan would pay to the public the value of the plot.” Henry George completely and emphatically rejected the plan of having the rent paid over to the public, or to any persons claiming to represent the public save the land owners themselves. And he freely granted that a portion, at least, of the rent was the proper compensation to them.

     Now, my good friend, I want to suggest that the whole matter of your third paragraph is something you would most likely leave out of your letter if you were writing it again. The kind of objection you make there would be chargeable against any improvement or amelioration of human conditions and affairs. Material prosperity cannot atrophy the manhood of mankind. What can and does enervate men is a material prosperity for which they give no recompense — for which they bestow no prosperity on their fellow men. It is only slavery or compulsion, lack of freedom to serve by exchange, the mass slavery of taxation or under whatever guise, that enervates the power of the masters as it deforms the bodies and brutalizes the souls of the masses of mankind. And let us never forget that, beyond the enslavement to his environment that is the lot of primitive man, there is no form of slavery that does not rest wholly upon the autocratic power of the political and predatory state — in short, upon the taxing power which Henry George proposed to purge from its public practices and thus emancipate mankind.

     We need not fear that under a contractual administration of community affairs “tenants would have no say” concerning the public services rendered to them. They would have everything to “say” and they would say it with the price, the one price, the rent, that they would pay. With administrative proprietors as dependent on rent then as they are dependent on it now, having no power to tax, they would solicit every expression of the desires of their customers and of how they might be better served.

     Men do not desire authority or responsibility over the business and properties of those who are serving them. The price they pay for the services supplied is an efficient and a sufficient regulator of the manner in which the services shall be performed. But men would have as, apart from taxation, they do now have, all the “say” in the world over their own property and business which they must conduct, first of all, in the interest, and to the advantage of the customers — the purchasers — whom they would serve. The public business, conducted as a business, would be no exception; its hazards, its responsibilities, its decisions and its rewards belong to the public proprietors and to them alone; its benefits belong to its customers whom they serve. When these benefits are large then their recompenses will be great and their values high; when they are small or not at all so will be their recompense.

     When the community business — government — is conducted by the community proprietors then and only then can it be administered by contract and consent and financed out of rent.

     Where decision and responsibility are involved, men do not desire any directive “say” in the administration of the services they receive. And over the services they perform for others they do have all the authority that government now allows and taxation does not destroy and all the responsibility and danger of loss that they desire.

     It is not the business of community government and authority to impose services and responsibilities but to perform them and to reap in the rising rents their voluntary recompense. And here, as elsewhere, under all pro-social relations and accord, those will be most great and most recompensed who are of the greatest service to all.

     Unless we feel that freedom is poison and slavery divine, we need never fear that the social-ization of politics and government — of political slavery by force into community services by contract and consent — will ever sap the manhood of mankind. The very reverse is true.

     It is the function of Society — of the social practice of consent and accord and exchange — not to suppress but to liberate the energies of the race, to free them at once from the rigors, from the compulsions, of an unsubdued environment and no less to lift them out of the tyranny of anti-social or political power.

     It is in their social organism, which Henry George so sharply distinguishes from the compulsive state, that men find all the power that enables them to transform their world. This higher organism emerges and evolves out of the barbarous and predatory pre-social state of mankind by its human units and groups coming to adopt and accept the organic relations of contract and consent — of operating together without destructive opposition but by exchange of differentiated services, just as the many parts that compose the individual are organized, ordered and arranged.

     This functional integration of parts into an organic whole, this integrity, this at-one-ment of himself, is what gives to man in all its varying degrees his own self-kingdom and control. But this self-sovereignty does not give him the power to build a better world. Not all his individual strength, but only his social power can do this. Not until he unites in the social bonds of property and peace and service by contract, consent and exchange, can he even begin to re-create either a niggard or a bountiful world. In the one he remains as a beast; in the other he becomes but a slave.

     All of men’s social and creative power rests in the services that they perform for each other — in their practice of the divine injunction to do unto others in the manner they would have others do unto them.

     Into the cosmic dust was breathed a breath — a spirit — of divine life and power, and that dust became a living soul with power of choice, election, will. That which was void became full. God realized himself in his extended work. So man, carrying on God’s creative will in peace and unity (contract and consent) with his fellow man, touches the rock of mountains and cities gleam and deserts bloom. In this divine commission and communion man creates the kingdom, builds the holy city of God with mansions of glory for the habitation of the soul.

     And this is not the end. — In this habitation, self-created, into these gardens of beauty in which it refreshes itself, into these garments of glory through which it ineffably glows, the spirit of man is forever and ever reborn. It recreates itself not from the casual dust of the earth but from a bounty that its own labors have transformed into a subsistence more creative and more divine. Through its own concord and communion of work the spirit of man that came from and is the spirit of God marches ever into higher realizations of itself — the ever infinite extension of God. This is the vision, — but it is a troubled dream.

     For these ends we yearn. The means are close at hand but only slowly do we open our eyes to them. Blind to the beauty with which our social structure is already endowed, we lack the faith, the inspiration to create, and in our desperation we turn and return to the powers that destroy. From the beauty of creation by service, by concord and consent, we turn away. We invoke the undoubted power and the mistrusted beneficence of that sole and only group or human institution that still remains unregenerated into creative services by the technique of contract and exchange. Like the many brands and breeds, the many colors of collectivists, we actually invoke the power of taxation, the technique of mass enslavement and basis of all slavery, as though it were or could be employed as a social or creative force.

     We who profess a Philosophy of Freedom and would honor him who gave it name should scorn the dark diabolism that puts its faith in destructive might and all that pagan superstition that the heavenly kingdom of high desire can be builded with the sword of force in the hand of compulsive power.

     The divine power, the creative power, comes to us from the Beauty that lies within the heart of the world and in the consensual engagements and contractual institutions of men. When we seek we shall find and when we open our eyes we are infused and inspired. Seeing that which abides and endures, we are free to rejoice in it, to think creatively — divinely, — and divine action will follow and attend us on every hand.

Yours very sincerely,

 

                           

   /s/ Spencer Heath

 

Woodstock Hotel

New York City

September 12, 1940