Spencer Heath Archive

Item 1707

Covering letter followed by critique of articles in the July 27 and August 10, 1953 issues of The Freeman by Profs. Glenn Hoover and Frank Knight, respectively for and against the economic argument of Henry George.

1953

 

Spencer Heath[1]

Dear Fellow-Thinker:

     An intellectual pioneer, seeking to understand the structure and the rationale of the modern evolving social organization, is in no large company.

     He finds most minds prepossessed with the negative, the political counter-trends in human affairs and, in consequence, deeply infected with traditional misconceptions contrary to the enduring long-term actualities of societal advance, thus largely incapable of positive forward thinking. Conflicts and frustrations intrigue. Knowledge of evil outweighs, even disdains, knowledge of the useful and the good. Except to the very young, nothing but effective challenge of long accepted premises can stir complacency into free and eager inquiry.

     This is all there is to justify any attack on implicit hidden false assumptions and traditional mass beliefs. Like physical surgery, the operation is wholly uninspiring. Yet it is psychologically necessary to remove long-accepted malignancies against the inspiration — the creative beauty — of the intellectual understanding from which alone comes the high human power to realize the dream, to create the ideal.

     All of the above is my apologia for the form of the accompanying exposition of the positive and creative, the enduring social relations, so long obscured by the anti-social premises, derived from Malthus and Ricardo, that constitute the commonly accepted land communist creed.

     Communism is a real and present menace. It rests on the false that we allow to masquerade as true. It is not necessary, not even intelligent, to accept its basic premises. To do so is tantamount to swallowing the whole “line.” To be indifferent is to invite its minions into power.

                               Sincerely,

 

__________________________________

HOW COME THAT WE FINANCE WORLD COMMUNISM?

     The United States Government is said still to be spending abroad hundreds of millions of its happy taxpayers’ funds for the continuing promotion, as it did in China, of communism in the guise of “land reform,” so called. Complacent people unthinkingly assume that the Henry George proposal to “make land common property,” to turn it over to the politicians, is a dead issue today — the it-can’t-happen-here obsession.

     A professor of sociology, for example, advocates land communism in the United States in The Freeman Magazine under the caption, “What is Left of the Single Tax?”[2]

     Following the first and foremost article of the Communist Manifesto, he lays down five basic dogmas of the communist creed, and he asserts that economists, “almost without exception,” recommend them, and that “most of them must always have been accepted as true by thinking men.” He thus muddle-mindedly hoists the ideological red flag right in the columns of The Freeman, in most respects a libertarian magazine.

     A following article by a professional economist[3] — another high academic authority, offered ostensibly in opposition to the above, makes no attack. He has no word against his colleague’s five basic communist premises. Quite the contrary, he offers the authority of David Ricardo and J.S. Mill in support of them. Says he:

 

 

The theory of confiscatory taxation of land value is quite simple, if one accepts the premises. It is based on the economic theory of David Ricardo and his followers, the English Classical Economists, including John Stuart Mill.

And further:

On this reasoning it would indeed be hard to find any objection to simply taking the rent for social[4] use.

     He thus accepts, in “principle,” the “single tax” reasoning and its communist program of government control not merely of business but over the very sources of human life and subsistence. And with typical academic detachment he inconclusively concludes:

We must recognize that no law can be just. . . .  There is no “solution” to most of our problems . . . it is impossible to say anything very realistic, in the actual state of the realities.

     For something that is realistic, let this be said: The Ricardian “law of rent,” for all its century-long respectability, is demonstrably false and misleading in its every aspect. Its only effect has been to impress a sleepy-minded academic “intelligentsia” (and through them the literate mass mind) that the landlord is somehow the unjust beneficiary of other men’s toil, and thus to serve as a reputable foundation for the land communist creed. This Ricardian theory that the land rent is a necessary differential between the yield of a given piece of land and that of the least fertile land in use without payment of rent — that rent is in fact the difference between rent and no rent — is too trivial and artificial for extended discussion. Nor is that necessary. It is sufficient to expose the fallacies of the five land communist dogmas themselves without going into all the academic silliness that has been so much exuded in support of them, to wit:

     Tenet No. 1. The earth is not the product of labor, but a free gift of Nature or of Nature’s God. Granted! So what? Does it follow that governments by politicians in office are God’s divinely authenticated deputies for distributing it? Do not the real-estate markets of free communities do this more equitably than would the politically elected or appointed denizens of local city halls and county court houses or of a distant centralized, bureaucracy?

