Spencer Heath Archive

Item 1181

Carbon of letter from 310 Riverside Drive, New York City to Francis I. duPont, One Wall Street

June 29, 1936

Dear Mr. duPont:

Your proposed letter Number three is to me the most interesting of your series.

 

I would like to contact some of the Georgists who recognize that the present value of unused sites is only the value of the hope or chance to collect rent at some future time and that all such value would disappear as soon as it became certain that all future rent would be taken for public purposes. Such persons doubtless perceive that rent is not tribute but is purchase price paid for the sale of public services to the site occupant and that vacant sites having public services supplied to them reflect the lack of need and scarce demand for public services while capital and labor (especially administrative labor) are so largely kept out of full employment. Where the amount of business (production) that can be carried on is severely limited there can be rent-paying demand for only a few of the best served sites in the community. Restriction of production (of employment and exchange) is what causes lack of rent-paying demand for land and sets disemployed capital to speculating in the prospect of land coming into demand and so into use. This is what gives unused land a selling price that can never be realized while production is restricted by taxation. I like the way you have illustrated this by there being seven equally available locations but not enough business being done to make demand for more than one of them. Any dealings with the other six must be purely speculative, with no wealth being produced and no rent being paid.

There is entirely too much confusion of mind between dealings in speculative values (the figures or numbers used by men who must trade in hopes because there is so little profit in the production of wealth) and the transfers and exchanges of actual wealth. If Henry George had kept this distinction clearly in mind he would not have departed from his fundamental definition of rent to make room for his conception of “rent potential. He would have adhered to his primary position that rent is one of the three portions into which the wealth produced is actually divided. This leaves no room for “potential” or “speculative” or any other kind of rent but actual rent, and this is why no other kind of rent can be taxed or taken — because it is not wealth.

I dare say you are not unmindful that your sixty-four island plots must have been supplied with some kind of public services (even if nothing more complex than protection from pirates and keeping communications open) and that it was the supply of this service, together with your purchaser’s effective demand for it, that gave rise to the actual rent of a capitalized value of $1,000. If more persons were so untaxed or otherwise favorably situated so that they could carry on profitable employment, then they too could make profitable use of public services and would pay rent (capitalized at $1,000) for more of the plots. All such actual rent (and no other) could be used (taxed) to maintain the public services.

Animals cannot create their subsistence. As soon as their numbers exceed their subsistence they must starve. They might all starve but, because they fight, the strongest may live.  They must fight to survive.

Men can create their subsistence, and their subsistence need not be inferior to their numbers. To do this they must exchange services and practice division of labor. To exchange private services effectively, they must also have public services, and they must give private services (wealth) in exchange for the public services. Private services (wealth) so given are rent. Where private services are restricted there is less wealth produced, less need for public service, and but little rent paid. Taxation restricts private exchange of services, disemploys capital, creates monopoly, and makes wealth scarce and dear. This throws land out of use and into speculation. Less wealth is produced; less rent (actual) is paid. Only one well-served plot in sixty-four (perhaps) can be used.

Your diagnosis and mine, Mr. duPont, I believe is essentially the same; but mine seems very general and yours very specific. The former should have high theoretical value, but the latter, quite possibly, yes, very probably, has the highest immediate and practical value.

Where land values (actual rents) are low or absent, as in enormous rural areas, there can be no great landed interest mistakenly opposed to the emancipation of capital (rent-paying) values. I understand that you propose emancipation of capital values. I consider that as all that is necessary, for I believe that civilized men live not, as the animals do, upon the precarious bounty of the unworked earth, but upon the services they perform for each other and the wealth they thus produce and exchange with each other. And I believe that the taxation and penalization of the exchanges of goods and services is all that stands between men and that human abundance which alone can lift them above the animal necessity for strife and destruction and into the practice of brotherly love. I believe that when relieved of their burdens and restrictions all capital and labor will become productively employed, and that will put an end to all fictitious and potential values and all speculations upon them. I think, therefore, that the vitality of your proposition is in the exemption from taxation that you propose for rural occupiers. This, of itself, tends to destroy speculation by keeping capital employed. To most Georgists, this would seem a very small point of beginning, but it may be in this small point that the power of our truth can best be applied. Henry George describes how the force of a man cannot oppose that of a great beast, but if concentrated in the point of a spear can give him the effective power of ten. Moreover, your insistence upon the primacy of food in the order of basic and vital necessities suggests that the farm is the place where the beasts of monopoly and speculation must first feel the spear-point of our creative philosophy. The times are certainly calling, as never before, for some unfoldment of the deep implications of that great proposal of Henry George to abolish all taxation save that on rent and to bring it forward in its full creative aspects acceptably to every interest and to all intelligence. And the need is for men of capacity who can guide an effective policy to the most vital point of attack.

 

I am eager to see the publicizing of your views bring together an effective group. So, I am wishing you the happiest of responses to your letter Number 3.

Very truly yours,

 

 

I am enclosing for your possible comment a little sketch on inflation, prepared for a broadcast.