    Tenet No. 2. Its value — apart from improvements — is created by the increase in the population it serves. If the mere “presence of population” or its “increase” created land value, then the teeming hordes of Asia would “create” most of the land values of the world and would pay or receive most of the rent. Men who have developed no general system of exchange relationships — Professor Hoover’s nomads (see his Freeman article supra) and many Asiatics — use land as grasshoppers do. If it is from God (Tenet No. 1), then its value is whatever they freely return to Him for giving it to them — either the men or the grasshoppers. But land is not land value. The value of land is created only by service — by the public service of serving it to men without compelling or enslaving them. Land itself does not serve civilized men, any more than food itself does. Both are served to them. And, whether land or food, what civilized men pay for it, is not for its production, either by God or by men, but for the serving of it to them in the civilized way; not for any service of producing it (which alone and of itself is no service) but for the service of distributing it to them under the equities of free contract and exchange. Land value, like the value of anything else, is the value-in-exchange of the services performed by its owner in his act of distributing it.[5]

     Tenet No. 3. The supply of land — unlike the products of labor — cannot be decreased by any tax that can be imposed upon it. No; God made it, and it certainly cannot be un-made. But land value can be taxed away. Does the learned Professor of Sociology mean land, which is physical, or land value, which is social? Or doesn’t it matter? If God did make it, he certainly did not, in any similar sense, make the value of it. Land value is made only by men, and then only by those men in society who distribute the land to the benefit of society, employing only contract and exchange, instead of taxation or other form of force. Land value is the value received for this distributive service; rent the recompense freely paid for it. Certainly, land cannot be taxed away; but land value can be, and to tax land value away would be to tax security, and thus freedom and civilization away.

     Tenet No. 4.  Taxes imposed on the value of land cannot be shifted. There is no kind of tax but but falls at last upon the entire membership of the exchange system that it depletes; and no tax can be shifted out of that system, once it has been imposed. All that nature can do about it is to distribute the loss — just as she distributes the gains that come into the system — far and wide — among the membership, in proportion to their market-measured contributions to it. Any tax that depletes the market — and all do — diminishes the worth of — that is, the recompense to —  the services that distribute what remains. This loss of purchase or exchange power lessens the demand for, and thus the value of, all the other distributive services, according to their supply. Thus nature spreads the loss of value over the whole active membership of the exchange system, in proportion to their respective offerings of goods or other services and, through them, of exchange services. The only way a tax could be taken exclusively out of a land owner (or any other owner), functioning in an exchange system as an actual or potential supplier of exchange services, without diminishing his functioning — that is, his distributive services —  would be to take it out of his flesh or out of his food or the like that is no part of the exchange system. Taxes cannot be wholly loaded onto the prices offered for any services. Like any other depletion, such as by locusts or drought, taxes make some things less abundant. This lessens the demand — the offering — for all other things. The relative abundance then of other things is what makes them of less unit-price, and the taxed things of greater unit-price because less abundant. Taxation can only destroy values; only services — exchange services — can create them.

     Tenet No. 5.  The rent received by land owners is not a payment for any services they supply to society. This is a bald negation that only ignorance can accept. Mere negation or denial never gives any reason or light. Must we suppose that land is not distributed, or that it distributes itself? Who then does distribute it and for what price? It can be and sometimes is parceled out by the government of a prison camp or leased out for a “rent” set and collected at the discretion of bureaucratic functionaries of a state capital or a city hall. Here is administration by government, but at the cost of freedom, however willingly it may be borne. Alternatively, in a free society, sites and resources must be distributed by the process of free contract, in which land is the necessary subject-matter of, and the established title holder the only possible first party to, the contract. From him flows his social service of distribution. The rent is his automatic recompense, set and limited in amount by the free market, wherewith society recompenses the title holder — and no one else — in exchange. Thus the social and proprietary as against the political and coercive administration of its sites and resources is what lifts a community out of anarchical insecurity on the one hand and is its sole social bulwark against the uttermost of political tyranny on the other. Who has the wisdom to say that in this no service to society is performed?

     So much for the learned professor’s Five Dogmas of the Land Communist Creed. The First only lays the ground for an obvious non sequitur. The Second flies in the face of common knowledge and common sense concerning mere quantities of population. The Third assumes that because physical land cannot be destroyed by taxation, land value — security in the use and occupancy of land — can not be so destroyed. The Fourth assumes that taxation, when laid on land owners, do not come out of production and thus deplete the whole market as other taxes do. The Fifth is an ignorant and jealous denial of the primary public service, the basic distributive function in a free community, a service that none but its officially established and registered proprietary officers can perform, and without which there can be no freedom or decent order; either anarchy or tyranny must reign.

     Widespread acceptance of those basic misconceptions, all springing ignorantly and absurdly from the purblind theories of Thomas Malthus and David Ricardo, is what accounts for political administration — state collectivism — meeting so little intelligent resistance throughout the world. To accept absurdity is to invite tyranny. How shall we ever rout the Kremlin reds while we naively accept — or treat as though harmless — the false fundamentals on which their damnable doctrines depend?

     Henry George, however unwittingly, was special pleader for a destructive and reactionary policy and totalitarian trend. He proposed, by the tax method of creeping confiscation, to put the administration of sites and resources back into the hands of the same tax-taking and war-making power that, by the tyranny of its political administration of land, kept the world in dread and darkness for a thousand years. He was, above all else, a moralist. In confident self-righteousness, he frankly based his crusade on what he believed to be moral and ethical grounds. Indubitably he meant well. Yet his “single tax” plan for a political instead of proprietary and social administration of the primary means of subsistence could do no other than lead modern man back into mediaeval servitude in a total bureaucratic regime. No communism can be complete without complete “socialization” of land. But land communism, in its full effect, is total communism. Its propaganda and plans ought not be supported at all, and least of all by a free nation’s public funds.¹⁷⁰⁷